We have spoken to many accountants and none of their answers seem to be consistent.

We are launching a website which basically allows users to support a seller (think patreon) through donations/support with the promise of getting something in return.

So a seller would say, "for £10 a month, i will try to provide a thing for you."

A user would pay £10 a month and receive that thing.

A seller is not obligated to provide the thing. In this case, the user is not purchasing that thing for £10. The user is paying the money to support that seller and that the seller will try to provide that thing.

The issue we are having is in the legality of holding the funds. Our service takes a fee from the seller for providing the commerce functionality. Lets say for arguments sake its 50%.

So, user pays £10, we take £5, seller gets £5. So far so good.

However, we need to hold the funds that the user pays for 28 days, before we take our fee and pay it to the seller. This is to allow for easy refunding and potentially mitigate fraud.

At this point, we will store all £10, even though our actual profit is only £5.

The length of time holding this money could increase if the seller has not provided us with a means to pay them. This means we could be holding that £10 indefinitely. Will this be an issue in regards to accounting?

It is my understanding that we would tell HMRC at the end of our financial year that we earned £5. However, our bank account would show £10 because we have not paid out our seller.

One of the accountants we have spoken to have said that it is illegal to hold money that is meant for someone else, in this case the seller. Is this true?

  • It sounds like this would fall foul of the unfair contract terms act; you can't have a contract where a consumer pays for something that may or may not be provided at the whim of the seller. Oct 23, 2016 at 8:45
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    You clearly should not be embarking on this endeavor without a lawyer. You appear to be trying to create a novel business model, and doing that without reputable legal advice is just foolish. To put it another way, if your accountant is of the opinion that a given course of action is not legal, the only way you'll be able to change your accountant's mind is to find a solicitor who disagrees. The opinions of unvetted strangers on the internet will carry no weight.
    – phoog
    Dec 19, 2016 at 21:12

1 Answer 1


Of course you can hold other people's money - if you couldn't businesses would not be able to take deposits or buy on credit and banking would be impossible.

Find another accountant.

  • Selling on credit and banking both require licenses. Oct 23, 2016 at 8:45
  • @PaulJohnson so in the UK it's not legal to do an online transaction where the buyer pays before the seller ships the goods? Must make internet commerce impossible!
    – Dale M
    Oct 23, 2016 at 11:26
  • its legal to hold money for something you are providing, but this business model has the business holding money as a third party on behalf of a buyer/patron and a seller/recipient. "Selling on credit" is a different category again: see gov.uk/offering-credit-consumers-law Oct 23, 2016 at 13:11

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