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Non-business expenses and not reporting BIKs

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I work for an SME, owned fully by a parent company, and I am struggling with a legal/moral quandary. 

Our MD (an employee - not a shareholder) is claiming expenses I suspect are personal. Things like his lunch every day at the office from the local supermarket, meals during the day when he is out with a colleague (a close “mate” of his) etc, which I know for a fact, but when the claims come in, they are tagged as supplier/customer entertaining. This colleague also has a company car which I have been pressured not to report as a benefit in kind on his P11D (tax of £2000 a year not being paid). 

This has been going on a long time and I have just really twigged, but if anyone came in and audited the books there would be no hard evidence that he is lying on his claims - only my knowledge. 

I wouldn’t be bothered if he was the owner, although these expenses run into the £000s per month, and this is effectively defrauding the tax man and the shareholders, for his own personal benefit. He has nobody above him in the business to approve any claims, just his submissions to me which I am told to pay  

I’m by no means a snitch but I have a responsibility to the shareholders to make sure the accounts are reported properly. Maybe it’s an obvious question - but I value my job - how would I go about trying to report this to the parent company without fearing the MD will get rid of me (less than 2 years service)? Would this count as whistleblowing if I had no hard evidence these expenses were personal, even though I know for a fact they are?

Replies (16)

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By the_drookit_dug
14th Aug 2019 23:21

Are you a member of a professional body? Read their code of ethics, particularly the section regarding accountants in business.

Also, I'm confused about your point stating no hard evidence in the event of an audit. What about the company car?

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Replying to the_drookit_dug:
By ApplesAndBananas
15th Aug 2019 07:33

The issue is the pressure not to report it as a BIK - nothing in writing. Just my word against theirs, my “competence” for not reporting it. And if I did I’d potentially just get the boot in exchange for someone who will do what they ask.

I am a member of a professional body, I’ll look into their code of ethics.

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Replying to ApplesAndBananas:
By Duggimon
15th Aug 2019 08:49

Well, assuming the BIK ought to be reported and isn't, there are only two likely reasons. One is that you are incompetent and don't report things correctly, the other is that you know what should be reported but have been prevented from doing so.

If you are the one reporting the problem, it will be hard for anyone to argue the first. If, however, you wait for a third party to discover it, you're leaving yourself open.

It doesn't sound, from the information you've provided so far, that the MD would have the slightest hesitation in throwing you under a bus.

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Replying to Duggimon:
By the_drookit_dug
15th Aug 2019 09:10

I see no easy option here - you may want to call your professional body for a chat.

It's only August - the company is only facing a £100 fine for the late P11d.

Moral courage is required here - the MD needs to know that his preferred option, tax evasion, is illegal.

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By WhichTyler
15th Aug 2019 07:59

Could you discuss it with the FD/FC of the parent? Even as 'whats group policy on expenses/entertainment/cars? I just want to be sure we're consistent and don't find problems at audit?'

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By jcace
15th Aug 2019 11:58

Arm yourself fully with company car rules i.e. when a benefit arises and when a car can be treated as a pool car.
Likewise, make sure you are aware of the rules regarding entertainment, staff entertainment etc, so that when any arguments come back to you, you are in a strong position to advise the correct treatment.
And see WhichTyler's advice.

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Red Leader
By Red Leader
15th Aug 2019 12:15

Document the facts, send the email to the MD, spelling it out. You do need a trail to cover yourself so that the MD can be seen to be the instigator of this, not you.

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Replying to Red Leader:
By ireallyshouldknowthisbut
15th Aug 2019 16:32

This is what you do.

People like that will blame you when it goes wrong, so make sure you have documented (via an email, and Bcc your own private account so you have a record of it) your raising these concerns.

I find with client when you say something like "did you just ask me to drafud the tax man?" they back off sharpish, then again its a different relationship when they are the boss and you are the employee.

If you have the balls, you could do something pointed such as saying "I don't feel I can assist you in committing fraudulent behaviour so I would like you to take on tasks ABC" Dont of course expect a medal!

