Here's a question: if you did what I'm sure a lot of sole traders do and get paid a significant amount of your income in cash and not tell the tax man, and not put it into any bank account, how much would you be able to use it without attracting suspiscion? Sure you could get through a couple of hundred every month in the pub or whatever, but if you had a couple of thousand you'd probably struggle. You couldn't for example keep paying your mortgage in cash without the risk of being found out. Or could you?
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Will work inside IR35. Or for food. -
Tax free
People do & get away with it....the problem comes on enquiry. Dealt with a case a number of years ago when the client turned up to an enquiry meeting in a Posche and designer gear despite only declaring very low profits that clearly did not support this lifestyle...not very clever!Originally posted by VectraMan
Had another where the client would have got away with it and was extremely clever in loosing a lot of cash....was only found out as the inspector lived in a nearby street and had "heard" that there was an undisclosed villa in Spain, which turned out to be paid for using undisclosed cash from his 2 pubs!
Not a good idea to hold back large sums of cash! There are of course moneylaundering regulations that prevent large cash deposits going into the banks without a few eyebrows and questions being raised.
The general consensus from a number of inspectors is that they expect people to keep back a few quid in cash but they get really annoyed when people take too much!
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Originally posted by Darren@1stAccountancyServThe general consensus from a number of inspectors is that they expect people to keep back a few quid in cash but they get really annoyed when people take too much!
In other words nobody is perfect, just dont take the piss. An eminently sensible approach IMHO."Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.Comment
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When I worked for the Revenue our estimate was that 5% of people would scrupulously pay every penny owed, 90% would make a good attempt to be honest but would try to get away with what they could, and 5% would take the piss as far as possible.Originally posted by DaveB
In an ideal world HMRC would go for the 5% taking the piss, and there will be inspectors doing that, but the reality is that most bread-and-butter investigations focus on clients and areas of the accounts that are easy money for a quick turnaround.
Unfortunately, taxpayers that are commonly thought to require closer examination (the wealthy and corporations) are also those that are more likely to hire decent lawyers and tax accountants that will draw out the investigation.Comment
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Darren
How do you validate what you are being told by the contractors when preparing year end accounts. I know Accountants put in a disclaimer that the reports are prepared from information provided to them, but with no audit requirement the scope for 'creative accounting' would appear to be in place!!
I presume if the Revenue see the company trading in industry wide levels of income and profitability then they would be satisfied that all was well - especially if a company used a reputable accountant.Comment
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Accounts
The accounts prep process for a contractor can be quite similar to carrying out an audit mainly because of the level of transactions involved...main difference is that we don't have to complete reams of audit programme paperwork.Originally posted by maximus
As income tends to be remitted from agencies direct to the bank account, this is easy to vouch....it's the expenses that come under most scrutiny which is why it's a good idea to retain all receipts together with recording as accurately as possible...this is the area where "creative accounting" is likely to take place.
And you're correct, if the accountant has a good relationship with the IR and is known to provide accurate figures, then it should go in the clients favour on enquiry.Comment
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