Directors Loan - Self Assessment

[Dave the rave]

Hi all, A couple of questions regarding some, what I reckon is dodgy advice a friend got from an accountant. He has been advised to set up two Ltd companies with similar names run one for 18 month then close it and then begin trading from the other. The "accountant has told him this way he won't have to pay any tax. How can that be ? Surely he will have to declare the income from the company ?

It leads me to this question Would an overdrawn directors loan have to go on a directors self assessment as income, or would it just be the dividens ?

 

[Bob]

The "accountant" is advising your friend to commit fraud. Presumably he is suggesting the "Spongebob" plan for the first company. I hope the "accountant" is a chap down the pub and that he does not represent himself as a qualified accountant.
This definition may help
Tax evasion is the illegal non payment or under-payment of taxes, usually resulting from the making of a false declaration or no declaration at all of taxes due to the relevant tax authorities, resulting in legal penalties (which may be civil or criminal) if the perpetrator of tax evasion is caught.

 

[Dave the rave]

The accountant works on a share of the savings he makes for the individual or company. I am assuming this is tax savings. I was of the same opinion Bob. The accountant said he has one client who does this on a regular basis and he has not paid any tax for 15years. He claimed his clients company turned over 6 million one year !!!! He wasn't a guy down the pub he was an actual accountant with an office. Not sure we're he is based but the companies in question were in the home improvement space. I to did tell my mate he would still be liable for his personal taxes no matter what he did with the company. However I wasn't sure. I have no idea how accountants like this get away with it ...

 

[UK Contractor Accountant]

It's not tax savings it's TAX EVASION which is a criminal offence.

 

[Energise Accounting]

This is clearly Tax Evasion which is not to be mixed up with tax avoidance which is totally legal.