How to create a Million

[Cricko]

Now you are going to have to take political license with me here but I am going to show how to create a million on paper..


I own 2 companies that occupy the same warehouses...for a long period of time company A loses money but company B makes profits.....one year company B makes to much profit so then to reduce its tax burden issues a bill to company A for rent due lets say 500 k for example..This is of course only paper movement as company A has no monies therefore company B just becomes another creditor who is not going to be chased for the monies as I own both....but now the paperwork shows as company B with an outstanding unpaid debt therfore less tax to and company A shows a huge liability to the parent company...but of course no monies change hands.

We now have created a 1 mill paper movement,one company will show an extra 500k income, and a £500k debtor, the other company will show a £500k expense for rent, and a £500k creditor - therefore one company is inflated, and the other is deflated, even though no actual transaction will take place, if you get me. The accountancy term for this is 'window dressing' ie you change the appearance of the accounts to make it look better to outside viewers!

Multiply that a few times and hey presto!

 

[number11]

Although in your scenario, the local paper could be reporting that actually neither Company A or Company B are making any profit and in fact are heavily in debt........are you suggesting there is a company C elsewhere raking in all the money, or that the transactions between Company A and Company B are being used for other purposes than hiding profit for tax purposes? (Shifting Debt around maybe to help avoid creditors?).

 

[Cricko]

Although in your scenario, the local paper could be reporting that actually neither Company A or Company B are making any profit and in fact are heavily in debt........are you suggesting there is a company C elsewhere raking in all the money, or that the transactions between Company A and Company B are being used for other purposes than hiding profit for tax purposes? (Shifting Debt around maybe to help avoid creditors?).

I could not possibly comment on such issues...:whistling:

 

[class]

Nice post! :obl:

 

[Its Only A Game]

Now you are going to have to take political license with me here but I am going to show how to create a million on paper..


I own 2 companies that occupy the same warehouses...for a long period of time company A loses money but company B makes profits.....one year company B makes to much profit so then to reduce its tax burden issues a bill to company A for rent due lets say 500 k for example..This is of course only paper movement as company A has no monies therefore company B just becomes another creditor who is not going to be chased for the monies as I own both....but now the paperwork shows as company B with an outstanding unpaid debt therfore less tax to and company A shows a huge liability to the parent company...but of course no monies change hands.

We now have created a 1 mill paper movement,one company will show an extra 500k income, and a £500k debtor, the other company will show a £500k expense for rent, and a £500k creditor - therefore one company is inflated, and the other is deflated, even though no actual transaction will take place, if you get me. The accountancy term for this is 'window dressing' ie you change the appearance of the accounts to make it look better to outside viewers!

Multiply that a few times and hey presto!

Only problem with the above is that if company B has made too much profit and "issues a bill to company A for rent due of say £500K", then Company B has just increased its taxable profits for no good reason whatsoever.

Not quite so easy is it?

 

[Cricko]

Only problem with the above is that if company B has made too much profit and "issues a bill to company A for rent due of say £500K", then Company B has just increased its taxable profits for no good reason whatsoever.

Not quite so easy is it?

Of course it is it depends when each year end is..its all paper movement when needed amongst however many companies you need..and if ends up off- shore where is cannot be found whoopee.

 

[Its Only A Game]

Of course it is it depends when each year end is..its all paper movement when needed.and id if ends up off- shore where is cannot be found whoopee.

but i thought you were trying to decrease company B's tax liability. Instead you've increased it by at least £100,000!

 

[Cricko]

but i thought you were trying to decrease company B's tax liability. Instead you've increased it by at least £100,000!

Again no, in my example I have used just 2 companies...I did say try multiplying it by 20.Inter company transfers are nothing new if you own the lot it just depends on your reasons behind them.

 

[Its Only A Game]

Again no, in my example I have used just 2 companies...I did say try multiplying it by 20.Inter company transfers are nothing new if you own the lot it just depends on your reasons behind them.

But why increase the tax burden on company B?

