umbrella companies and the money laundering rules

Re: Re:Suspicion

tim123: If she aint using it then I think she is okay - its up to Revenue to check their books to see if she is on the scheme. She uses this address for all mail including IR tax returns (obviously i did not open them but i see front) and she actually does not live in the house. If she did not use the scheme then I see no reason why would she get all mail at this address and use it on all contracts. In any case its up to Revenue to decide if she breaks or not - from my point of view I can go to court and prove that she did not live there for at least 18 months - and thats not just my word.

Fiddle wise - my calculations are different. IF she is using rent a room then she can have £4250 every year tax free - now she since she did not live there this amount would be subject to income tax - 23% I believe, which is £1k per year, and she definately was into this for at least 2 years.

Well, shame IR wont take her to court - she did take me to court for alleged damages and lost it spectacularly

Re:FMCs

Sorry Tim - started a rant and couldn't stop!

Any suspected tax evasion must be reported to NCIS under the money laundering rules by either the agent to the scheme or more likely any UK bank that you transfer the funds to after you come back to the UK(the banks have been subject to the ML rules for longer).

How much evidence do you need for suspicion? - whatever a reasonable person would consider as proof.

Re: FMCs

Bradly,

Sorry, I was referring to those companies that manage income from overseas employment.

These companies have schemes which limit liability to tax in the 'host' company and are unambigiously free of UK tax once someone has met the non-residency rules (one complete tax year).

However, they will tell you (as they did me) that this money is *always* free of UK tax even if you return after a few months. This advice is patently wrong, and they must know this (at least the managers of these companies must know). Are they now risking a criminal prosecution for this? (and FYI I do hope that they are, it should cost nothing to give correct advice)

Tim

FMCs

s739 Taxes Act 1988

the following provisions of this section shall have effect for the purpose of preventing the avoiding by individuals ordinarily resident in the United Kingdom of liability to income tax by means of transfers of assets by virtue or in consequence of which, either alone or in conjunction with associated operations, income becomes payable to persons resident or domiciled outside the United Kingdom

.

ie you can't avoid tax in the UK by giving it to a company overseas eg IOM, Jersey, Guernsey etc etc

I think that, the controlled foreign companies legislation and the transfer pricing legislation about covers it.

As I've said before, do not believe that any of these schemes will work unless you have in your hand a letter from the Inland Revenue saying everything is fine and above board for your particular circumstances.

Foreign Management Companies

I've been kind of wondering all day if the MCs that run some of the somewhat questionable offshore 'solutions' will be liable under these rules. I have heard several stories where these people don't just turn a blind-eye to their client's indiscretions but actively create a 'scheme' to cheat the system.

Does anyone know if these people are now playing with fire?

tim

Re: Re:Suspicion

Atw:

1) You say she is a cheat IF she is using Rent-a room. What if she isn't using it?

2) The rent-a-room scheme is not intended simply as a generous concession on the part of the IR, but as a simplification. If you use rent-a-room you are NOT entitled to deduct your legitimate expenses (which includes a pro-rata amount of your mortgage interest payments) off of the rent before calculating the tax due, the 4000 available for rent-a-room is the IR's reasonable guess as to what these allowable expenses might be (though for someone with no mortgage on the property this is on the high side). They realise that they lose a 'bit' because there are some people paying less tax than they should, but they gain on not having to do the asociated paperwork.

3) The maximum possible fiddle using RaR is 1700 for a higher-rate tax-payer and about 900 quid for a standard rate payer (assuming zero allowable expenses which is very very unlikely).

4) The revenue will not be interested in taking such a piddly case to court (nor will they donate the proceeds to charity just because you ask nicely). Your options are to simply shop the woman with no preconditions or do nothing.

HTH

Tim

Re: Re:Suspicion

BGG:

It is my firm believe now that IF she is using "Rent-a-Room" scheme which allows for free £4k every year THEN she is tax fraud because she broken rule of the scheme of living in the same property.

I am not the kind of person who "rats" on people but she started war with me and given my understanding that tax evasion was likely to have been committed there I feel necessary to alert authorities.

I am going to make it in an honourable way - ask to pay any reward to charity and supply all my details with a view to give statement in court, if necessary.

If anyone thinks I am a doing something really stupid or just think against the idea then please speak your mind.

Reporting

If a financial advisor has ANY suspision of irregularities he HAS to report you to the money laundering authoroties. If he doesn't report you and you are found to be money laundering he is then liably to a custodial sentence. The rules for this have been really tightened up recently.

Re: Re:Suspicion

I'm sure the Revenue would be very interested in £2 - 3k of tax.

Could have a field day with that one, going back to the dawn of time....

Re: Re:Suspicion

ATW : I know what you angle is on this...Landlady from hell..am I right ?

Re: Re:Suspicion

is revenue really investigating people reported on their "fraud phone line"? I mean obviously it depends on amount, how important would £2-3k of unpaid tax be for them?

Re:Suspicion

Agreed ASB. The Revenue rules apply here - guilty until you can prove yourself innocent.

Suspicion

I think you nee a '"don't" in your penultimate sentence

The whole set of ML rules is getting stupid. It is predicated on an assumption of guilt and it is, IMO, fundamentally flawed.

If I produce records that my advisors are suspicious of it is down to them to query them and then be satisfied with my answers or exclude those transactions.

If I can't satisfy them then if they include them and report me to NCIS who in turn make an investigation and I prove to NCIS that the allegations are unfounded then the adviser would need to defend their suspicions in the subsequent malpractive case. Going around making false accusations against people is a serious business, but the new rules effectively demand advisers do just that.

The Government is to issue more "guidance" about Money Laundering this month.

The English Institute's interim guidance on ML says

Tax evasion is a criminal offence irrespective of the amount involved and irrespective of whether the Inland Revenue or HM Customs and Excise are prepared to settle on a civil basis. Suspected tax evasion, including for example the deliberate under-declaration of income or the intentional over-claiming of expenses, falls within the scope of the money laundering rules and needs to be reported to NCIS even if the Revenue and/or Customs are already aware of it

.
How many people knew that to claim more expenses that you actually expend is potentially criminal?
It seems that the umbrella companies must report you to NCIS if they "suspect" that you're claiming too much.