Need clarification on expenses paid directly to my abroad account

[pramo]

I am currently contracting though a limited company(body shopping - say company XYZ) which pays me partly as expenses and partly as salary. I was sponsored Tier 2 General Visa through them though the job hunting process was completely my headache and they don't provide any assistance in helping me get a job.

In the last few months of working through them, I noticed that they were directly crediting the expenses into my Indian account (my personal NRI account) from an UAE account which made me suspicious.
This happens every month and I was quite worried as I was not sure whether the payment I am receiving is genuine after tax payment. I don't provide any receipts for expenses, so not sure on what basis the expenses are made.

To give some background and figures,
I look for a contract on my own and once I am successful, we have a % understanding, so they pay a % of the contracting amount to me as salary and expenses.
For eg:- If I earn £100 per day, they take a 30% cut, so I get paid £70 though not completely as salary, I get around £40 as salary and the rest is credited to my NRI account in India from a UAE account.
So effectively I pay NI and tax for the £40 that I earn as salary.

The reason I chose this company-XYZ was purely for visa. I had been on Tier 2 ICT visa earlier for few years. With my previous company(say company ABC), they had few clients though due to the economy slowing down, they were not able to extend my contract here in UK. In the meantime, I started looking for a contract on my own and was able to sign a contract with a client but my company "ABC" was acting as a Limited Company. I was not happy with the company "ABC", so I needed another sponsor which was "XYZ". They sponsored me a Tier 2 General Visa on an understanding that I pay them 30% of my earnings.

So the question is,
is the company "XYZ" cheating HMRC by not paying taxes (directly paying me expenses) and am I also helping them in the process?
So if the HMRC questions me at some point in time, what is my liability and what is the liability of the company "XYZ" ?

[LisaContractorUmbrella]

Are you tax resident in the UK Pramo?

[DirtyDog]

You should only be claiming for expenses which are incurred in the course of the business. You should then have receipts to back those expenses up, unless the umbrella company is operating on a scale rate. Expenses that are incurred in for the business, which are then merely reimbursed to you, should attract no tax.

If you are not claiming the expenses, but they are just saying "oh, here's a load of expense money", then that would be a tax evasion measure.

Do you complete a self assessment tax return? If so, what figures are you putting down? What does your P60 show, and what does your P11D show?

[malvolio]

Tier 2 visas are tied to jobs, so having one while finding your own work means someone is breaking at least one law.

As for liability, assuming you don't get done for evasion - which is six years inside - it's the unpaid tax plus interest plus up to another 100% on top as fines. And, of course, cancellation of the visa and permission to stay in the UK.

Perhaps looking to move to a more conventional arrangement would be a good idea?

[northernladuk]

Tier 2 visas are tied to jobs, so having one while finding your own work means someone is breaking at least one law.

As for liability, assuming you don't get done for evasion - which is six years inside - it's the unpaid tax plus interest plus up to another 100% on top as fines. And, of course, cancellation of the visa and permission to stay in the UK.

Perhaps looking to move to a more conventional arrangement would be a good idea?

I would guess a whole raft of them. I mean, paying a company 30% of your rate to get sponsorship isn't really cricket. I should think this would be a right mess if we had all the facts. Looks like something that is discussed on the immigration forums.

EDIT : Something like this.. http://www.immigrationboards.com/viewtopic.php?t=77309

[LisaContractorUmbrella]

I would guess a whole raft of them. I mean, paying a company 30% of your rate to get sponsorship isn't really cricket. I should think this would be a right mess if we had all the facts. Looks like something that is discussed on the immigration forums.

It's difficult to actually find something right about the OP's situation isn't it

[pramo]

If you are not claiming the expenses, but they are just saying "oh, here's a load of expense money", then that would be a tax evasion measure.
Do you complete a self assessment tax return? If so, what figures are you putting down? What does your P60 show, and what does your P11D show?

I didn't fill P11D, the P60 figures shows only my salary and the tax deducted on it. I don't have any details regarding the expenses etc.
What I am worried about is since I rely on my employer to pay the taxes properly and I am not an expert in this area, I am not sure whether this would also affect me?
Or may be my employer is exploiting any loopholes in the taxation process in which case he can get away from this even if HMRC does spot something fishy?

