Money laundering query
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One of my clients has been paying their cleaner a weekly amount of £96 via the business payroll (ie no tax & NI), when the total weekly pay to this person was actually £150. The difference of £54 was paid by the client personally.
The employee also worked as a dinner lady and so there is the question of whether any of the earnings were taxed at BR or both via the 522L code.
However, the reason for the £96/£54 split was so that the employee would only declare the £96 to the Income Support people etc in order to claim benefits. By being paid the £96 via the business payroll, the employee had a payslip to provide proof that these were her earnings and the £54 difference was not declared.
Also, if the full amount of £150 had been paid via the payroll, there would have been PAYE & NI deductions.
Sadly, I think the client has done this artificial arrangement just to help the employee, but where do I stand now that I know all of this?
The employee also worked as a dinner lady and so there is the question of whether any of the earnings were taxed at BR or both via the 522L code.
However, the reason for the £96/£54 split was so that the employee would only declare the £96 to the Income Support people etc in order to claim benefits. By being paid the £96 via the business payroll, the employee had a payslip to provide proof that these were her earnings and the £54 difference was not declared.
Also, if the full amount of £150 had been paid via the payroll, there would have been PAYE & NI deductions.
Sadly, I think the client has done this artificial arrangement just to help the employee, but where do I stand now that I know all of this?
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Comments
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Re:Money laundering query
Under the money laundering regulations, if you have knowledge (rather than suspicion) of PAYE/NIC evasion and/or doctoring income through whatever means in order to claim benefits then you have a duty to report this under the money laundering regulations.
Presumably as no tax/nic has been deducted from the £96, then the payroll could be operating 522L - though in theory, she should be taxed at BR on her dinner lady job if she has elected for her personal allowance to be utilised at the cleaning job. Even on a net wage of £96 per week going through the payroll - should it not be taxed as the gross element surely would be over the weekly "free" limit?
The regulations do not have a "threshold" for the level of money laundering - they are clear in that if you have knowledge of any form of laundering, you should make the relevant disclosure.
The AAT Ethics helpline should be able to give you further advice and help you make the relevant disclosure.
Kind regards
Steve
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