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Landlord Fraud To Evade New 10% Receipt Rule?

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Today I had to invoice a client for some work done on her house. When I spoke to her - she asked if I could make the invoice out in the address of her BTL property which is around the corner, and to date it with next week's date to ensure it goes in the next tax year.

When I queried this - she said they have to produce actual receipts from now on and something about 10%. I wasn't paying attention as she had a rather exceptional chassis. But what was this? What's the 10%? Should I refuse to make the receipt out for a property other than the one we worked at?

This is where it gets difficult for businesses. We don't want landlords breaking the rules. But there's a good chance they will find another firm in future to carry out any work (at their own house of course - not their tenants). I'm not talking specifically about this particular landlord. But some of our landlord clients have 300+ properties and I wouldn't want them to look elsewhere.

Thoughts?

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Up to you - but it sounds like fraud from your angle - and is most definitely 100% fraud from her angle.

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It's a simple tax fraud. She's trying to claim the cost of work on her private residence, as a "business" expense on her tax return.

The 10% business, is because HMRC couldn't be bothered to investigate the costs of repairing/replacing furnishings in a furnished let. So, in order to save themselves work, they allowed landlords of furnished lets to simply claim 10% of the gross rent as the cost of repairing/replacing furnishings; no additional accounting needed. This perk is going from April, from which point all claims for repair of furnishings must be accounted for.

As for you, definitely don't lie on the invoice - by all means put down the customer's preferred billing address, but make sure that the address at which the work was carried out is clear. What would happen if the BTL property (which you never touched) collapsed, and the buildings insurer tries to sue you for negligence in your work, waving the invoice as proof of work?

Edited by ChumpusRex

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Makes sense now. So from April she has to actually show proper receipts to claim the tax relief on the BTL. So she's having work done on her own house and hoping to claim it against the BTL. Naughty! In that case I will just send the receipt stating the actual work address.

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If she calls to say the address is wrong and wants it with the BTL address - I may tell her I called the HMRC business advice line to query how to enter this in my accounts - and they told me it's fraud and took all her details. Although that would be possibly be a bit of a cruel wind up!

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Makes sense now. So from April she has to actually show proper receipts to claim the tax relief on the BTL. So she's having work done on her own house and hoping to claim it against the BTL. Naughty! In that case I will just send the receipt stating the actual work address.

The funny thing is landlords usually prefer to do cash accounting, where the date of payment defines the tax year, not the date of invoice. So I doubt it'll make any difference anyway.

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This is a complex question. Whilst none of us will condone aiding and abetting tax evasion, the real world is not that black and white. It is likely that for some tradesmen the majority of their work may come from landlords and they cannot afford to alienate a large part of their potential customer base.

Ultimately, the LL should never have asked the question but they have and therefore you need to protect yourself whilst ensuring you business does not suffer.

I have no doubt that there are plenty out there that do not share your moral high ground and if you are unwilling to be complicit you will lose out.

A possible compromise would be to send the invoice, correctly if maybe ambiguously phrased, as a word file rather than a printout or a pdf. If the scroat decides to modify that for their records then that is 100% their own decision. Make sure you keep a record of the original email sent.

I am sure many will disagree with the above but in today's corrupt climate you need to play the game to survive.

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Also, note that you should (of course) invoice in the tax year that makes sense for you. If you do traditional accounts (based on invoice dates) and you've had a good year you might benefit from pushing the invoice into next year.

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The funny thing is landlords usually prefer to do cash accounting, where the date of payment defines the tax year, not the date of invoice. So I doubt it'll make any difference anyway.

That is not what cash accounting means. It means no prepayments and accruals etc. This is the idiocy you get when £200bn of mortgage debt held by morons interacts with HMRC.

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This is a complex question. Whilst none of us will condone aiding and abetting tax evasion, the real world is not that black and white. It is likely that for some tradesmen the majority of their work may come from landlords and they cannot afford to alienate a large part of their potential customer base.

Ultimately, the LL should never have asked the question but they have and therefore you need to protect yourself whilst ensuring you business does not suffer.

I have no doubt that there are plenty out there that do not share your moral high ground and if you are unwilling to be complicit you will lose out.

A possible compromise would be to send the invoice, correctly if maybe ambiguously phrased, as a word file rather than a printout or a pdf. If the scroat decides to modify that for their records then that is 100% their own decision. Make sure you keep a record of the original email sent.

I am sure many will disagree with the above but in today's corrupt climate you need to play the game to survive.

