Is this fraud?

[Badda]

Squirrelofwoe said:

Badda said:

JulianPH said:

@Badda - I want to make it clear that I have never argued with you or any of your posts.

However, you are barking at Eric Mc for no reason whatsoever.

Sit back and have a read. It does make sense.

Cheers

Julian

I don't think it does. Eric was saying that the FIL was offering to do this for selfish reasons and I don't think that's the case - yes his tax bill will be less but overall, he'll be down on the deal and therefore it's not a selfish offer.

What am I missing?

The FIL is intending to make a generous gesture by paying the bill - he could do this using his own personal money and do just that. He could even do it using company money (via his director's loan account) and do just that.

However what he wants to do, is make a generous gesture by paying the bill - but at the same time fraudulently save his company some VAT & tax at the same time (the selfish part).

He has already decided he wants to pay the bill and is therefore already happy to sacrifice that money, whether it is via his company or not- however by treating it as a company expense (when it clearly isn't) he wants to reduce the 'overall cost' of making the generous gesture at the expense of HMRC and the public spending purse.

As you rightly point out, he will be down on the deal whichever way he does it (he is making a generous gesture afterall), however he wants to commit tax fraud in order to be slightly less down on the deal than he would be if he made the transaction legitimately.

Regardless of the significance of the amount in question, surely the principal behind it can be understood?

Yes, I would hope that my posts so far on this would suggest we're in complete agreement.

Eric Mc said:

It sounds like he is an extremely selfish individual in that he is only willing to help if there is some advantage he can gain.

This is the only bit I'm questioning. Eric's inferring that the FIL is ONLY helping as he stands to GAIN from the deal which we're both in agreement that he's not. It's reminiscent of people slating celebs who make large donations by saying 'Yeah but they can offset it against tax' as if it's in their interest to donate. Eric is an accountant and shouldn't make such statements IMO.

Unless I've grossly misunderstood something here?

[Squirrelofwoe]

Badda said:

This is the only bit I'm questioning. Eric's inferring that the FIL is ONLY helping as he stands to GAIN from the deal which we're both in agreement that he's not.

Unless I've grossly misunderstood something here?

But he is gaining from it.

He could easily pay the bill legitimately and not defraud HMRC - in this instance it would cost him/his company say £100.

However by claiming it as an expense, it will only cost him/his company £80. HMRC are effectively paying the other £20.

Or in simpler terms;

Paying the bill legitimately he gains nothing.

Paying the bill illegitimately he gains the tax & VAT saving (the £20 in the example above).

I do get what you are saying- it is costing him something either way - but surely you must see that by defrauding HMRC he is gaining something?! Why would he bother doing it that way if not?

Edited by Squirrelofwoe on Tuesday 24th July 13:09

[Eric Mc]

Squirrel - don't bother. I gave up trying to explain ages ago. I'm sure he'll be back with a rejoinder but it's not worth arguing with him.

[InitialDave]

No, I agree with them. The FIL is indeed trying to avoid paying the tax on the payment to the garage, both by having it come out of the business rather than his own post-tax income, and most probably by putting it down as a business expense so it can be offset against VAT and so on.

I'm not an accountant, so I'm not going to get mired in specific details I'd only get wrong anyway. Numbers below are made up to illustrate my thinking.

But seems to me, if it's a £1k bill, to pay it out of pocket, FIL needs to have £1k post tax, which let's say is £1.3k expense to the business for how much he'd have to pay himself gross to get it, and then the business knocks back £200 for VAT.

So yes, he'd be taking the government for £500 in tax revenue, but in order to do it, his business is still spending £800 it wouldn't otherwise.

I would regard it as something the tax man might not be very impressed by, certainly, but I don't think FIL is being greedy or taking advantage himself, he's minimising his cost to help, but it's still costing him.

How OP feels about that morally is up to him.

[Badda]

InitialDave said:

I would regard it as something the tax man might not be very impressed by, certainly, but I don't think FIL is being greedy or taking advantage himself, he's minimising his cost to help, but it's still costing him.

Phew, I thought I was going mad for a moment!
"he's minimising his cost to help, but it's still costing him" - sums it up perfectly and to my mind, makes him not selfish.

[Badda]

Eric Mc said:

Squirrel - don't bother. I gave up trying to explain ages ago. I'm sure he'll be back with a rejoinder but it's not worth arguing with him.

Eric you are being uncharacteristically childish about this. You didn't try and explain, you just said your bit and then huffed off when I countered your point.

You are in the wrong, in my (and at least two other posters') opinion.

[Badda]

Squirrelofwoe said:

But he is gaining from it.

He could easily pay the bill legitimately and not defraud HMRC - in this instance it would cost him/his company say £100.

However by claiming it as an expense, it will only cost him/his company £80. HMRC are effectively paying the other £20.

Or in simpler terms;

Paying the bill legitimately he gains nothing.

Paying the bill illegitimately he gains the tax & VAT saving (the £20 in the example above).

I do get what you are saying- it is costing him something either way - but surely you must see that by defrauding HMRC he is gaining something?! Why would he bother doing it that way if not?

Edited by Squirrelofwoe on Tuesday 24th July 13:09

See it in this very simple way:

Is he better or worse off by paying the bill?

Worse is the answer, obviously. Hence he's not selfish. I really do understand how he is reducing his cost (I owned a medium sized company for many years) but overall he is down and therefore, surely, cannot be described as a selfish man??

[RTB]

Badda said:

See it in this very simple way:

Is he better or worse off by paying the bill?

