AIBU to be cross when self employed people use accountants to manipulate their earnings?

[donkeyderby]

Like the people I know who manage to get free prescriptions and free school meals, thanks to clever accounting, while living in swanky houses in nice neighbourhoods. One partner is the self-employed person, the other becomes 'company secretary'. The wages supposedly get ploughed back into the business, which necessitates the purchase of laptops, i-phones, gardeners, cleaners etc., etc., all through the business, yet none of it really used in the business.

And all those builders etc., who ask to be paid in cash to avoid tax.

Surely the tax avoiders and evaders must be stopped as much as the benefits cheats?

Hilarious, next time you are on holiday and being paid for the pleasure spare a thought to us SE that pay peoples wages and can't afford to take the time off won't you ?

No xstitch, noone is suggesting that, of course you should have used an accountant to sort it out!

What oblomov and i are saying is that some accountants are dodgy, and some self employed tax payers don't want to pull their weight when it comes to paying what they should .

Just because you're honest and doing it by the book, doesn't mean everyone else is..

Oh and revenue and customs would have a fit if an IT company put through gardening expenses, how stupid do you think the tax office is ?

Don't get nothing but child benefit but soon..... Never mind that, done on another thread.
You can't get free scripts, pay for gardener, cleaner, etc. Believe me the tax man sees all. You have to be really careful with receipts and even show the item to him if he inspects. Saying that, laptops, phones are used when at home and used for business purposes. Running a business is hard work 24/7 and we employ people which is challenging too.

We pay our wack!

I think there are sime eslf employed folk who get oaid a lot of cash in hand and don't declare it for tax purposes.
Their accountant never sees the real income.
That's just thieving.

Then there are the rest of us who employ a good accountant to make sure we are able to take the opportunity of any tax breaks. Just as employed folk get their allowances etc.

And yes, my accountant will ask me if I have spent money on x and Y. And I answer honestly and back it up with receipts.
This is not illegal or in any way immoral. And it most certanly does not leave me in a position to claim benefits.

Not sure if YABU or just don't know what you're talking about.

I'm self employed. Let me tell you, no accountant would help you fiddle the books the way you speak. You would need to do it yourself (you don't need an accountant), but the way HMRC is, you would be a fool to try.

Agree with JellyKat.
Sweetness, how did you manage on such a small amount? Has anyone sat down and gone through how much of a 'viable business', yours actually is. Its tough, but it sounds like this really needs to be done. Do you not have any alternatives? PAYE ?
Many people, I did their accounts. Of course corp tax, but I prefer personal tax. And many weren't making that much, but loved it, and that was good enough. Small record companies, recording studios, that kind of thing. If thats the case, then thats their choice. Which is fine. He had left a 70k job to do this and hadn't made any money for 4 years. But he was happy.
Are you ?

Am I the only one who gets nervous at even the idea of falsifying their accounts?

I am self employed and I am even nervous about claiming for a business related taxi trip that I forgot to get a receipt for! I am seriously still trying to decide whether to eat the £8 or make the receipt section of my books as 'unavailable' and see what happens!

Never mind putting my non existent household staff on my books!!

I agree with some of the argument here, like the nail bars and hairdressers who are never busy but manage to 'survive'. [Drug money and money laundering] they are ones to watch, taxman!!

Tee you're not the only one - I know exactly what you mean.
I am sooo festidious about getting receipts that i panic when the Post Office gives me a Certificate of Posting instead of a proof of posting receipt (the latter has the price on it, the other is hand-written and stamped and has no price on it)

My Dh and I are both self employed and our accountant is as honest as they come (thankfully).

No one pays more tax than they have to and why should I not be able to put a laptop and phone calls through as a business expense?

As a maternity nanny there is so little that I can claim back and virtually all of my clients pay me directly into my account (I hate cheques!). Even if I babysit for them, I ask them to pay directly into my account as that way no can say I am "fiddling" my accounts

I agree it is the cash-in-hand thing where people cheat the system.

I know of a family on free school meals who can pay for all-inclusive holidays in peak season.

I know another family who got a 100% bursery for their son at a private school on the basis that they were on a low income. Father is self-employed and mother works full-time, sorry I just don't buy it.

I also know someone whose business accounts were frozen when Inland Revenue started to investigate them. They have literally walked away from those bank accounts which contain 10s of thousands of pounds. An indication of how much they were making by cheating the system if they can afford to walk away, methinks...

I think people working as contractors to companies (eg in IT) who set themselves up as companies also have many loopholes they can exploit in terms of business expenses...

