Tax avoidance at work.

wannabecyclist

So not sure what to do about my work situation. I work for a firm that employ us as self employed agents. They do this to avoid paying any employers national insurance obviously but this isn't the main problem I have. My gripe is the employees I work with earn gross amounts, say 2k per month. I have found whilst I am being honest with my tax affairs they are listing expenses such as made up trips to manchester 10 times a month and using the miles to offset any tax bill. So earn 2k, claim 1.2k in mostly fake expenses and have no tax, or minimal tax, to pay. What makes it worse is that they then claim child and working tax credits, in some of thems case hundreds of pounds a week. The Director himself probably takes home a gross figure of 3k, makes up loads of phantom trips to offices around the country they claim to have and then receives working tax credit as claims to only earn around £900 a month, just enough to avoid tax bills and then get benefits to top up his claimed low income.

Really annoying me now, so is there a way to report this? Obviously will cause problems for my employment but I am soon leaving them anyway. I hate tax avoidance, and claiming benefits when they are paid high salaries makes it worse. People claim that large companies tax avoidance is worse, but I bet if you add up the little mans false tax reporting it would be far more

arran77

Report it to HMRC

https://online.hmrc.gov.uk/shortforms/form/TEH_IRF?dept-name=TEH&sub-dept-name=&location=39&origin=http://www.hmrc.gov.uk

Pisses me off too when I struggle to make ends meet :evil:

Stevo_666

arran77 wrote:

Report it to HMRC

https://online.hmrc.gov.uk/shortforms/form/TEH_IRF?dept-name=TEH&sub-dept-name=&location=39&origin=http://www.hmrc.gov.uk

Pisses me off too when I struggle to make ends meet :evil:

Beat me to it.

Wannabecyclist - at the risk of sounding techy this isn't tax avoidance (which is legal) - this is fraud, pure and simple. Shop 'em.

mpatts

Stevo 666 wrote:

arran77 wrote:

Report it to HMRC

https://online.hmrc.gov.uk/shortforms/form/TEH_IRF?dept-name=TEH&sub-dept-name=&location=39&origin=http://www.hmrc.gov.uk

Pisses me off too when I struggle to make ends meet :evil:

Beat me to it.

Wannabecyclist - at the risk of sounding techy this isn't tax avoidance (which is legal) - this is fraud, pure and simple. Shop 'em.

It's tax evasion, not avoidance. Getting tax relief on legitimate expenses is fine, making them up is not.

arran77

Tax avoidance pisses me off too, just because it's legal does not make it morally right in my opinion especially when it's often very large companies or wealthy individuals doing it but hey ho I think we've probably 'discussed' this before on here :roll:

I'd love to not pay the taxes on my income that I do but if everyone had the means to avoid it what would happen to all of the facilities and services that are funded by them?

One for you to answer Stevo

Anonymous

This is tax evasion and is illegal. Most 'chartered' institutions make it policy that you have to inform HMRC if this is happening.

If you tell the employees that you're going to dob them in, this is also a criminal offense known as 'tipping off'.

Pross

At the gross figures being mentioned above I'd be doing my utmost to legally avoid any tax. The contracts would presumably be outside IR35 and therefore being employed in this way is bad for employees as they'll have all the risks associated with being a contract member of staff without the tax benefits. However, it does sound more like fraud / evasion if they are claiming for non-existent expenses.

I'm not sure on the legality of what the employer is doing either. I thought there were rules on using contract staff for permanent roles to prevent this sort of thing happening.

drlodge

wannabecyclist wrote:

I work for a firm that employ us as self employed agents. They do this to avoid paying any employers national insurance

I would speak to HMRC about this...the company can't "employ" you as "self employed" if they are dictating your terms i.e. what/when you work etc.

"If you’re self-employed, you do not have a contract of employment with an employer. You’re more likely to be contracted to provide services over a certain period of time for a fee and be in business in your own right. You’ll also pay your own tax and National Insurance Contribution)." The important bit here - "be in business in your own right" and if that's not the case, you're an employee.

You are employed by this company and they have to put you on their books. raising this with HMRC would get them to start looking into the more general affairs of this company.

pblakeney

Legal issues aside as they have been covered above, what is the point?

£2k/month = £24k/annum. Knock £10k allowance off that and you are looking at saving tax on an income of £14k.

Then there is the issue of minimum wage. Even self employed people are "supposed" to pay themselves a minimum wage, which means N.I. so they have to pay their employer contribution and any corporation tax which cuts the savings even further.
That is if they are even pretending to do everything legally.

Nice to have a little extra in your pocket no doubt, but worth jail?

wannabecyclist

Yes we are self employed and no contract as such. However there is a staff rota, work in the same office each day and have a holiday allowance so I know they are doing this illegally which is why I am getting out. My main gripe was the fact I am paying my tax (or will be anyway once my accountant has finished my assessments) and then someone on a higher salary is not paying any tax at all and then receives work and child tax credits as they have claimed they spend £800 a month travelling from London to Manchester 10 times a month. When I started I thought I would mainly be working from home, it then turned in to more of an employed role as time went on and now clearly they are breaking the rules. I would have nothing to hide if we were investigated as I have an accountant etc so feel I should report it even though people here are my friends.

