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?

Of course Litchick is right, theats the whole point Of UOH ( Use of Home ) allowances. Part of phone, electric. Of course you can employ a cleaner, if clients visit.

YABU on the first bit (but I think you get that by now), but YANBU in regards to people who take cash in hand in order to evade taxes.
that is illegal. And immoral.

In my line of work we once "discovered" someone who refused to give out receipts, and only accepted payment in cash. His reasons? He didn't want his ex knowing how much he earned so he only had to pay the absolute minimum for child maintenance, and could evade paying taxes. His nuts deserve to go in a vice, IMO.

I just wonder if the OP really knows what her acquaintance's financial situation is?

On the face of it I drive new car, have a fancy MAC laptop, use a Blackberry, but I didn't actually pay myself a wage at all for 18 months. I now only get just over minimum wage. I don't have pots of cash to spend but I DO have the above flash items because they are vital to the business.

I also have a cleaner because I don't have the energy or desire to hoover when I get home at 10pm some nights.

But I've been wearing the same jeans for a year. Only have one decent pair of shoes for smart (my business requires rough workwear). We eat very simply and huddle round the fire in the winter to save on heating.

Priorities. We all have different ones

My office is at home.
So if my client (one of my friend's) drops round on a Friday pm for a couple of glasses of wine does that mean I can employ a cleaner to clean the house and a gardener to deal with the wilderness outside. Just off to call my accountant.

nice try, potplant !!

Nickelbabe & Katef You can be employed by your dh and not be PAYE, as long as you are only paid a certain amount a year under £4500 or something,
But it is a pain as I am not entitled to anything, no SMP, no anything, just child benefit (and as someone else said thats a whole other thread)

But must see if dh can change his accountant because he works 24/7 just to pay the tax man , and also has the added bonus of paying the tax on money he hasn't earned yet, self employment is NOT a bed of roses

YABU

Just because someone wants to be paid in cash doesnt automatically mean they want to avoid tax. DH (SE electrician) prefers cash as his bank charges a fortune for just about everything. Everything still goes through the books - it has to to allow him to register work for building regs.

if you're employed under PAYE (even if it's just to use your tax allowance, so around £475 per month) you can claim SMP - did this for one of my clients the other year.

I work in a Chartered accountant's office part time and prepare accounts for the self employed and limited companies. We check everything and disallow "dodgy reciepts" - of course some will "try it on" but they don't get away with it!!

As another poster says we will advise on the LEGAL ways to mimimise tax, and might for expmple suggest a Limited Company Structure rather than being self employed if that is appropriate. But break the law, no!!

Anyone lying on their tax return now and getting caught faces very punitive sanctions.

Shrinking I get paid less than that as we don't have PAYE as there is just dh & I, so entitled to F'all, or so I was told

if someone is employing their partner (who has no other income) they should be paying £475 a month a month and putting it through a PAYE scheme.
Not least because at that level of earnings you are credited with NI contributions for 2nd state pension purposes.
If such a person is pregnant then the wage should be increased for the relevant period to bring them into the SMP regime.

That's the kind of advice you are paying a decent accountant for.

People who put personal gardeners through their business and claim tax relief for it are doing so illegally.

Lots of people appear to have a problem with using the current laws to maximise their net income - that is another discussion - but there is a massive difference between that and lying (claiming to have business expenses which aren't or not declaring income).

Chasing I don't have any other income, we were given 2 choices PAYE or lesser amount a month, I think at the time we thought PAYE was too complicated and tbh I was pg with ds at time and didn't really look into to it any further and still haven't (ds is now 7).

thanks PlumBumMum - that does make sense.

and I agree - one of the most annoying things about SE is thhe fact that if you've sold something , you have to put it as income even if you haven't been paid for it! Which means that if someone never pays, you're screwed. (or you're taxed for it in the previous year, when you don't have their money to pay with!)

What I am saying is that even if you are taking the lesser amount per month it should be going through a PAYE scheme. There would be (virtually) no cost to this as you could do it yourself very easily, and at that level of pay there would be no PAYE to pay, and no employers or employees NIC to pay. Basically you would submit nil monthly payslips and an end of year employer return online, which you could easily do yourself.

Preferably you are NOT an employee, you are a director without a service of contract.

This may seem pointless.
The point is that you get the NI contributions record (which you personally may get for being at home with an under 12 - but this doesn't apply to everyone).
And maybe entitlement to other contributions related benefits (I'd have to double check that) which you wouldn't get from the "at home with an under 12".

As I said, you could also have had a higher salary for a time (even at the detriment of your partners salary if there was no spare cash in the business), paid a small amount of PAYE and NI and then qualified for SMP - which the government would have repaid to the employer plus a 5% supplement for small employers.

Is this using the system to your best advantage - yes.
Is this in any way illegal - no.

That's the kind of advice you pay a decent accountant for, or not if you (not saying you do or don't, using a generic you) think it is immoral.

Completely different to lying about your circumstances.

if you haven't received payment for an invoice, and don't expect to receive it - then provide for it in the year as a bad debt.

you don't have to register as an employer is they're earning fewer than £90 per week.

I have 3 under 12, so maybe that has something to do with it, should probably start going with dh to accountant yearly meetings and see,
as I'm doing alot more for dh now anyway to more than cover my meager wages

mickelbabe thats sounds about right, with my 87.50

and doing so's a lot more trouble than it's worth - once you've registered, you can't de-register, so like me, where my employee earned more than the threshold for one month, and now only works during school holidays (normally only 2 or 3 days a week, so normally under the threshold), I still have to fill in employee's forms for her every quarter.
:(

I know an IT contractor who is a 'limited company' but works solely for one company and has done for 2 years.
The person concerned pays himself and spouse,who actually does no work for the 'company' in dividends and thus avoids alot of higher rate tax.(and presumably will keep child benefit....)

no, you are right, there are circumstances in which you don't need to register.

what I am saying is that if you (or your company) only employ your spouse (or spouse and self in a company) then given the minimal amount of paperwork involved and the related benefits that you gain - it makes a lot of sense to register.

And the IT contractor has either structured their contract in such a way that they no longer fall under the remit of an employee - or are not declaring their income under IR35, which is illegal.
But IR35 is a can of worms.

Thanks didn't want to be taking the moral high ground to find we are actually doing something wrong but with our accountant there is no chance anyway,

Chasing the contract only goes so far - it is the reality of the contractual relationship that is looked at.

Georgina - I know of a Management Contractor - who does the same, wife supposedly works, he has worked for the same company for 10 years, and gets £500 a day.

oh indeed, the reality has to support the contract. But we don't know the reality - the stated example might be within the law, or might not.