A cleaning business located in Umuahia, the capital of Abia state provides services to 7 offices. The staff gather at the residence of the business owner, each last Saturday of the month to collect their salaries in cash. They say they earn too little to keep their monies in a bank; afterall, the meagre salaries will still suffer charges. Mr. Mbadigwe, the business owner, feels obliged to pay them in cash. He has successfully done this for 22 months since the inception of the business.
What has gone wrong?
There is no verifiable evidence of the salaries paid, so, the tax authorities disallowed the salaries as an expense. They believe he was overly bloating the business expenses so the tax liability would be reduced. He had no formal evidence to back up his claim. He argued that it was impossible to run a cleaning business with over 20 employees and not pay any salaries. On this ground, the tax authorities accepted to use their own judgement to estimate a salary value for the business. The business suffered higher tax. On involvement of Accountinghub, we signed up bank accounts with the business major bankers in one day. We explained to the employees why they shouldn’t be among the unbanked. The business owner got basic training to understand allowable and disallowable tax expenses. He understood the place of verifiable evidences in any business and the power of the tax authorities to disallow any expense.
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