My friend recently had problem with the men of Federal Inland Revenue Service. Five years ago, my friend (let’s call him Lashman) registered a limited liability company with the Corporate Affairs Commission. He also opened a bank account for the “company”.
He did not start the business immediately. He went back to school for his post graduate studies. But he kept using the account. He received personal funds into it. He even raised money for a kidney failure patient running into millions of Naira. He added his o80s life.
He then decided to start working on the business a couple of months ago. He set up a website for it and started running adverts.
A few months ago, he received a letter from the tax guys, the FIRS. He was told his tax liability in total after five years of operation (VAT, Company Income Tax, Fine for not paying etc)…
Seventeen Million Naira!
Yes, that’s right.
Seventeen and SIX ZEROES.
My friend was livid.
How dare you bring such a tax liability to me even though he has not made a single kobo in sales. He wrote back to FIRS explaining the situation and even threatened them with a lawsuit. The tax guys did not budge. They were coming for an audit. They insisted that with the kind of transactions in his bank account, it can only mean he has been doing business.
Lashman refused to pay and he left it at that.
Two weeks ago, he wanted to transfer money out of that account but he could not because the bank had put a “post no debit” limit on it. When he went to the bank to investigate, he was told the order came from FIRS. He now went back to FIRS and he eventually paid a reduced fee after lots of negotiations.
He paid millions in taxes on a company he has not earned a kobo from.
Is this fair? No.
But there is a simple lesson here. It will help you avoid such issues. The lesson is…
Never Receive Personal Funds Into Your Corporate Account!
Most people are like Lashman. They receive personal funds into their corporate bank accounts. Someone wants to “dash” them money, they send the details of the corporate bank account. You should stop. It will put you in trouble. When you come under the radar of the tax guys, they will assume you have been making a lot of money over the years and you are refusing to pay tax.
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