Taxman ... How will they know?

andy1_3

no probs just want to know what is the best option as i paid PAYE for my first 6 month contract even with expenses of approx £200 per week

cheerfulcat

andy1 wrote:

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

Do you pay into a personal pension? This is a very good way for a higher rate tax payer to reduce the tax bill. If you can afford it, you can make sufficient contributions to bring you down to the basic rate level. Someone else mentioned charitable donations; this is another good way to bring you down to the BR level.

There are investments such as VCTs and EISs which can reduce your tax liabilities but they are pretty high up the risk scale. Keep an eye out for CITR accounts from Charity Bank; when available, they offer valuable tax reliefs free from investment risk.

Finally, I would urge you to see a good tax accountant; they can save you absolute fortunes.

andy1_3

i think the iom just have a business account (which is a requirement of my uk agency that it's paid to a business account) they then pass on to me ... if that makes sence

Is anyone else a contractor in a similar situation and how do you make the most of your pay

Bordera

andy1 wrote:

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??

Andy

The agency, UK based I think you said, will be required to prepare accounts. They will want tax relief themselves for the amounts they are paying you. That is just one of the routes by which HMRC will find you if you are not shopped by someone before HMRC get the chance. Money does not just "appear" these days. Even Swiss Banks have to toe the line now.

There are ways of legally making your situation work to your advantadge but a lot will depend on the terms of your contract, the exact mechanics of payment and a load of other things besides.

The advise you are asking for is very valuable. Those who know how to deal with this will either charge for that knowledge or will have had to pay for it themselves. Also please remember that things change; what worked last year will not necessarily work next year, that is why seeking professional advice is your best bet.

Good luck

hjd

The Revenue send out a form to agencies and other companies asking for details of payments (usually totalling over £1,000 for the year) made to individuals/service companies. This form has to be completed annually and gives the Revenue all the necessary information to find people...

Debt_Free_Chick

andy1 wrote:

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

I don't think we necessarily know how the taxman might find out - if anyone suspects you are not paying tax, they can shop you confidentially. The taxman is likely to have a number of different ways of tracking down those who don't pay tax, but they're not going to publicise them, as that would simply give tax-evaders the chance to escape further.

The problem is that if the taxman finds out, you are up the creek as you have no defence. The law places an obligation on you as an individual to ensure you are paying all the tax you ought to be. For this reason, you should have asked for a tax return or signed up for self assessment online. Once the taxman finds out, you could end up with a nasty fine - you will almost certainly be charged interest on any tax paid late.

In relation to the title of this site, I'm sure that Martin's intention is that this for legitimate and legal ways of saving money ..... and not ways of getting out of paying anything that we are obliged to pay.

You could just leave things as they are, but that really will increase the risk of a fine and increase the interest you pay on the tax you owe.

Or you could ring the tax office and grovel a little ..... you will need to complete a tax return for any gross income you received between 6 April 2004 and 5 April 2005.

Regards