Is our client doing anything wrong?

Is our client doing anything wrong?

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An Italian client set up a UK Ltd company several years ago whilst working in the UK.  He paid himself a low salary via a payroll + dividends.  Some years ago he returned to Italy but has continued his UK payroll.  The company continues to pay our fees, files accounts and a corporation tax return etc and he files a personal tax return every year.  Occasionally a sales invoice (and associated receipt) go through the company, and our suspicion is that these are merely designed to stop the company bank account becoming overdrawn.  On our client's salary level there is no tax or NI. 

On the face of it our client doesn't seem to be doing anything wrong.  We are not experts on EU pension law, but imagine our client is earning credits towards a UK state pension by drawing his small salary (it falls in the right band), and therefore could be trying to get a UK pension as well as an Italian one.

Is our client doing anything illegal, and if so what should we do about it?

Thanks in advance for any thoughts.

S

Replies (5)

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By chicken farmer
21st Oct 2014 08:08

Money Laundering?
Have you asked the client the reason for this?

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By StephenGuy
21st Oct 2014 10:11

If it's money laundering, what's the crime?

Chicken farmer - he simply says there wasn't any work in the UK that year.  I did wonder about money laundering; but proceeds of what crime?

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Replying to lionofludesch:
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By chicken farmer
22nd Oct 2014 14:39

You know more than I do!

But you have said you have suspicions that the invoices raised are only to stop the company's bank account being overdrawn, Who are they invoicing, one of his other companies outside the UK? What services or goods are they providing for these fees? It all seems a bit fishy - maybe the crime, if it exists, is also outside the UK.

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Replying to DJKL:
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By StephenGuy
22nd Oct 2014 15:20

Yes I did say that.

Chicken Farmer

Yes I did say that.  I have no reason to believe he isn't doing some work and invoicing for that work, but he only seems to do enough to prevent the bank account becoming overdrawn.

The invoices raised are for engineering services (he is an engineer), the last ones were to a French company.  I am not aware that he owns any companies outside the UK, but it's always possible.

I agree it seems a bit fishy. 

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James Reeves
By James Reeves
21st Oct 2014 12:18

Ask him

The client most likely has (to him at least) an entirely rational explanation for this behaviour.

If one were of a suspicious nature and inclined towards speculation one might have some questions.  For instance, has he informed the UK and (more importantly) Italian tax authorities of his actual residence status? By paying tax & NI in the UK is he attempting to avoid tax & NI obligations in Italy? Are you filing his personal SA returns each year or is he doing it himself? If you are doing it then why haven't you asked HMRC to remove him from SA? If he's doing it himself then to do it correctly he is presumably filing on paper, or using commercial software.

It all seems like a lot of cost and effort and I can understand why you are wondering about it.

As I said, he probably has a perfectly logical reason. So ask him.

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