View Full Version : How illegal is...
454697819
24-02-10, 08:07 AM
Taking money from your company when your a director?
Our director is taking advantage of the economic climate and building a couple fo high spec houses on land he has bought whilst its cheap.
All well and good but he is using the projects in which to do, i.e invoicing the project for all the work. And its not just like £20k we talking £300k in some respects.
I seriously doubt he is declaring it to HMRC.
Now it might be he is building them to sell and put the money into the company but the chance of that is about 0.0%
Im only asking as we were told last week that no pay rises this year and we have already made 1 redundancy, and if I end up out the door it might help to take some evidence with me? :smt104
funny old world
Sounds dodgy but as for if its illegal no idea.
Hope you keep a job tho being outta work is horrible.
nah i dont think there is anything wrong with what he is doing. from what i gather from your short post boss has land and is bulding some property to sell. technically he is getting his company to build these houses (it looks like he's taking the money from the company, but on paper it probably means the company are doing the works!) there for once the project is finished your boss could sell these properties, then pay the company for bulding them.
however there is nothing to say a company has to make a profit on all works done. so technically it could cost the company £100k to build the house, but they may deem it the best option to sell the house for £90k! i'm not saying its the right thing to do if he's made someone redundant, but legally doing nothing wrong!
PoRk ChOp
24-02-10, 09:55 AM
He could be taking the money as a 'Directors loan' which he is entitled to do
454697819
24-02-10, 10:02 AM
fair enough, its more that if it was above board we would have expected a job number and just everything be charged to that, but he is charing bits to each job trying to hide it..
Stil, itsl Rubbing me up the wrong way
Just document what you can, if you end up out of the door, approach the police for some advice, and if it's dodgy, the state will pick up the case.
Isn't blackmail illegal too? :p
Owenski
24-02-10, 11:06 AM
Im sure if he's doing it so blatantly that you know about it then he's doing it legally.
454697819
24-02-10, 11:12 AM
Just document what you can, if you end up out of the door, approach the police for some advice, and if it's dodgy, the state will pick up the case.
Isn't blackmail illegal too? :p
yes but two wrongs make a wright, didn't your mum tell you that
hindle8907
24-02-10, 11:15 AM
Im sure if he's doing it so blatantly that you know about it then he's doing it legally.
+1
Captain Nemo
24-02-10, 11:18 AM
He could be taking the money as a 'Directors loan' which he is entitled to do
he can only take the money out as a directors loan if its profit that the company has already made, you cant take a directors loan on money that you know is required for the tax or vat.
even then it has to be formalised, im pretty sure the company has to eventually have a net beneift from the loan or HMRC come down on you.
PoRk ChOp
24-02-10, 11:22 AM
he can only take the money out as a directors loan if its profit that the company has already made, you cant take a directors loan on money that you know is required for the tax or vat.
even then it has to be formalised, im pretty sure the company has to eventually have a net beneift from the loan or HMRC come down on you.
Fair enough mate, I wasnt sure of the in and outs. All I know is my 2 bosses have done it in the past
454697819
24-02-10, 11:27 AM
he can only take the money out as a directors loan if its profit that the company has already made, you cant take a directors loan on money that you know is required for the tax or vat.
even then it has to be formalised, im pretty sure the company has to eventually have a net beneift from the loan or HMRC come down on you.
My thinking too, you cant just take money without declaring it,
He inst doing it blatantly, its only because I see the financial side of things and brickwork crops up on a job where there is none, or £000's of fees for architects when we dont use them that we know about it,
Im not looking for a reason to get on my soap box about it, more out of interest than anything really as I like to have the facts if other people question me about it.
Owenski
24-02-10, 11:46 AM
Na i'd be doing the same as you, any bit of dirt that might keep me on the payrol an id love to dig it up.
This does sound dodgey but I think it'll all be legit and if you ask the wrong person then it might come back to bite you on the ass.
If the Company are building the houses its not illegal. If he's taking money from the company, i.e. paying himself then building the houses then there is an income tax implication.
Sir Trev
24-02-10, 12:39 PM
If the Company are building the houses its not illegal. If he's taking money from the company, i.e. paying himself then building the houses then there is an income tax implication.
Possibly. If he put capital into the comapny he can take it out for whatever purpose he likes. Directors loans are also a minefield but again, he can almost certainly do what he likes with them as long as they are declared on his tax return.
The payments for supplies and services for this non-company project would worry me more. If these costs are lowering the company profits then less corporation tax will be payable to HMRC at year end. Assuming the profit on the houses at the end of the project is not comany profit that is.
Thankfully as a CIMA beancounter I never have to get into this sort of tax quandry!!
