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back to article Brit robot programmers banged up for £500,000 tax evasion

Two robot programmers have been jailed for income tax evasion after hiding their company's sales in offshore accounts. Roderick Smith, of Duddon Close, Standish, Wigan, and Stephen Howarth, of Gee Cross, Hyde, Cheshire, managed to evade about £500,000 in UK income tax over six years by diverting most of their firm's balance into …

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Unhappy

Meanwhile...

...the likes of Amazon, Google and scummy bankers get away with squillions while HMRC are busy with two oiks.

Still, something must be done, eh? Got to keep the Daily Mail readers happy.

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Re: Meanwhile...

Slight difference unfortunately, Tax avoidance vs Tax evasion

Amazon and Google declare all of their UK profits, which just happen to be almost zero thanks to some legal accounting fudgery

This pair didn't declare what they should have declared and so have been sent to jail

As Denis Healey said:

"The difference between tax avoidance and tax evasion is the thickness of a prison wall."

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Re: Meanwhile...

It's a pity they didn't spend some of their money on a decent tax accountant. He would have got the £49,000 they did declare down to about a tenner.

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Re: Meanwhile...

Slight difference unfortunately

Yep, I realise there is a legal difference but the end result is the same. It's still ripping off those that do pay their fair share.

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Re: Meanwhile...

"Smith and Howarth stole from UK taxpayers, using the money that should have paid for public services to fund luxury lifestyles filled with prestige cars and expensive holidays," HMRC assistant director of criminal investigation Mike Preston said in a statement

"Stole" ??????

They didn't take anything. They just didn't give it. Yes, they broke the law and they have been justly sentenced. However, it's unfortunate that HMRC has chosen to use this emotive language as it makes them look like the tax collectors of medieval times. I pay my taxes but I do not hold the view that the state has an unalienable right to any part of my property and it pisses me off when people like Mike Preston think it does.

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Re: Meanwhile...

The likes of Amazon, Google and "scummy bankers" employ accountants to do what they do legally. Perhaps these two should have done it too.

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404
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Re: Meanwhile...

And General Electric (zero US taxes)

And Facebook (zero US taxes - getting a refund actually(!))

And and and....

Sigh. Tax everybody at a 10% flat rate if you want to be 'fair' IMO.

;|

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WTF?

Re: Meanwhile...

10% of what? Profit, or turnover?

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Re: Meanwhile...

turnover, then they can't use dodges to make the profit vanish into offshore shell/parent companies

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Anonymous Coward

Re: Meanwhile...

Jail time here awarded for not employing a good tax accountant.

Don't skimp on your tax avoidance system.

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Re: Meanwhile...

As someone working in retail for a company with margins (i.e. difference in cost and retail price) typically around 10%, I can forsee some major problems with your 'tax everyone 10% turnover' plan..

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Anonymous Coward

Re: Meanwhile...

Can't tax based on turnover, what if your profit margin is only 10%, it would all go in tax. Why should businesses operating a higher margin get to keep more of their profit? How is that fair?

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Anonymous Coward

Re: Meanwhile...

You can see why those working for accountancy firms are millionaires. They help global businesses avoid tax and get paid millions.

Local or UK businesses can't compete and go bust. Then these accountancy firms also get to sort out the mess of the failed companies and get paid millions to do so.

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Anonymous Coward

Re: Meanwhile...

They withheld it, which is sort of like stealing.

If you rent a car and don't give it back then you would be stealing it. They knew they would have to pay tax just like you know you're supposed to return a hire care, so they were stealing.

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Re: Meanwhile...

"You can see why those working for accountancy firms are millionaires."

You can also see why they succeed. These 'cream of the crop' accountants are up against those employed by HMRC, who are paid from the public purse, and we all know that everybody screams and froths at the mouth when any civil servant is paid more than poverty wages,

It's like a team of £100k per week footballers playing a team on £100 per week.

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Anonymous Coward

Re: Meanwhile...

