I had a really strange letter from a (now former) client this week that is a UK born and resident IT Contractor of Indian descent working for a finance house in Canary Wharf.
As is our wont, a few months ago he had come to me with one of those ludicrous 'man down the pub' schemes, whereby he was going to continue to operate his UK company as previously, but instead of paying the UK's 'extortionate' corporation taxes and such, he would sub-contract an offshore company based in a tax haven to undertake the actual work (actually performed by him at some bank in Canary Wharf) and then the offshore company would invoice the UK company extracting the majority of profits tax free and just paying him enough to live on.
He justified this as being 'all right' as he was going to retire at 50 and live in India and he needed it to setup his retirement fund.
After looking at him aghast for about 30-seconds I pointed out to him why this was probably a bad idea in that it was a fairly obvious attempt at tax evasion which would (once discovered by HMRC) be subject to full repayment of unpaid tax, a penalty of up to 200% of the tax due, interest and the possibility of a jail sentence for willful tax evasion. I then explained about things like SOCA and Money Laundering, etc.
From that point onwards the meeting petered out and it wasn’t raised again.
Then out of the blue last week, I received a letter from him effectively saying that he was unhappy that he was paying me a lot of money, but that if he did anything wrong I was going to ‘report him to the taxman” and accusing me of working for HMRC rather than the guy who was paying the bill.
Since he could no longer ‘trust any UK accountant’ he was arranging to have his brother-in-law who is an accountant in Pune, India deal with his affairs and that he would make arrangements in the coming weeks.
He’s paid his latest bill, so there is no concern over fees, but I’m just wondering what (if anything) I should do from here. He’s within his rights to get anyone to do his accounts if he feels they are appropriate and qualified, but I suspect the real reason is that he would like to go ahead with his crackpot scheme and is using the Indian accountant as a way to bypass SOCA and Money Laundering Regulations.
I don’t really want to report this unless I have to as if HMRC come knocking it will be pretty obvious that I was the one that made the report; certainly I have no evidence of anything untoward, just a sneaking suspicion.
Equally, wouldn’t an Indian accountant be bound by equivalent legislation over there, even if he was preparing accounts for a UK based company?
Thoughts and comments please (after you’ve stopped laughing)...