The usual way is to simply omit the details of the place of work from the invoice. My invoices just reference the quote or purchase order (which has all the details). I don't do this to benefit the client or me or anything - just can't be bothered to write any more.

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Reminds me of a similar scam. A contractor where I was working suggested a big curry night out. Everyone contributed their share, (most of us regular employees on about a third of his earnings). He asked for the bill and admitted when I asked him that he would use as an expense in his tax return. I hate these parasites.

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Also, note that you should (of course) invoice in the tax year that makes sense for you. If you do traditional accounts (based on invoice dates) and you've had a good year you might benefit from pushing the invoice into next year.

If we are being 100% honest the date of the invoice is irrelevant. It should be included as work in progress if invoiced after the financial year end. However that would of course depend on when the OP's financial year ends which may well not be April 5th.

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Reminds me of a similar scam. A contractor where I was working suggested a big curry night out. Everyone contributed their share, (most of us regular employees on about a third of his earnings). He asked for the bill and admitted when I asked him that he would use as an expense in his tax return. I hate these parasites.

Entertaining is not an allowable tax deduction. At best he would be allowed his own meal as subsistence. He should fear an investigation.

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Some good replies here. My company uses an online accounting system which generates PDF's that get sent via email or posted. I can't and won't go faffing around with a word document but I can see how that would be one way around it.

It is a difficult situation to be in. Not for this particular landlord as they only have a couple BTL which won't affect us financially. But we do have some that would be difficult to fill.

These include multiple estate agents (some actually ask to make the invoice for more than the actual amount - fraud towards their client), housing associations and large BTL landlords with 300+ houses. If they asked for a similar thing I'd need a way around it without getting my company dragged into warranty / accounting issues, but without upsetting the client.

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We did refuse to issue an invoice amount other than the amount actually charged. We got told several times this was their policy and they wouldn't pay without the inflated invoice. We refused. They paid up. They haven't used us since. We are lucky work is always busy so we can afford to knock dishonest firms like this on the head.

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We did refuse to issue an invoice amount other than the amount actually charged. We got told several times this was their policy and they wouldn't pay without the inflated invoice. We refused. They paid up. They haven't used us since. We are lucky work is always busy so we can afford to knock dishonest firms like this on the head.

If an organisation is that morally flexible at some point they will try and screw you.

Better off without.

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I would think the number of times HMRC goes back to doublecheck with the company that issued an invoice, unless some sort of big time carousel type fraud, is vanishingly small.

The current mad hybrid of a paper and electronic accouting world is massively open to abuse. Most invoices are on plain white copier paper in B&W, rather than coloured logo headed paper produced by a printing company. HMRC have virtually no way of telling if the document is original or printed, in an edited version, the day before. In fact, I bet in the majority of cases they investigate they just say email a PDF across.

They urgently need some central website where all B2B or allowable expense invoices are processed through so if you are paying for something you want to claim you have to provide a VAT or UTR number and the vendor's invoice goes on your central account.

I suspect the main thing holding this back is a lack of imagination of what new non-jobs to create for the legions or redundant accountancy workers and assorted spreadsheet botherers the current system keeps occupied.

Another reason, I believe, is the state likes little form-filing tests that demand civil obedience and the fear of tax investigations.

Edited by SNACR

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If an organisation is that morally flexible at some point they will try and screw you.

Better off without.

But they're ripping of BTL landlords. Quite the HPC Moral Maze.

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They urgently need some central website where all B2B or allowable expense invoices are processed through so if you are paying for something you want to claim you have to provide a VAT or UTR number and the vendor's invoice goes on your central account.

Already exists - it's called the Blockchain and is Bitcoin's ledger of every transaction that has ever been made, shared and distributed throughout the entire network. So the potential for fraud is vastly reduced. That's why the central banks hate bitcoin.

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I should refuse to make the receipt out for a property other than the one you worked at, as it may make you liable for work on that other property.

Politely refuse saying it is an insurance / health & safety issue

Yes you would be opening yourself up to all sorts of crap for doing that. Do you have professional liability cover? What if she then turns round and blames you for work that you didn't do ... You could end up seriously out of pocket.

And then there's the tax man.

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Although morally very questionable, I can see why you may not want to refuse, Just put the address at the header of the invoice with a note above it saying "billing address:", then just itemise what you did and give it to them like that, if you change the date remember to account for it on your books in the different tax year (This is commonplace in business).... Any come back and you simply say that was the billing address they wanted the invoice too.... You are not then complicit in the fraud but they are happy and you keep getting work.

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