I just wondered if anyone has experience with the following?
I met with a prospective client yesterday currently employed within PAYE.
He advised that he started a business within 2014/2015. HMRC not notified, but I will deal with that.
Basically he purchases advertising credit packs from an American online site for say $49.99 ( yes $ just to make it even more awkward)
He then has to view a number of websites, and in return he gets a credit paid into his account, and has the choice to withdraw the funds, or use it to purchase more credit packs which allows him to view more selected sites, and so on.
So basically he is paid to view web pages.
His initial investment (?) was $2300 and he viewed sites daily and had funds credited to his account. Looking at his account on the webpage, it shows total paid by him (including the reinvestment when visiting sites) of nearly $18000. No money was ever withdrawn.
Looking at the funds he received from visiting the sites he made $16000.
However he still has a number of packs to view sites and create income.
So, he has physically paid £$2300, and to date has not withdrawn any although he has made use of the profit to purchase more Credit Packs which have a value to him.
What would the nature of trade be?
There was one bank transaction. All other transactions have taken place within the Website account.
Has he run at a loss to set against his PAYE?
I have not listed the website in case it is against the rules, but will do so if it is acceptable to assist with this issue.
posting the site is fine Jay but ensure that it is secure first as that's the main reason that I need to remove them.
I just wrote a nice long answer to this but the more that I wrote the more questions / worries that were occuring to me about how this translates to profit so I defintely think best that we have a glance at this site and how this scheme works.
One thing that occured is that this is actually a clever long term scam by the US company and the only benefit to the UK taxpayer would be through tax which would mean that it wasn't really a business but a hobby making it non claimable for tax purposes (annulling the one potential benefit).
I must be misreading / misunderstanding something so best I think you point us to that site to see how this works.
all the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you for the reply and as usual I think you are spot on. I had the same problem in that the more the client explained it to me, the more questions I had and the more defensive the client became.
However at the time I did not think of a scam, but I have now googled it and its probably as you have mentioned.
I cannot vouch for the site so its at myadvertisingpaysdotcom. Replace dot with .
I also discovered the Daily Mirror did an article a few days ago which seems to support the view that its not a scheme to get involved in. There is also a Facebook page doubting its validity.
I have since spoken to the client again and referred them to the Daily Mirror article, and believe it or not, he still intends to continue with it.
The profit (?) on paper has been used to buy more credit packs so the bank account simply shows the initial investment, and two upgrade charges. So the bank account shows a loss, with just the 3 payments out.
The tax year has ended so whatever the client decides to do now, it will not affect 2014/2015.
So Im left with a difficult situation. Is this a trade, a hobby or what?
Is it a loss, as on the other hand if (maybe a very big if) the client does get paid out at some time he will have a profit.
As the ONLY real money that can possibly be made is by recruiting other people to it (which would actually make it a Ponzi scheme).
Now, if as seems extremely likely here this is a Pyramid scheme, such and the promotion of such are illegal so in the unlikely event that your client makes any money at all from this (even where they are still a nett loser) such funds would be a proceed of crime reportable under money laundering legislation.
You may find this page useful for your potential client :
You have to feel sorry for people such as your potential client in that they are attempting to make a little money in addition to the employed income but go into it completely oblivious of the lack of business rational behind what they are attempting to achieve because they looked purely at figures rather than the business and the cashflow.
I've seen a case where someone lay the pyramid on a side and stretched it over thirty pages to disguise what they were attempting to sell (another case where they had not realised what they had signed up for but luckily they asked me for business advice before they attempted to actually sell membership of their guaranteed income scheme! (when will people realise that here's no such thing as a free lunch).
This is not a business Jay, it's just a scam. Nothing would be claimable against tax (it's not even a hobby, it's an illegal activity) and representing this client would end up with (a) you having to report them and (b) them losing even more money in your fee's.
The money that they have already invested is basically lost as taking businesses to court internationally will cost many (many, many) times more than they have already invested (that word used in the loosest possible sense of the word).
Considering all of the above personally I would not represent this client.
Sorry, I know thats probably not what you wanted to hear, and it is definitely not what your client wants to hear!
kindest regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you for your time on this. Looking at the links, I am so relived I posted here for some guidance.