 

[Cricko]

But why increase the tax burden on company B?

How does it? This is a bill issued, unpaid.

 

[Its Only A Game]

How does it?

because you said company B had made too much profit.

Company B then charged Company A rent therefore increasing the profit and tax liability in B

Company A will then just have a bigger loss that it can't get tax relief on.

No money changes hands but B owes HMRC a minimum of 20% of the rent charged

Just seen the edit to your original post........Does the fact that its unpaid make any difference?

 

[Cricko]

because you said company B had made too much profit.

Company B then charged Company A rent therefore increasing the profit and tax liability in B

Company A will then just have a bigger loss that it can't get tax relief on.

No money changes hands but B owes HMRC a minimum of 20% of the rent charged

Sorry you have lost me now....and I ran this past an accountant first before posting it.....I am not wording it correctly then.. but I know this although frowned upon is a way of shifting tax liabilities/assets, call them what you like around.

 

[class]

Only problem with the above is that if company B has made too much profit and "issues a bill to company A for rent due of say £500K", then Company B has just increased its taxable profits for no good reason whatsoever.

Not quite so easy is it?

I think Cricko intended the other way round, so the loss making company invoices 'rent' to the profit making company, thus reducing it's taxable profits, and utilising the losses of the other company.

 

[Cricko]

I think Cricko intended the other way round, so the loss making company invoices 'rent' to the profit making company, thus reducing it's taxable profits, and utilising the losses of the other company.

Thanks Billy , I thought I was going do da for a minute there.

 

[Yorkshire Blue]

Now you are going to have to take political license with me here but I am going to show how to create a million on paper..


I own 2 companies that occupy the same warehouses...for a long period of time company A loses money but company B makes profits.....one year company B makes to much profit so then to reduce its tax burden issues a bill to company A for rent due lets say 500 k for example..This is of course only paper movement as company A has no monies therefore company B just becomes another creditor who is not going to be chased for the monies as I own both....but now the paperwork shows as company B with an outstanding unpaid debt therfore less tax to and company A shows a huge liability to the parent company...but of course no monies change hands.

We now have created a 1 mill paper movement,one company will show an extra 500k income, and a £500k debtor, the other company will show a £500k expense for rent, and a £500k creditor - therefore one company is inflated, and the other is deflated, even though no actual transaction will take place, if you get me. The accountancy term for this is 'window dressing' ie you change the appearance of the accounts to make it look better to outside viewers!

Multiply that a few times and hey presto!

I was following up to the bit about when you make too much profit. Can you run this bit past me again because once I get this bit I'm confident I'll be able to make the million pounds you promised in the title.

Cheers

 

[Cricko]

I was following up to the bit about when you make too much profit. Can you run this bit past me again because once I get this bit I'm confident I'll be able to make the million pounds you promised in the title.

Cheers

Meh my words were wrong....it is about paper movement of funds/no funds and you know it.

 

[Hotman]

I think Cricko intended the other way round, so the loss making company invoices 'rent' to the profit making company, thus reducing it's taxable profits, and utilising the losses of the other company.

All irrelevant given that Company A and Company B might be in a group structure, with one owning a substantial percentage of the other, utilising group tax reliefs available :whistling:

 

[class]

All irrelevant given that Company A and Company B might be in a group structure, with one owning a substantial percentage of the other, utilising group tax reliefs available :whistling:

'Might' being the operative word, although I do take your point....

 

[McNasty]

All irrelevant given that Company A and Company B might be in a group structure, with one owning a substantial percentage of the other, utilising group tax reliefs available :whistling:

Being a complete ignoramus, what about if these obviously fictitious companies were individual and not part of a group structure and I owned another in the tax-haven of Outer Mongolia High Street ? Could I stick a load of money in there , salted away until I tell all me mates that I was going on a short break when really I had plans to pop off to South America ?

 

[Hotman]

'Might' being the operative word, although I do take your point....

but of course this is all irrelevant to sufc, so shouldnt it be in the pub?

:)