Accounting for funding circle income

[TechJinx]

Hi all,

wonder if anyone can help - my accountant seems to be having a hard time with this one as they're finalising my annual accounts.

I invested around £8k to date of my retained in funding circle and have made £179ish to date. They provide a downloadable tax statement in the form of a PDF stating profits made in the year and a transaction statement that you can only download in a CSV file

I had assumed this wouldn't be too complicated to account for but they are asking me to:

"provide a document in an non-editable format that shows the money put in by your company, and the interest received – thereby providing a running balance, as with a bank statement"
"....the Excel statements provided would not be a suitable format to pass any inspection by HMRC. We shall require something official showing that there have been several payments made to the funding circle "

I take issue with non-editable as thats a pointless remark as I can easily edit a pdf but that appears to be what they mean.

I'm at a loss (not literally ), I've mailed funding circle to see if they can supply this but if the answer is no, then what. Does my company account showing payments in alongside the official yearly profit doc from funding circle not count?

The account in is the company name and I used the registration number when opening it so should be no problems there. I don't want some accounting confusion to stop me taking advantage of a 10% return here!

thoughts?

[Kenny@MyAccountantFriend]

I think what they mean by non-editable is that a CSV can be changed in error quite easily whereas to amend a PDF takes a bit more time and effort.

To solve your issue can you take a print screen of the online balances as this would show the logos and information required backed up by the CSV file.

[TechJinx]

The problem I have is its about a 60 odd page statement each month due to lots of small interest and capital repayments for each loan part and "print to pdf" does not preserve the formatting so it's a mess.

I can save it as a web page archive but is this something hmrc would be happy with?

The real problem is they give you a great point in time dashboard but not by month bank account style lists

[Jessica@WhiteFieldTax]

Its a bit over the top. HMRC don't require non editable documents, neither do your accountants.

Your accountants require, at law, nothing other than your word - anything else is their own choice. For example we give our clients the option of giving us a note of their bank statement balances on a year end questionnaire, for us to check it agrees to the accounts, and then we don't want to see the bank statements. Why? We are preparing accounts, not carrying out an audit, our report is to the directors only, and we have no obligation to detect internal fraud. Inter alia chasing bank statements for a client with good records is fruitless. Bit different if its a pickle and needs re-constructing.

HMRC, in an enquiry, may require external confirmation of something. I've personally never known them reject a document as being "editable" - as you say PDFs can be hacked. Anything can. HMRC may ask for permission to approach a third party directly for confirmation, which is the only safe response both for private sector auditors and HMRC. If there was any thing serious coming out of an enquiry they would require a certificate of full disclosure, which, if falsified would render you liable for prosecution.

So - politely - suggest to your accountants they are being a little over zealous.

[Alan @ BroomeAffinity]

I would remind your accountant that he/she isn't auditing the accounts, that you're responsible for the info and are verifying it, and to chill out a bit.

[TechJinx]

cheers for the advice - it appears the accountants on here are more relaxed than mine

I think it's because they are a specialist IT contractor outfit and anything a bit out of the ordinary is a bit tricky - I had a similar issue when I asked about starting a secondary business for my wife to run and they said I'd basically need a different accountant

Final thought though - is there some issue on how you treat the "profit" from funding circle. I.e. if its investment return instead of bank interest is there an issue or does it go somewhere else in the accounts? Or is it all just "profit" and taxed at 20% - move on....?

Also - do you need to pay corporation tax when the money is earned or only when you take it out of the account back into the company's account?

[Maslins]

I agree with all the above.

CSV is very easily editable, by mistake or otherwise. Add a digit to one of the figures and calculations could easily carry through an incorrect figure.

A PDF/screen print image you could also edit, but would require real effort on your part, can't imagine anyone accidentally doing it.

Yes the accountant isn't doing an audit, but I still think we're expected to make some modest effort to ensure the figures are accurate.

If I were the accountant, and you gave me a CSV, I probably would ask for a PDF/similar. If you said that was hard to get for whatever reason, I imagine I'd ask you to confirm by email that the balance was indeed £X. Being honest it's basically just an arse covering exercise.

From an accounting perspective, I'd just treat it as a savings bank account. So putting money in/getting money back out has no tax impact, it's just the interest paid (and possible bad debts) which hit the P&L.