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By pauljohnston
22nd Aug 2019 10:02

Yep but this guy/girl wants to keep his job. And this may be the reason that his boss can cause him to look the other way. The advice about an audit trail and copy to private email account not connected to the business is essentail.

I dont think you have much of a choice if you carry on you could be assisting with a fraud. If you leave you have to find a new post.

I feel that you will have to go down the second option eventually. Are you in a position to get a transfer to the parent company? If it were me I would be looking to get out asap.

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By Lambdenman
22nd Aug 2019 10:03

Is there not another way?

Surely it's normal practice for subsidiary company MDs in a group to have their own expenses counter-signed by their line superior?

A word in the group MDs ear?

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By Brend201
22nd Aug 2019 10:27

I sympathise with anyone who has an ethical dilemma. Many years ago, I had a difficulty and I got good guidance and moral support from my professional body. I hope you do too.

It is unlikely but there is a possibility that the group people are aware of the MD's activities but are prepared to turn a blind eye because of his key role in the business.

In addition to WhichTyler's advice, I would add the question: What is the group policy on approving the MD's expenses? From my experience in a large group, every person's expense claims were approved by someone higher up, sometimes by a person in a group office elsewhere. It is easy to say that you are uncomfortable approving your superior's expenses from an internal control point of view, without necessarily disclosing all of the details. Someone higher up should either spot what is going on or decide to send someone to do an internal audit.

Good luck. This is an occupational hazard in our profession, alas.

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By alanpoole
22nd Aug 2019 10:45

A tough situation but two separate things here.
1) You have to fill in HMRC returns correctly. It's your responsibility to do so. I've been in this situation in the past and found light humour helpful. Titter at any suggestion you should deliberately conspire to defraud - particularly for petty amounts of cash.
2) MD's expenses. I suggest an email to the MD and the MD's boss pointing out that the MD would be better protected from any HMRC claim if his expenses were countersigned by a third party.
Perhaps wrap it all into one email. Apologise for making a mistake on the P11d and confirm you've corrected it. Take the opportunity to say that while thinking about it you think it's best if everybody's expenses are approved by another manager in case of an HMRC inspection. In order to keep the MD's matters confidential you suggest a Group manager.
Oh. And start job hunting. You don't want to be in a dishonest outfit.

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By InflatableBassPlayer
22nd Aug 2019 16:28

No way should anyone be pressuring you into not reporting a company car on P11d. That is tax evasion pure and simple.

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By C.Y.Nical
22nd Aug 2019 18:09

There seem to be two problems. The first is expense claims which are not prima facie tax evasion. But if expenses which are not genuine business expenses are being treated as costs which reduce corporation tax and/or they are not subject to income tax in your boss's hands, then these payments do constitute tax evasion. Then there's unequivocal tax evasion, and if I have understood the question correctly the car falls squarely within that category.
Assuming everyone agrees up to this point it seems to me you can't just do nothing. You really don't have that option. You aren't in quite such a bad position as the folks at Patisserie Valerie who have been arrested (and charged? I'm a bit behind with that case) because it doesn't sound as though this fraud is going to bring the company down, but you can't do nothing. So I agree with the others who have advised you to take advice from your professional body, and document everything that happens using email accounts and data storage to which neither your employer nor anyone else has access.
Good luck. I was always blessed with honest bosses when I worked for other people. A very great blessing.

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By FCExtraordinaire
22nd Aug 2019 18:13

Is there an FD/MD of the parent company? they are likely to be your first point for an email to describe what you have said here.

That was it can be done without the knowledge that it came from you directly if you request this anon for the moment due to the situation.

You should definitely raise a concern and directly to the person if you need to. If it all goes wrong with a HMRC enquiry, it sounds like he will respond by ' the accountant didn't tell me anything' or similar.

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Pile of Stones
By Beach Accountancy
25th Aug 2019 09:53

Is there a group HR function as well? I would ask the Group FD to get them involved - they tend to be far better at saying "No" to directors!

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