As a Daily Mail reader -- try not to alienate people needlessly --, I entirely share your sentiments. Had they been "big firms", owing billions, the director of HMRC would merely have come round for an aimiable chat at the club; "more claret, minister?" and all that. Had they murdered hundreds in Stafford hospital, they might have been promoted to head of the NHS. But, being poor and powerless and unconnected, no sentence was too harsh.

The idea that they "stole" from anyone is a sickening lie. One of the nastiest habits of the current day is to presume that all money belongs to George Osborne, and that we are allowed to keep only what he allows us. In reality all they did was refuse to allow little George ("doesn't earn enough to pay top rate tax; heir to enormous fortune") Osborne to take the fruits of their labours. They worked for that money. And, reasonably, they took the view that the government didn't deserve a penny of it. Call-me-Dave and little George are still pissing away our money on all sorts of rubbish (while not collecting ours).

Is there anyone who actually has to pay such taxes who actually believes it is worth the money?

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Anonymous Coward

Re: Meanwhile...

Actually its the legions of scum like these that are the biggest problem.

Fortunately we know what prisoners are like, so they'll get theirs in the showers.

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Big Brother

Sanctimonious crud for the rubes.

"You cheated the Inland Revenue and therefore this country, by evasion of income tax"

Because we need more money for our friends, the friends of our friends as well as a few wars.

"Crimes motivated by greed and selfishness."

Not socialistic enough? Guilty!

"To suspend these sentences would offend any reasonable sense of justice on the part of the honest taxpayer."

The suckers have to keep on believing that we rob them for their own good.

Judge should just say "You better pay your protection money. What you gonna do about it?". End of story.

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Re: Sanctimonious crud for the rubes.

Nonsense from start to finish.

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Re: Sanctimonious crud for the rubes.

"Because we need more money for our friends, the friends of our friends as well as a few wars."

Er no, you need more money to pay for the public health service, schools, roads, a police force, a military, to maintain parks and public spaces, for the civil servants, the social welfare system, the government, clean waterways and beaches - everything which gets paid for out of the public purse and requires the public to pay back into it according to their means.

While I'm sure a huge debate could be had over the efficiency of this system, the allocation of funds, the waste, the loopholes that allow people to legally avoid taxes etc., none of that matters here. These people were defrauding the state and so ultimately they were defrauding everyone else.

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Re: Sanctimonious crud for the rubes.

No, the efficiency of that system DOES matter here. Because if, as a result of its incompetence, venality, laziness and greed, we pay more than we should, it does beg the question of whether we, as taxpayers, should withhold our earnings. At what point does the corruption and venality become so serious that withholding one's earnings becomes a moral duty? That is a fair question to ask.

If the public services worked, then people seeking to cut the size of the state wouldn't really have a leg to stand on. It's the fact that they don't that makes the argument for a smaller state a valid one. They are simply awful and poor value for money. How many more people does the NHS have to kill before its supporters stop treating it like some sort of national religion?

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Re: Sanctimonious crud for the rubes.

They should improve efficiency by merging the NHS and the military, as killing is the primary competence of both organisations.

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Coffee/keyboard

There goes the entrepreneurial spirit

*just as well the HMRC is effective at recovering taxes that £500,000 will surly go a long way.

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£500,000 goes a long way

Yep. It'll cover the cost of keeping them in prison

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Re: £500,000 goes a long way

except if they dont pay then they get their sentences doubled (so thats porridge for their original length - 1 year/15 months?

so stay inside an extra 6/8 months and get a 200 and 300k payout? errr ok.

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Re: £500,000 goes a long way

That's what I thought... For 15 extra months inside I get to be £300K richer - Sign me up!

In fact, it's even better than that. On the extended, keep the money, 30 months sentence, good behaviour release would be at 2/3rds, so keep your nose clean and you're out in 20 months, with your £300K safe (or at least not in £300K worth of debt).

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Re: £500,000 goes a long way

The problem is, HMRC will not write off your debt. When you eventually get out of jail, your can bet your assets will be carefully scrutinised ...