Captain Nemo
25-02-10, 01:53 PM
My thinking too, you cant just take money without declaring it,
He inst doing it blatantly, its only because I see the financial side of things and brickwork crops up on a job where there is none, or £000's of fees for architects when we dont use them that we know about it,
Im not looking for a reason to get on my soap box about it, more out of interest than anything really as I like to have the facts if other people question me about it.
hes probably looking at tax evasion if its profit thats been hidden and then pumped into other less profitable projects, and probably false acounting if he never admits it,
although, you can do things any way you like as long as at the end of the year everythings back in the right basket, you could just argue that its very difficult to keep track of things if you dont do things to an established system like you have,
yup, by the sounds of it, profits going from one project into another less profitable or invisible project, i asssume hes not invoiceing a client for materials etc that arent used, hes just using it to boost his "actual"cost for a project as oppsed to billable, companies house would probably never find out, what they will look at though is if turnover goes up or down substantially and if profit loss alters out of step, then they get suspicious and snap on the rubber gloves..............and theyve seen and heard it all............
Not just flag it up with someone?
Don't mention any names, take it up with someone...
Why are there x amount of materials being 'used' when we aren't using any on the job?
hes probably looking at tax evasion if its profit thats been hidden and then pumped into other less profitable projects, and probably false acounting if he never admits it,
although, you can do things any way you like as long as at the end of the year everythings back in the right basket, you could just argue that its very difficult to keep track of things if you dont do things to an established system like you have,
yup, by the sounds of it, profits going from one project into another less profitable or invisible project, i asssume hes not invoiceing a client for materials etc that arent used, hes just using it to boost his "actual"cost for a project as oppsed to billable, companies house would probably never find out, what they will look at though is if turnover goes up or down substantially and if profit loss alters out of step, then they get suspicious and snap on the rubber gloves..............and theyve seen and heard it all............
Doesn't sound like he's doing it for tax evasion reasons, but that will apply too.
Companies House would never investigate anything, only HMRC would.
Yup looks like false accounting, but not to the extent that the Serious Fraud Office would get excited about.
So it's tax avoidance and theft from the company (shareholders). Director's loan is nothing to do with it if it's being accounted to different projects, not the Dir's Loan
454697819
25-02-10, 02:33 PM
it is basically coming out of any profit on the job, but whilst the job is running, so if I write out a PO and put the job No. on it it gets charged to that project.
Just slightly annoying to see him building 2 houses whilst making the jobs report badly and then making ppl redundant... "grump"
his train set though
yeah but has he made people redundant due to lack of work/money within the company, or has there position become redundant, eg no work in their existing roles, meaning they become surplus to requirement.
i dont think what he's doing is illegal. ok the company are not allocating the costs of these jobs in the correct place (i used to have invoices for corporate weekends away allocated to jobs that had been finished for 5years in my old place!). but at this moment in time it still looks (on paper anyway) that your company are building these homes for a client, the director. he can still pay the company for carrying out these works. yes its not a nice thing to do, but are you liable to put your job on the line flagging this up? maybe worth while just keeping the head down and getting on with it. it is his company after all, these are the benefits of being at the top of the tree, he doesnt have anyone to answer to!
it is his company after all, these are the benefits of being at the top of the tree, he doesnt have anyone to answer to!
As a Director? no it is not his company at all!
It is the Shareholders' company (He may also be a shareholder - but unless he is the 100% shareholder if he's using company expenses for private assets, it's theft)
EssexDave
25-02-10, 06:57 PM
He could be taking the money as a 'Directors loan' which he is entitled to do
Director's loans are a bit of a dodgy area. There are rules regarding and when it is a loan or when it is income (eg regularity of withdrawls and whether there is a credit or debit balance).
As such, its not really that easy to say, I'll borrow 500k from my company to build a few houses and pay it back when they sell.
Also, this area I'm so so certain on, but loans to employees are a taxable benefit. Eg. If you work for a bank and get a very cheap interest rate loan, then you pay tax on that benefit (at what rate I'm not sure).
This holds true also for directors, but it is much more confusing than that.
It is to avoid directors taking drawings and claiming its just aloan and so not paying tax.
EssexDave
25-02-10, 07:04 PM
Taken from HMRC;
"If you’re a company director or ‘participator’ and take money out of your company that's not a salary or a dividend - over and above any money you’ve put in - you’re classed as having received the benefit of a director’s loan.
If your director’s loan account is overdrawn, your company must pay tax on any amount you’ve not repaid by nine months after the end of your Corporation Tax accounting period"
Specialone
25-02-10, 07:40 PM
In reality what he's probably doing is,
He bought the land privately,
Getting his company to do the work, above board, for him, they invoice him an inflated amount.
He sells them for x amount, minus inflated amount, he pays tax on profit.
Company, pays tax on income they earn from doing the work for him.
Tax mans happy, he's happy.
He will no doubt hide a few material receipts in there also.
Or roughly what i said anyway.
EssexDave
25-02-10, 07:42 PM
In reality what he's probably doing is,
He bought the land privately,
Getting his company to do the work, above board, for him, they invoice him an inflated amount.