Tier 2 visas are tied to jobs, so having one while finding your own work means someone is breaking at least one law.

True, so I am their employee, but I need to find contracts on my own, if not I wouldn't be paid. So I need to find contracts on my own though my employer does say he would help me find contracts. Once I find a contract, a % of my daily contract fee goes to him. If I am without contracts in between, I won't get paid.

To cut things short, my worry is more along these lines.
Will I face the consequences due to my employer who seems to exploit loopholes in the taxation policies?
Is this a loophole which my employer is exploiting or is this activity illegal?

[pramo]

If you are not claiming the expenses, but they are just saying "oh, here's a load of expense money", then that would be a tax evasion measure.
Do you complete a self assessment tax return? If so, what figures are you putting down? What does your P60 show, and what does your P11D show?

I didn't fill P11D, the P60 figures shows only my salary and the tax deducted on it. I don't have any details regarding the expenses etc.
What I am worried about is since I rely on my employer to pay the taxes properly and I am not an expert in this area, I am not sure whether this would also affect me?
Or may be my employer is exploiting any loopholes in the taxation process in which case he can get away from this even if HMRC does spot something fishy?

Tier 2 visas are tied to jobs, so having one while finding your own work means someone is breaking at least one law.

True, so I am their employee, but I need to find contracts on my own, if not I wouldn't be paid. So I need to find contracts on my own though my employer does say he would help me find contracts. Once I find a contract, a % of my daily contract fee goes to him. If I am without contracts in between, I won't get paid.

To cut things short, my worry is more along these lines.
Will I face the consequences due to my employer who seems to exploit loopholes in the taxation policies?
Is this a loophole which my employer is exploiting or is this activity illegal?

[malvolio]

I didn't fill P11D, the P60 figures shows only my salary and the tax deducted on it. I don't have any details regarding the expenses etc.
What I am worried about is since I rely on my employer to pay the taxes properly and I am not an expert in this area, I am not sure whether this would also affect me?
Or may be my employer is exploiting any loopholes in the taxation process in which case he can get away from this even if HMRC does spot something fishy?


True, so I am their employee, but I need to find contracts on my own, if not I wouldn't be paid. So I need to find contracts on my own though my employer does say he would help me find contracts. Once I find a contract, a % of my daily contract fee goes to him. If I am without contracts in between, I won't get paid.

To cut things short, my worry is more along these lines.
Will I face the consequences due to my employer who seems to exploit loopholes in the taxation policies?
Is this a loophole which my employer is exploiting or is this activity illegal?

I think you need to talk to a lawyer (or at the very least the PCG, who would be very interested in your "employer's" arrangements). You are not only being royally ripped off (for example, you can't be charged for job seeking services) you shouldn't even be working here.

[DirtyDog]

I didn't fill P11D, the P60 figures shows only my salary and the tax deducted on it. I don't have any details regarding the expenses etc.
What I am worried about is since I rely on my employer to pay the taxes properly and I am not an expert in this area, I am not sure whether this would also affect me?
Or may be my employer is exploiting any loopholes in the taxation process in which case he can get away from this even if HMRC does spot something fishy?

You might want to ask your employer these questions. If they are paying expenses, then they should have a clear record of what you are claiming (and so should you) - ask if they are paying on a scale rate, or whether they have a dispensation which means that the expenses do not need to be included on a P11D. Note that just because they have a dispensation, that doesn't mean that YOU don't need to keep a record of what expenses you are claiming and what they are for.

Income tax is a personal commitment, so HMRC would come to you for the shortfall and any penalties which might occur. Ignorance is no defence.

Will I face the consequences due to my employer who seems to exploit loopholes in the taxation policies?
Is this a loophole which my employer is exploiting or is this activity illegal?

If you aren't paying enough tax, then it's your responsibility to make sure that you are. If HMRC investigate, you'd better make sure you know what has been paid, and what has been reimbursed (and for what). If there is a discrepancy, then you'll be in trouble.

If it's a valid expense, then there is nothing wrong with reimbursing the expenses you are due. If it isn't a valid expense, then it's an attempt to avoid PAYE and National Insurance contributions, which would be tax evasion. Start working on your defence now.