Pross

Seems like a huge amount of hassle to need to do your own taxes, pay an accountant etc. for £24k gross salary especially if you aren't making the most of (legitimate) tax benefits for working as a Contractor. I don't blame you for getting out and I'd certainly report it in your situation.

Stevo_666

arran77 wrote:

Tax avoidance pisses me off too, just because it's legal does not make it morally right in my opinion especially when it's often very large companies or wealthy individuals doing it but hey ho I think we've probably 'discussed' this before on here :roll:

I'd love to not pay the taxes on my income that I do but if everyone had the means to avoid it what would happen to all of the facilities and services that are funded by them?

One for you to answer Stevo

Happy to

1. Who decides what is morally the right amount to pay? The law doesn't so all this moral stuff is just opinion and you'll get plenty of self appointed moral tax arbiters who 'decide' that certain groups of taxpayers don't pay enough, usually not based on the facts - see point 3. There is case law that says specifically that no tax payer is under any legal or moral obligation to arrange their tax affairs in such a way that the Inland Revenue can stick the largest possible shovel into it.

2. Where do you draw the line between managing your tax affairs sensibly and avoidance? Are ISAs avoidance? Or me making an additional contribution and getting a tax deduction for it? Or giving money to your other half because she doesn't pay tax on her inventment income?

3. Have you seen the stats for the total tax contribution of the top 100 companies in the UK? I can send a link but last year it was £78 billion. And for individuals the top (IIRC) 1% of tax payers pay around 30% of total income tax. Anyone who claims that big multis and the better off pay naff all tax hasn't been looking at the facts

4. If tax wasn't so complex and costly there wouldn't be the incentive to reduce the bills. The government needs to sort the underlying problem rather than try to put a sticking plaster over the symptoms. They've made some progress as they have lowered the corporate rate enough so that I am on a project that brings taxable income into the UK at the expense of high tax Euroland places like France, Italy, Germany, Spain etc. That's helping the UK exchequer - because we've lowered our tax rates.

5. A certain level of tax is essential but they can cut a lot of the crap out - take a look at the sort of jobs that get advertised for local councils in the Guardian and tell me if we really have to have that sort of thing. There's literally billions wasted on other stuff we don't need. Then they wouldn't need to tax you so much...

6. Working on this stuff pays for my bikes so sod off

veronese68

Stevo 666 wrote:

6. Working on this stuff pays for my bikes so sod off

This is the important bit.

MichaelW

I mostly do rabbits, pheasant and hedgehogs, the odd stoat. I dry the skin on my computer and dispose of the innards before they start to smell. I prefer Borax.

arran77

I knew you'd set me straight Stevo

Anyway, just theoretically, how would the ordinary man on the street get into this tax avoidance malarkey, a hard working mechanical estimator for example

tlw1

arran77 wrote:

I knew you'd set me straight Stevo

Anyway, just theoretically, how would the ordinary man on the street get into this tax avoidance malarkey, a hard working mechanical estimator for example

sell your ar5e at night? Cash in hand

arran77

matthew h wrote:

arran77 wrote:

I knew you'd set me straight Stevo

Anyway, just theoretically, how would the ordinary man on the street get into this tax avoidance malarkey, a hard working mechanical estimator for example

sell your ar5e at night? Cash in hand

I'll leave that to Seano I think

nathancom

Stevo 666 wrote:

arran77 wrote:

Tax avoidance pisses me off too, just because it's legal does not make it morally right in my opinion especially when it's often very large companies or wealthy individuals doing it but hey ho I think we've probably 'discussed' this before on here :roll:

I'd love to not pay the taxes on my income that I do but if everyone had the means to avoid it what would happen to all of the facilities and services that are funded by them?

One for you to answer Stevo

Happy to

1. Who decides what is morally the right amount to pay? The law doesn't so all this moral stuff is just opinion and you'll get plenty of self appointed moral tax arbiters who 'decide' that certain groups of taxpayers don't pay enough, usually not based on the facts - see point 3. There is case law that says specifically that no tax payer is under any legal or moral obligation to arrange their tax affairs in such a way that the Inland Revenue can stick the largest possible shovel into it.

2. Where do you draw the line between managing your tax affairs sensibly and avoidance? Are ISAs avoidance? Or me making an additional contribution and getting a tax deduction for it? Or giving money to your other half because she doesn't pay tax on her inventment income?

3. Have you seen the stats for the total tax contribution of the top 100 companies in the UK? I can send a link but last year it was £78 billion. And for individuals the top (IIRC) 1% of tax payers pay around 30% of total income tax. Anyone who claims that big multis and the better off pay naff all tax hasn't been looking at the facts

4. If tax wasn't so complex and costly there wouldn't be the incentive to reduce the bills. The government needs to sort the underlying problem rather than try to put a sticking plaster over the symptoms. They've made some progress as they have lowered the corporate rate enough so that I am on a project that brings taxable income into the UK at the expense of high tax Euroland places like France, Italy, Germany, Spain etc. That's helping the UK exchequer - because we've lowered our tax rates.