Tee - If I don't have a receipt for it then I don't claim for it.

Gardeners and cleaners - I wish!

decorhate, my dh is an it contractor and i would love to know what expenses he can fiddle, chance would be fine thing! Accountants are very strict about what you can claim, so strict are therules that you may be able to claim for a mobile but not an i phone or blackberry, which you could consider more useful for a business than an ordinary mobile. Keeping reciepts for 6 years and knowing the inland revenue can investigate you at any time is no picnic. Running your own business is no picnic and not the way to an easy life, no job security, no sick pay, no work no pay.

A chartered accountant can only help save tax legally. They produce financial statements based on the information provided by the company secretary, sole trader.

It makes me that people think it's all down to a clever accountant. If people fiddle the books it's done before the accountant gets to look at them. Of course they can advise a client that the books don't look realistic but it's up to the client if he wants to risk an investigation by the inland revenue.

Every penny I earn is taxed and it does grate that builders and self employed are pocketing cash. There is a limit to how much they can do that. Money has to go through the bank to pay for bills. Reckon a mortgage lender would be suspicious of a builder walking in with cash every month. Harder nowadays for businesses to fiddle with debit cards etc.

Ah but it is amazing how many contractors are nothing like contractors - instead they work in effect as employees but are not subject to PAYE and take a low salary and the rest is classed as dividends.

I know of many so called contractors - they are not truly self-employed as their job is never at risk, they in effect work for an employer - take the IT and Construction Industry. They work alongside PAYE employees doing EXACTLY the same job - but claim they are contractors.

fizzle, that doesn't sound legal. The inland revenue would class them as employees.

fizzledrizzle - but isn't that exactly where IR35 kicks in? Tax regimes are different if you are an "employed contractor" (with one client using their equipment) than if you are genuinely contracting your services out.

www.hmrc.gov.uk/ir35/

I agree to an extent OP, though not sure if anyone actually gets free school meals... I don't think they are fiddling the books but I know there are loopholes so people can pay themselves a nominal salary and then take the rest in dividends.

Like my next door neighbour who told me with glee how they get loads of child tax credit, including the childcare element, because they only put down her IT contractor husband's 'salary' on the form and don't declare the 'dividends'. Of course they also pay the basic rate tax and will get to keep CB.

BUT, I know it is swings and roundabouts... DH used to be an IT contractor but took a permanent role when the kids came along as he wanted job security and a pension.

Now lets see:

free school meals? No
free prescriptions? No
laptops? Yes, a core bit of business equipment.
iphones? Yes, have to be in touch with the office and clients on the road. We don't pay the premium to text our mates and play angry birds!
gardners? I wish!
cleaners? You're having a laugh!

It's no easy ride. Any profits mostly go back into the business to try and grow it. Yes we pay slightly lower wages and take dividends, that's how it works. In good years, you can pay a higher dividend than in bad years. Salaries are less flexible. This is why companies organise their affairs in this way.

YABU.

an accountant employed to check your finances may actually conclude you need to pay more tax - yet this is still worthwhile as if you get your tax wrong, you could face a large unexpected bill, or even worse, a prison sentence.

any self-employed person would be foolish, IMo, to make a tax return without consulting an accountant with a good knowledge of current tax legislation.

OP, if you have genuine evidence of tax evasion (illegal) not tax avoidance (legal) then you could report it to HMRC if you wish.

If you don't have any such evidence then I suggest you get on with your own life and leave others to theirs. Life is too short.

A SE person could declare a false low income if they were foolish enough, get child tax credits, working tax credits, housing and council tax benefits too.

But they would not get free school meals. You don't qualify unless you are on a low income AND if you are not in receipt of working tax credits as a family.

Eventually I suppose HMRC would start to question how viable a business only making £3000 p.a actually is and would be asking to see your bank statements.

Its not the clever accounting...its the cash work which duffs this country up...

I know someone very well who gets the maximum amount of tax credits because the company hasn't been very profitable for a few years, but the "cash" earned makes for a very very comfortable lifestyle!

Oblomov It's complicated. DH is actually more freelance so there isn't a business as such - just him working and invoicing. He is working hard to try to break into an industry that's quite hard to infiltrate. And yes, along the similar lines of those you suggest. We have a current account mortgage and since I left work after having DS1 5 yrs ago we have been supplementing our income using equity in our property. It's partly our decision because we said we were happy to do this while the DCs were small (DS2 will be 3 in Jan). At some point I'll go back to work but with DH being freelance he has no steady work pattern so it would be hard for me to work "a proper job" aroound him and the DCs (hence the Avon!)