He sells them for x amount, minus inflated amount, he pays tax on profit.
Company, pays tax on income they earn from doing the work for him.
Tax mans happy, he's happy.
He will no doubt hide a few material receipts in there also.
Or roughly what i said anyway.
Sounds about right.
Several ways you can do it, but something like that.
As a Director? no it is not his company at all!
It is the Shareholders' company (He may also be a shareholder - but unless he is the 100% shareholder if he's using company expenses for private assets, it's theft)
Who said there are shareholders? I cant see that post. :p
EssexDave
25-02-10, 08:11 PM
Who said there are shareholders? I cant see that post. :p
And even if there are, shareholders don't always have an interest in how a company is wrong, so long as there is a return on their investment.
Some shareholders want to know every decision, obviously it comes down to how much money you have invested and what you stand to lose.
He could be doing the houses to make money for the company. If this is the case, the shareholders may know about it (if there are any)
If he personally purchased the land, he can sell the land to the company for more (if he purchased it cheaply) or he can charge rent to the company on the land he is lending them.
Many ways around things.
carternd
25-02-10, 08:23 PM
Who said there are shareholders? I cant see that post. :p
It's implied by him being referred to as a Director, as opposed to owner. To me it suggests a limited-liability company, which is a legal entity in its own right.
"A limited company in the United Kingdom or Republic of Ireland is a corporation with shareholders whose liability is limited by shares (Ltd), which is the most common form of privately held company. Setting up as a limited company is an attractive option for many people as, unlike sole traders, personal assets are completely distinct from company finances.[1]"
http://en.wikipedia.org/wiki/Limited_company
EssexDave
25-02-10, 08:27 PM
It's implied by him being referred to as a Director, as opposed to owner. To me it suggests a limited-liability company, which is a legal entity in its own right.
"A limited company in the United Kingdom or Republic of Ireland is a corporation with shareholders whose liability is limited by shares (Ltd), which is the most common form of privately held company. Setting up as a limited company is an attractive option for many people as, unlike sole traders, personal assets are completely distinct from company finances.[1]"
http://en.wikipedia.org/wiki/Limited_company
Except it doesn't mean there has to be lots of shareholders, you can have one shareholder who is also the director.
It's implied by him being referred to as a Director, as opposed to owner. To me it suggests a limited-liability company, which is a legal entity in its own right.
"A limited company in the United Kingdom or Republic of Ireland is a corporation with shareholders whose liability is limited by shares (Ltd), which is the most common form of privately held company. Setting up as a limited company is an attractive option for many people as, unlike sole traders, personal assets are completely distinct from company finances.[1]"
http://en.wikipedia.org/wiki/Limited_company
Not always the case though. Plenty of the topdogs in LLPs have branded themselves as Directors, rather than Partners.
carternd
25-02-10, 08:50 PM
I stand corrected! Note to self, if you're going to be a pedant, do yer ferkin' research.
It sounds rather dodgy TBH, and maybe the director should consider his employees and their families before using THEIR employer to make himself rich(er).
EssexDave
25-02-10, 08:53 PM
I stand corrected! Note to self, if you're going to be a pedant, do yer ferkin' research.
It sounds rather dodgy TBH, and maybe the director should consider his employees and their families before using THEIR employer to make himself rich(er).
This is a business we're talking about right?
The only constant in the business world is money. As far as I can tell anyway. Finding a concered and caring employer, from what I can figure, is very very difficult.
ceeshaw
25-02-10, 09:27 PM
It's funny how we all assume the worst. Consider this... the market is quiet, he is responsible for ensuring the company generates a satisfactory return on investment. He's already laid someone off, and nobody likes doing that.
He realizes that his employees currently don't have enough work to justify their expense so he puts them to work on a project that will ultimately benefit him, but which has the added side-effect of keeping his team busy (and in a job) as well as keeping his shareholders happy.
Why's he hiding the costs? Perhaps he's under pressure to lay more people off and doesn't want anyone to know he's 'creating' work for them so as to make them look busier than they are.
That's the glass half full scenario anyway.
PS. Be very wary of taking company information off premises in any form; that's considered gross misconduct in any business and could result in you being summarily dismissed without notice... not worth it.
EssexDave
25-02-10, 10:00 PM
PS. Be very wary of taking company information off premises in any form; that's considered gross misconduct in any business and could result in you being summarily dismissed without notice... not worth it.
Just like to add; Talking about this sort of thing on a forum wouldn't go down to well either. I know of people being sacked for posting things on facebook/internet forums and being found out.
yeah, but unless the company do the work and the director never actually pays the company for the work, then there is no problem here at all.
454697819
26-02-10, 10:16 AM
Just like to add; Talking about this sort of thing on a forum wouldn't go down to well either. I know of people being sacked for posting things on facebook/internet forums and being found out.
But im not bringing the company into disrepute infact I specifically said I only want to know so when other ppl here ask me about it I have facts!
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