Is this Tax Evasion or Tax Avoidance ?

Dublin_Diva

Sorry not sure where to post this but

I recently found out that a number of directors in my company have their spouses on the payroll , these are ghost employees , I know that they have never worked for the company , not even from home as secretarial duties. I was copied in on an email that I shouldn't have been with all the details of who , how much and length of time .

These people are earning £200k+ a year and they are paying their spouses £30k a year and some of this has been going on for over 10 years.

Morally I don't think this is right and it seems to me that they are diverting part of their salary to use up their spouses unused tax allowances and lower rate tax bands.

Do I report what I know to HMRC and what happens if they launch an investigation. This is not happening any more, as the Auditors found it , but I thought they would inform HMRC but nothing has happened yet ?

If this is tax evasion and not tax avoidance would the people be prosecuted or just fined?

The reason I ask is if customers were to find out then they might leave and people would lose their jobs. Its hard enough that I know this but it would be harder knowing that I caused people to lose their jobs.

My husband says to leave it alone but I can't sleep at night knowing this.

Please be gentle with me as I'm feeling very stressed and emotional about this.

DD

getmore4less

Shareholders might be interested

chrismac1

This is a very tricky one. Forget about the auditors, they are cronies of the directors and will do nothing which is precisely what they've been doing for years.

The other question is whether you have a full picture, it's just possible all this is being declared fully on P11ds and all tax paid - unlikely to be sure.

Whistleblowing accountants lose their jobs 80% of the time, and sometimes their careers.

I had a situation in my first job in industry in 1991 where one director was claiming an expensive family holiday as business. After consulting ICAEW ethics hotline, I signed all 30 or so of the other P11ds personally - back then it was all manual - and had the director sign his own and left it at that.

I've had a few difficult ethical situations down the years. As a minimum you must protect your own position, in situations like these if it all comes to light these sorts of characters always look for a fall guy some levels below to blame for the whole thing. Don't be that patsy.

If you are in a professional institute, consult them. Find out as many of the facts as you can before you do so. Consider whether you want to carry on working there.

real1314

Surely the key issue isn't whether the relevant rate of tax is being paid, but that the partners are not actually performing any duties of employment and are being used to reduce the directors tax liabilities?

I'd say it's pretty clear evasion, but that the auditors should be reporting this, otherwise they are failing in their ethical requirements.
To suggest that auditors are "cronies of the directors" is a bit odd - that would be more true of the accountants. The auditors should be independant (although is this an auditable company - turnover >£6m pa?) :cool:

whitewing

I would delete your post, especially considering your user name.

It is difficult to see how you can report it and it not be tracked back to you if you were copied on the email?

Do the auditors belong to some kind of society/body? You may be able to get general advice from them, enough to let you sleep at night.

Quentin

How do you know they have "never worked for the company"?

Just because you may never have seen them on the premises doesn't mean they don't do any work for the company!

Your husband gave you sound advice!

jamesd

Dublin_Diva wrote: »

This is not happening any more, as the Auditors found it , but I thought they would inform HMRC but nothing has happened yet ?

Leave it to the auditors and the board to sort out how to handle it beyond ending it, as they have.

You may later find that some directors leave or do not have their pay increased to the level that would be their official pay plus their wife's pay, effectively fining them for the conduct.

I'm assuming that you are not a professional covered by money laundering or other laws who would be committing a crime yourself by not reporting this. If you are, consult your appropriate professional body for guidance.

prowla

On £30k/year they are above the radar and are paying tax and NI.

The wives may well be doing work for the company, that you don't know about.

I don't think that it is either tax evasion or avoidance, and company can employ who they like, subject to the scrutiny of the auditors.

Nonetheless, it has a distinct whiff about it...

I guess the real question is whether you think the apparent injustice of it is worth more than your job there.

Of course, depending upon the company's ownership, they could just make their wives non-executive directors and shareholders, which would be another way of doing it.

chrismac1

To understand what auditors have become, consider this:

Since 2007, over 300 banks in Europe have required major funding by outside parties to prevent their becoming completely insolvent. Of those, the number which had been issued with a qualified audit report in the previous 12 months - thus warning shareholders of the balance sheet problems - was zero.

The first thing the auditors will do with this information is disclose it to the board members, along with the identity of the whistleblower.

zygurat789

Neither you nor I can say if this is avoidance or evasion because we do not know all the salient facts. You accidentally came across a bit of information which you have interpreted in the worst possible way.
It is, and never was, anything to do with you and if you go gossiping to HMRC (or their Irish equivalent) you will probably end up with egg all over your face.
Leave it to those whose responsibility it is, listen to your husband, delete the email you should not have received and stop thinking everyone is a tax defrauder or you will end up in a dark place.

thenudeone

External auditors are not there to identify every possible issue with the way a company deals with things; they are simply there to confirm that the accounts represent a true and fair view of what has happened. The costs of the ghost employees will appear in the accounts and the auditors won't be interested in whether the company is getting good value, that's the director's responsibility.

If you wish to take this further then I am sure there are ways to make an anonymous complaint to the authorities (It will be different if you are in Ireland like your name suggests); but don't be naive enough to think that the directors won't try to find out who knew about it and then make up some way to get rid of them.

If they have a disregard for telling the tax authorities the truth then they may have an equally "flexible" view about how truthful they are going to be with an employment tribunal or worse, a criminal court, if they decided to make up a criminal allegation against you.