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Re: £500,000 goes a long way

Exactly, it's not a case of 'do extra time and keep your ill-gotten money', it's a case of 'do extra time and get out still owing money' and rightfully so.

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Re: £500,000 goes a long way

They are crooks, it isnt like they care much. Goldlogic Control is still trading so it obviously has money when they return. HMRC are not in the habit of putting a dozen people out of work either - the court will see to tha.t Although this company has done bad, it isnt worth shutting a manchester company down in the middle of a recession so a judge will not order the repo if it can be shown the company would go under.

as per usual, the bosses will get away with it (comparatively speaking of course, 12 months inside is still nasty work). PLC and SCADA work will still be around in 12/15 months so I bet HMRC will see nothing of that money. If nothing else i'd sit on the money in an offshore account until I retire (converting half to bitcoins for shit'n'giggles)

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Anonymous Coward

Re: £500,000 goes a long way

I think you might find that when they get out of prison they'll have lost their jobs as people convicted of fraud are not allowed to be company directors.

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WTF?

The only difference..

...between these guys and Amazon, Google et al is that they didn't have good accountants / lawyers to advise them properly.

Fundamentally they've done exactly the same thing, but in a manner which re-badges tax "avoidance" as "evasion". If they'd licensed the technology and software etc from a sister company based in some tax haven at a rate which didn't make a net profit, they wouldn't have broken the law.

I feel annoyed with and sorry for these guys in equal measure.

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Re: The only difference..

It is fundamentally different. The reason that Apple cannot do anything with its cash hoard is that it's sitting in other countries, and if it's brought back to the US then they get whacked with a massive bill. What these guys did is put the money overseas, that's the legal bit, then brought it back without telling anyone. That's the illegal bit. You can avoid tax all you want, you just can't then spend it here.

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Re: The only difference..

No. It is legally different sure, but fundamentally it is the same thing. Not paying taxes: The difference is all in which forms you fill out.

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Re: The only difference..

Yeah, but they can loan it to yourself.

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Re: The only difference..

"Yeah, but they can loan it to yourself."

Indeed. I've thought about this for a while and cannot see any way of stopping that. Anybody have any ideas?

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Anonymous Coward

Re: The only difference..

That's actually the basis on which some of the life assurance schemes work - you don't own anything, but your house and car are loaned to you (or something like that, I'm no expert). I'm not sure how long that will last though, I have seen discussions about changing the rules there too. This would, for instance, no longer work in the UK as the domicile conditions have just become much stricter.

(no, I'm not rich - I just have the opportunity to see a lot of these tax seminars)

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Re: The only difference..

No, doesnt' the UK give itself the power to tax its subje... Umm, citizens worldwide? The USA does, and so, if I were to do what was suggested, send the money out, but do not bring it back to the USA until or unless Congress lowers or eradicates the repatriated income tax or whatever it is is called, then the US IRS could nail my ass if I returned "home" or to the USA for more than the number of days or instances allowed. So, effectively, the only way one can avoid such problems might include some or all of the following:

-- renounce citizenship (not free, and costs a US citizen at LEAST $400 to file the papers)

-- move ALL of one's personal possessions or controlled assets OUT of the USA

-- empty banking accounts, gym memberships, storage facility contents, home assosications, charter clubs memberships, etc

-- divesst oneself of board member status of a USA-based company

-- never spend more than 3 months total days (consecutive or broken up) in the USA

-- give up the drivers license, technical or engineering or similar society memberships, and other things if they have perks that have value in them to the IRS

-- probaby 5-10 other things.

Now, it may be possible to set up the offshore, license-controlling entity abroad, but if it pays for expenses to fly to and shelter in and entertain throughout that abroad locale, the IRS STILL might take a position that "you could not have lived there for free, and as a US citizen, you benefitted materially, emotionally and financially, in a way that was instrumented by you and was greater than $100 per year.