Worse is the answer, obviously. Hence he's not selfish. I really do understand how he is reducing his cost (I owned a medium sized company for many years) but overall he is down and therefore, surely, cannot be described as a selfish man??

If I elect to buy my best mate a selection of real ales from the local supermarkets I'm being generous and selfless.

If I "reduce costs" by only paying for 4 of the 6 bottles, and steal the other two, then I'm being selfless with respect to my friend (still buying him 4 bottles) but I'm being a thieving selfish prick with regards the supermarket and the rest of society.

It depends on whether you feel the selfless act of buying someone a gift cancels out the selfish act of depriving others.

[InitialDave]

I think it depends on whether you see the situation as him offering to help, and then trying to fiddle it to get the money down a bit, or as him making the offer conditional to him being able to fiddle the cost down.

I took it to be the latter.

[Squirrelofwoe]

RTB said:

If I elect to buy my best mate a selection of real ales from the local supermarkets I'm being generous and selfless.

If I "reduce costs" by only paying for 4 of the 6 bottles, and steal the other two, then I'm being selfless with respect to my friend (still buying him 4 bottles) but I'm being a thieving selfish prick with regards the supermarket and the rest of society.

It depends on whether you feel the selfless act of buying someone a gift cancels out the selfish act of depriving others.

Bingo.

Edited to add:

I had a similar analogy along the lines of;

-The FIL decides to pay to get the car fixed, but instead of paying for 100% of the necessary parts, he nicks the bumper off of Badda's car to lower the cost to himself slightly. Clearly still a selfless act of unbounded charity as he's paying something out of his own pocket.

Edited by Squirrelofwoe on Tuesday 24th July 14:36

[Badda]

I absolutely agree that evading tax in this way in wrong and think little of the people that do it. My only gripe is with calling him selfish.

If he'd stolen all 6 beers to give to a friend, I still wouldn't consider that person selfish. A crook yes, but not selfish.

I don't understand how you can think that someone who volunteers to help someone (at a net cost to themselves) can be selfish.

[WhiskyDisco]

OP is a privileged chap, but not so much as to be able to afford to pay his own way. Accept the gracious offer, or pay your own way.

[RTB]

I think it's means and ends and where your line is drawn. Personally if a financial gain costs me any part of my integrity then I'd sooner do without the financial gain.

It's like watching someone drop £100, asking them how much they dropped and when they say "about 80 quid I think" only giving them back 80 quid and pocketing the other £20.

[Squirrelofwoe]

Badda said:

I don't understand how you can think that someone who volunteers to help someone (at a net cost to themselves) can be selfish.

Because there is clearly a means of helping that person out without the need to defraud HMRC/the rest of society in the process. He just doesn't want to incur the extra cost of doing it that way.

He could pay the bill himself without fraudulently claiming back the VAT & tax. He would just rather save himself some money at the expense of society.

Which in my opinion is selfish.

[Eric Mc]

Squirrelofwoe said:

Because there is clearly a means of helping that person out without the need to defraud HMRC/the rest of society in the process. He just doesn't want to incur the extra cost of doing it that way.

He could pay the bill himself without fraudulently claiming back the VAT & tax. He would just rather save himself some money at the expense of society.

Which in my opinion is selfish.

Badda obviously does not see fraud against HMRC as gaining a taxpayer any advantage. I wonder why people would take this risk of doing this if they weren't trying to gain something?

Anyway, the OP has gone quiet now so I assume he has taken on board all the information given by me and others and will have made his own mind up by now. It would be nice of him to let us know what the final decision was.

[InitialDave]

Eric Mc said:

Badda obviously does not see fraud against HMRC as gaining a taxpayer any advantage. I wonder why people would take this risk of doing this if they weren't trying to gain something?

Because the FIL sees it as a way to help out through a mechanism not available to the OP and his wife, and he's unable or unwilling to help by paying the full bill without the, how shall we say, DIY tax relief.

I expect the out of pocket expense from his post tax income to the equivalent level of personal generosity - without the scheming involved - would cover half the bill.

So maybe OP could diplomatically split the difference on that basis. "We appreciate your offer, but we can see a few ways this could get everyone involved in trouble with the tax man. So if you'd be willing instead to cover half the bill as a normal payment without going through your business, it'd still be appreciated, but we wouldn't feel guilty about it getting you in hot water for our sake".

[Eric Mc]

Let the OP speak for himself. He's gone awfully quiet.

[Badda]

Eric Mc said:

Badda obviously does not see fraud against HMRC as gaining a taxpayer any advantage. I wonder why people would take this risk of doing this if they weren't trying to gain something?

Eric obviously doesn’t know what the word Selfish means. I wonder why a man would want to pay for his own daughter’s car repairs. It’s such a conundrum. It’s either because He wants to help out (and also be naughty with the tax) OR it’s because he’s very selfish and wants to reduce his tax bill AT ANY COST.

[Richard-390a0]

I'm with Eric & Squirrel - if it's such a selfless gesture you wouldn't be wanting an invoice in the company name surely you'd just give the money to your daughter / pay it on your card etc.

[WhiskyDisco]

It's a way of the FIL reducing your bill by 20%...and reducing his corporation tax bill. You are in turn able to reduce *your* income tax bill by not having to pay the bill in the first place. You FIL's firm will still be down as a 'cost of sale' by about 50% of the bill. You could always give him this in cash, thus getting the work done for half the price and laundering a bit of money.

Edited by WhiskyDisco on Tuesday 24th July 16:16