I am sure we have all met someone, or know someone that boasts openly that they “pay no tax”. The obvious stereotype is the “man in the pub” who lowers his guard after a few drinks. You’ll also come across these types on internet forums, at the match or on your holidays.
The taxman refers to these as “ghosts” who do not declare any of their income or “moonlights” who only declare part of their income. HMRC have an internal target to collect an addition £4,000,000,000 of tax this year by enforcement against both of these types.
The best way to answer this is to – ignore them rather than ask them how they do it. Tax evasion has been with us since the days of the Roman Empire. The taxman is aware of the methods that many people use:
- ask you to pay them in cash and are reluctant to provide an invoice
- request that payment is made to someone other than the business
- offer a discount for cash and are reluctant to accept cheques or credit cards
- offer goods for sale at substantially below market value
- put money into an open till drawer without ringing up a sale
We don’t know all of the methods that HMRC employ to catch people who evade tax. However it’s worth pointing out that under the Proceeds of Crime Act 2002, professionals such as Accountants, Lawyers and Banks have a duty to report suspicious activity to HMRC without any obligation to disclose this to their client.
Using an accountant to ensure you pay the lowest amount of tax through utilising the available benefits and reliefs is, of course, a sensible approach to take. A good one will also help you to increase your profits, improve your cashflow and reduce your stress levels.
The man in the pub probably spends much of his time looking over his shoulder to see who is watching him. Time that could be better spent running his business and making more profit perhaps?