It's hard to win. And, it definitely IS verry goddamned appropriate to ask at what point do we withold our income from taxation when venality and corruption abound, and public servants earn 2-4 times the average college grad, depending on the field, and enjoy benefits the non-public citizen cannot, and are essentially non-fireable in many case in which a non-public servant would be sacked in a millisecond, legally and cleanly provided the firing company followed all the proper legal steps.

I think that at some point, it will become a crime against society and the tax authorities for one to willfully, defiantly, wantonly, and in braggard fashion withhold exploiting one's talents and skills if that failure to exploit oneself deprives the country of a startup company that could hire people or deprives an employer or venture capitalist of exploiting to the maximum with returning the least back when one possesses skills and talents.

I be the Twilight Zone or some Brazillian movies have already topically or in-depth explored such ideas.

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Re: The only difference..

"No, doesnt' the UK give itself the power to tax its subje... Umm, citizens worldwide?"

No.

" The USA does, and so, if I were to do what was suggested, send the money out, but do not bring it back to the USA until or unless Congress lowers or eradicates the repatriated income tax or whatever it is is called, then the US IRS could nail my ass if I returned "home" or to the USA for more than the number of days or instances allowed."

It's essentially what US companies do. OK, (if I were American) I would have to set up a company to own these assets, but there's not really any difference if I'm the only shareholder (limited liability, natch).

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Anonymous Coward

Damn, how can someone clever enough to program robots, be dumb enough to evade tax?

If you want to pay less tax, get a good tax advisor and follow their advice...

But in reality small businesses are treated very well by this country!

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Quite. These guys were dumb dumb dumb.

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Anonymous Coward

What am i missing here ?

So let me get this straight. 15 months or 300 grand .. Seems like a reasonable rate of return so why would anyone repay the money ?

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Re: What am i missing here ?

Plus a criminal record, which will be a headache when it comes to getting a new job when they come out of prison.

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Big Brother

Re: What am i missing here ?

Because if they do not pay up they get their sentence doubled. And at the end of that if they do not pay up their sentence can be extended. And again. Oh and there can be a re-possession order made too.

As for comparison with 'big business'....if they are obeying the word of tax laws then it is the tax laws that needs changing n'est pas?

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Re: What am i missing here ?

Plus a criminal record, which will be a headache when it comes to getting a new job when they come out of prison.

Talk to Rodney Adler, after doing the crime, he did the time, was gutted financially (or claimed there was nothing left), returned home to his mansion and cars (which technically weren't his), was disqualified from acting as a director of any company for 20 years, so during this time, appears as an "advisor" at a number of outfits, and doing well.

When you're rorting the system to that level, a criminal record barely slows you down on your road to success.

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Anonymous Coward

Re: What am i missing here ?

@buzzword. They're already going to have a record. There's no getting out of the first stint.

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Re: What am i missing here ?

Sounds a lot like they were running the show and not employees. The criminal record might not be a problem if they get out from a doubled sentence, move to another country with the funds they keep and start doing the robot thing again from a location not in the UK.

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Trollface

Wrong school tie

"Right Hugo, Who have we got today"

"Well sir there is a Mr Tarquin Smith from big bank inc"

"Ah splendid chap, i played rugby against him back in Eton, lose the file"

"Next there is Miss Fiona Applebottom-Smythe from Global Mega Corp"

"Ah yes Rory's wife, she does a cracking rubarb crumble! lose the file"

"OK, Now we have a couple of Robot makers from up north"

"WHAT, HOW DARE THEY, SEND IN THE SAS, RABBLE RABBLE RABBLE"

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FAIL

Re: Wrong school tie

As was pointed out higher in the thread, the majority of civil servants are not paid even competitive salaries, so the idea that HMRC is packed out with ex-Etonites all looking to scratch the backs of their pals in the City is simply too stupid for words. All the ex-Etonites are working elsewhere for far better wages.

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Re: Wrong school tie

Well, sure, there's a lot of minions in HMRC, but what about the people at the top?

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FAIL

Re: Wrong school tie

yeah probably should of made the point that it was a joke comment, if only we had an icon for that.....

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