Taxman ... How will they know?

andy1_3

hi

I was being paid PAYE for years and am now being paid gross through an agency via isle of man company, how will the IR know i am working?? What measures do they take to check??

Before anyone says this is avoiding tax, just look at the title of the website. And also re: not paying tax affects everyone else blah blah ... when i lost my prev job i was told not entitled to anything benefits wise

Any advice will be greatly appreciated.

Andy

Cook_County

1. The bank where you pay your money into will disclose to HMRC.
2. The bank that is paying you will disclose to HMRC.
3. HMRC will have details of the IoM payor under the exchange of information agreement.
4. Your friends and neighbours will know.
5. Failure to disclose, register for VAT, NI etc is tax evasion which would be a criminal offence likely to result in imprisonment. Tax however is just money and I'd personally prefer to spend some money on paying taxes as against spending time at Her Majesty's pleasure.

bbruce

There used to be a definite dividing line between tax avoidance and tax evasion. Looks like you want to join the second category.
However, Gordon Brown has decided they are just one big grey area, so you may get advice on here how to make your case when you get investigated!

andy1_3

ok, in response to thiswhat's the best option to me, i will more than likely be earning 40k +
Thanks for your advice

silvercar

Earning 40k + your lifestyle is going to make it obvious that you have an income. Don't even think of pretending you have no income you will be caught. To take your "how will they know?" one step further, are you going to claim benefits as they don't know you have an income?

Seriously to minimise your tax you could consider opening a bank account on the Isle of Man and only bringing into the UK the money you need to live on. I don't know the exact benefits but there must be some reason the agency is based in the Isle of Man.

If you are paying your own tax at least you won't have to pay it until the January following the year end. (Tax on earnings for April 2005- April 2006 will be paid in January 2007).

WHA

My advice would be to ditch the Isle of Man agency and use a UK one instead where you will be properly taxed - I presume the Isle of Man firm are charging you far more than a UK one would so you should save some money. As for the money you've earned via the Isle of Man, you need to declare it on your tax return and pay whatever tax and NIC is due on it.

Assuming you are a UK resident, you have to pay tax on your worldwide income and it is your legal responsibility to pay that tax, whether or not the Inland Revenue send you a tax return or tax demands. Failure to do so is a criminal offence and there are plenty of people in prison for doing so.

Remember, regardless of whatever promises the IOM agency have given you, it is YOU who is responsible for your UK taxation and YOU who will have to deal with the taxman, pay the tax, pay the interest and penalties, and possibly do the time in prison - the IOM agency will wash their hands of you as soon as problems arise.

sarahlouise210

In absolute reality......HMRC will only know you are working for the agency if you tell them. You have been paid via PAYE ......eventually there will be a gap in your employment and HMRC will wonder what you have been up to. So they can settle the tax year they will send you a P91 or P92 (this form asks what jobs or period of unemployment you have had) if this form is not returned then any refund you could possibly be due will be disregarded until such time you do let HMRC know what you are doing. This..however..is in the short time. Earning 40K plus per year you will (hopefully) accrue some savings and these will be notified to HMRC - but even then they are only checked selectively and mostly those that are not taxed at all. The most likely way HMRC will find out what you are up to is word of mouth - when someone is earning 40K plus and not paying his dues it makes others very disconcerted and believe me..they will dob you in! To be honest.. yes this is a money saving site..but not a grab all you can and pay nothing site.. you are earning the money-pay your taxes like the rest of us...........or take the eventual consequences like the tax evading scheming man that you appear to be!

silvercar

.. yes this is a money saving site..

Now how much money could we all save if we put all our money in high interest accounts, cancelled all bills, and went to prison for 2 years.

The more money you earn the more money you keep. Minimise your tax if you can, start a pension, open an ISA, give to charity. At the end of the day the money is for you to enjoy. If you can't sleep at night, worry everytime the phone rings and jump when someone answers the door your money is causing you grief.

andy1_3

What happens in my (and others i work with) is my money is pauid gross by my agency (UK based) to a company in IoM. They charge 3% then send rest to my UK account.

I don't want a moral arguement about why and why not etc, just minimisation advice and the best options for me not to overpay into a system where I'll see little benefit

what's my other options apart from umbrella, setting up as limited then getting accountant?? or others

any advice is appreciated but not critical personal comments SL10

PS - i have been paid lthrough the IoM company for 6 months, if i went through an umbrella now, do i declare the past 6 months??

cheers

silvercar

Setting up as a limited could work well for you. Pay yourself a salary of £4,795 - Below threshold for NI and uses tax personal allowance. Declare yourself a dividend of 27,000 a year - no further tax to pay on dividends that utilise your basic rate tax band. You would only then pay (higher rate) tax on any amounts over that if you took the money out of the company. If you don't need to take more leave it in the company for the time being in a company savings account so you receive gross interest on it. Costs would be initial set up costs (£200?) annual accountancy charges (~£500 including tax advice). Corporation tax on company profits is payable but works out cheaper than personal tax and no NI to pay.

sarahlouise210

andy1 wrote:

any advice is appreciated but not critical personal comments SL10

Sorry to have offended.
Your original post was obviously asking how and if you could get away with paying the tax. You are earning a decent salary and many on this site are using the good advice here to stretch their low incomes. I agree maybe I was over the top.. however I do have inside knowledge of HMRC and know that while it is great for you to gain advice on how to minimuse tax here..you will not get away with it for long of you pay nothing. Your original post suggested that this was your ideal solution..i.e. "how will they know?" Unfortunately..this is an open forum where you may not stipulate the content of the replies. Again..sorry.I will leave the others to advise you how to minimise your tax (as minimising it is your only real option - avoidance will only ever land you in trouble)