5. A certain level of tax is essential but they can cut a lot of the crap out - take a look at the sort of jobs that get advertised for local councils in the Guardian and tell me if we really have to have that sort of thing. There's literally billions wasted on other stuff we don't need. Then they wouldn't need to tax you so much...

6. Working on this stuff pays for my bikes so sod off

It is nice of really rich people and companies to pay tax

Which is easier to avoid paying tax on, income or appreciation of assets, ie capital gains? It strikes me that the rich are more likely to increase their net worth through the increase in value of investments in whatever rather than earned income.

I definitely agree that it is the responsibility of government to set the rules and close the loopholes not individuals to follow some putative moral code as set out by newspaper columnists. Systems will always be gamed.

pinno

MichaelW wrote:

I mostly do rabbits, pheasant and hedgehogs, the odd stoat. I dry the skin on my computer and dispose of the innards before they start to smell. I prefer Borax.

Do you blanche them or singe them?

bompington

MichaelW wrote:

I prefer Borax.

Nah, Ali G was better

VTech

You can't hire people on short term contracts and keep them longer than 6 months as it's illegal. They are breaking the law.

Majestic 12

My brother-in-law is a finance director. An expert at tax avoidance, to the extent that he and his fellow directors have their wives as salaried 'ghost' employees. Not sure how it works but apparently it reduces the tax burden on the board of directors. They are all at it in the upper echelons of companies. Perhaps it is something that we should all aspire to.

Stevo_666

arran77 wrote:

I knew you'd set me straight Stevo

Anyway, just theoretically, how would the ordinary man on the street get into this tax avoidance malarkey, a hard working mechanical estimator for example

Tricky one at your age but if you're willing to retrain then I could do with a minion to make the coffee, I guess you're pretty good at that Really it's like any other graduate type job, you apply to one of the bit accountancy firms, work your butt off and do bastard hard exams for a few years then off into the big wide commercial world to get some experience. That's how did it anyway, like a lot of your best decisions in life it was a bit accidental.

Anonymous

I'm sure that's called tax evasion and is probably illegal

Stevo_666

coriordan wrote:

I'm sure that's called tax evasion and is probably illegal

What, making coffee for me?

arran77

I was meaning more how could I avoid paying my taxes but thanks for the coffee making job offer Stevo, think I'll pass though, don't think I could handle the stress

Stevo_666

arran77 wrote:

I was meaning more how could I avoid paying my taxes but thanks for the coffee making job offer Stevo, think I'll pass though, don't think I could handle the stress

This is what happens when I try to post half cut

If you're on PAYE then it's a bit limited. Pension contributions are the highest difference you can make: tax deduction at your top marginal rate of tax means it's hard to beat in terms of value for money if you don't need the cash, and no arguments from the tax man. That's where some of my spare cash goes. Otherwise if you have a non working wife let her have some of the savings and earn the income tax free. Use your capital gains allowance if you're a share punter. Make sure the wrinklies give some of their money away well before they kick the bucket/go into a home.

Failing that, be a tight bastard like me :P

bdu98252

Majestic 12 wrote:

My brother-in-law is a finance director. An expert at tax avoidance, to the extent that he and his fellow directors have their wives as salaried 'ghost' employees. Not sure how it works but apparently it reduces the tax burden on the board of directors. They are all at it in the upper echelons of companies. Perhaps it is something that we should all aspire to.

This practice is illegal and when discovered the wife will be in court explaining the contribution she makes to the business and if it is anyway complicated she wont be able to explain what she does to benefit the business. This is a quick road to a lot of pain as some individuals of small limited companies have found to their cost through IR35.

blu3cat

bdu98252 wrote:

Majestic 12 wrote:

My brother-in-law is a finance director. An expert at tax avoidance, to the extent that he and his fellow directors have their wives as salaried 'ghost' employees. Not sure how it works but apparently it reduces the tax burden on the board of directors. They are all at it in the upper echelons of companies. Perhaps it is something that we should all aspire to.

This practice is illegal and when discovered the wife will be in court explaining the contribution she makes to the business and if it is anyway complicated she wont be able to explain what she does to benefit the business. This is a quick road to a lot of pain as some individuals of small limited companies have found to their cost through IR35.

However, if the Directors are all share holders in the company, then having thier partners as shareholders means that when a dividend is paid, it will be spread across 2 people rather than one. Effectively this doubles the threshold for higher rate tax (assuming the "wife" doesn't have any other income). However if they are "ghost employees", then this is Tax avoidance rather than being tax efficient and is illegal.

davidof

arran77 wrote:

I knew you'd set me straight Stevo

Anyway, just theoretically, how would the ordinary man on the street get into this tax avoidance malarkey, a hard working mechanical estimator for example

You could start with the Ride Your Bike To Work scheme

Anonymous

Tax avoidance is not illegal. Tax evasion is illegal