Tax Experts?

setmefree2

Hi

I've heard many times over the last few years that people hide money from the tax man in Premium bonds and N&I accounts. At first I thought this was a joke (- since the govt owned them all )and thinking I knew how inspectors worked I couldn't believe this was true. Does anyone know if this is true or not

TaxGeek

I'm not sure of your point - you don't pay tax on money won from Premium Bonds, but not exactly sure how this would be hiding the money? The actual money you put in there in the first place ought to have already been taxed.

setmefree2

Sorry for not making myself clear. Not if you are - say an IT contactor who receives their money gross. You ony declare part of your income (evasion) I've heard this story from a number of IT contractors now, just can't believe it's true as I've been hearing it for at least 3 years. Maybe urban myth?

Nomad25

Working lunch today advised that HMRC was in charge of all tax free products, so how it could be hidden in say an ISA, is beyond me. But I'm sure if there was a way [other than the mattress] for us common folk on normal incomes, we'd all like to know!

setmefree2

Apparently, a person (say a contractor) receives their pay gross. They put part of it in Premium Bonds and doesn't declare it on their annual tax return. The bank saving account details of building socities and banks are reported to the tax man. So when I worked in a tax department (20 years ago) it was possible for someone to get caught for tax evasion in this way. The tax man looks at a savings account of an individual and looks at their income and says "hang on a minute". Or if they are suspicious they might drive around to the persons house and see if matched their income and look at their car, etc.
Apparently, the tax man doesn't look at deposits for premium Bonds and N&I in this way. Therefore they are "off radar" to the tax man....true or urban myth?

Nomad25

Can't answer that, but I would be s****ing bricks if I had put undeclared money in anything that HMRC could in theory openly access info on - I'd defo go with the mattress and write off loss of any interest against payment of tax/devaluation. Hope someone in the know can confirm or deny your myth.

setmefree2

Nomad25 wrote: »

Can't answer that, but I would be s****ing bricks if I had put undeclared money in anything that HMRC could in theory openly access info on - I'd defo go with the mattress and write off loss of any interest against payment of tax/devaluation. Hope someone in the know can confirm or deny your myth.

:rotfl:Agree - just wondered

Mikeyorks

Suspect it's mainly myth. Very difficult to invest in any NS&I product without your money first routes via one of the accounts that are downloaded to the HMRC data warehouse. And just as difficult to liquidate it from NS&I without it equally hits an account subject to download?

I put 2 x £30k into Premium Bonds, for a short while, to avoid interest accruing on that sum. At the same time I opened a new (annual) account elsewhere to deposit other money into ... in order no interest was paid (and therefore taxable) for 12 months. All of that because (proceeds of downsizing) it suited my tax position to defer interest from that tax year.

HMRC, bless them, put a restriction into my Coding within 2 months of my opening the account. And which was easily calculable to be the extra 20% (making 40%) on the interest potentially payable from the new account.

Delightfully embarassed when I rang them and demanded the reason for the restriction. More stuttering and stammering than I've ever heard before. Even more embarassed when I pointed out no interest would be paid in the year they'd applied the restriction for .... so they immediately removed it.

So they are alert .... and sometimes too precipitate. They will have enquiry facilities with NS&I ... but I don't think they're as formalised as the arrangements with other deposit takers. And whilst I never tried, I can't conceive of a way I can launder funds (other than using the OH accounts) via NS&I without it showing in accounts declared to HMRC .... both on the way in and the way out.

Also - bear in mind that a main contractor claims the sums paid to sub-contractors (your 'IT contractor') against profit. So their accounts show gross payments made - and HMRC can complete the circle?

Nomad25

Thanks mike - good to hear of someone who is au fait enough with the system to slap HMRC around the ear.

fengirl_2

HMRC don't routinely get info on who has bought Premium Bonds. However, if you were subject to investigation, you would be required to declare all your assets, even the non-taxable ones and so you would be making a false declaration by not declaring the PB's.

setmefree2

fengirl wrote: »

HMRC don't routinely get info on who has bought Premium Bonds. However, if you were subject to investigation, you would be required to declare all your assets, even the non-taxable ones and so you would be making a false declaration by not declaring the PB's.

So maybe it is true then - PBs are off the radar. To my knowledge this has been going on for years...and I live a sheltered life...so how come HMRC doesn't know? All that untaxed income right under their noses - criminal ;-( What's to stop laundering as well?