I just did not see the scam. With hindsight it could not be anything else.
I have telephoned the client and put all the points to him, and he is still adamant that he will make money.
I have declined to act for him.
To be honest I feel sorry for him, He just cannot see a problem although he has conceded to cashing in his initial investment and just carrying on using his reinvested "profit".
I will let you know the outcome of this.
Again, many thanks, and I expect the gentleman involved owes you thanks as well.
I'm reminded of the old adage that you can take a horse to water but you can't make it drink. In a similar way we can tell clients what they don't want to hear but unfortunately we cannot make them listen
I think that you have made the right decision and hope that the person concerned at least learns a life lesson from this when they eventualy see the truth behind the fascade.
all the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
"I very quickly came accross this site in my search which I feel quite correctly describes the scheme as a new form of Pyramid selling."
I looked at the 'myadvertisingpays' site before getting as far as your reply, and what that link you give says just backs up the opinion I formed from reading its FAQ.
Jay: Best you can do is try to explain to the client exactly what it is and encourage him to cease involvement as soon as he can. He's already lost $2300 (even if he doesn't see it that way - yet) and he's lost more in time.
Get him to wake up and have a sniff of a caffeine product. Otherwise, at some point, there's a chance he will purchase more to "boost" his imaginary earnings, thus losing even more.
As Shaun says, none of his expenditure on this is something that can be used as a business expense. It's just a private loss as a result of his naivity - and if its his involvement in this scheme which is the basis of his business (which is the impression I got from your first post) then he doesn't have a business, and from an accounts point of view there's nothing you can do for him.
So try to make him see the light, but don't waste too much of your time on it. There is no client here.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Ah, looks like you've subsequently declined to get involved - having stopped mid-reply to go and do something else, I should probably have reloaded the discussion before continuing with my reply. :)
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Thank you for your time on this. Looking at the links, I am so relived I posted here for some guidance.
I just did not see the scam. With hindsight it could not be anything else.
I have telephoned the client and put all the points to him, and he is still adamant that he will make money.
I have declined to act for him.
To be honest I feel sorry for him, He just cannot see a problem although he has conceded to cashing in his initial investment and just carrying on using his reinvested "profit".
I will let you know the outcome of this.
Again, many thanks, and I expect the gentleman involved owes you thanks as well.
Best wishes
Jay.
Hi Jay
Might be worth sending the two links Shaun has posted here - your client is probably feeling foolish (hence denying there is a problem and saying he will carry on) - maybe someone elses view will persuade them that you are right and not to go any further. You can only try!
Good info for us all on the need to report too such things - thanks Shaun.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Interesting discussion and wonder what the outcome would be if the gentleman concerned decided to cash out his "profit"
Whilst I accept this to be a ponzi scheme (I've not bothered to check the site out) if it wasn't what would be the tax implications? It seems like the guy was wanting to offset the 2300 as a loss but I would have thought that as he had already attained 1800 his profit would be 15700. Is this only declarable once it's withdrawn or should it be declared once it's
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
think that you missed the part where the 18k income cost him 16k. Thats not taking into account th remainder of the credit packs which I assume have been counted in income but not cost of sales as they have been awarded (income) but not used (cost of sales).
The $2300 invested(!) would have been used to purchase the initial credit packs which would have been used on a FIFO basis.
Its not possible from the information available to state the profit / loss although I assume that there is a loss as nothing in the above takes into account expenses. (and the profit is purely a paper profit, no money exists in the process to pay people that money (#1))
Its certainly not possible to make a profit from the viewing ads, only from the pyramid selling (illegal) element of the process.
The issue with taking expenses into account is that there is no business so the expenditure incurred is actually personal expenditure rather than business.
You should read that blog as it's a really good job done of looking at the business(!)
all the best,
Shaun.
#1 Think about it. you pay to place ads, you are paid to read the ads of other people who have placed ads, they all do the same. The only actual money coming into the process is new people joining and purchasing the initial packs or possibly extending their holding so that on paper they seem to be seriously rich where as in reality there is no money being generated there at all.
#2 I'll read this again in the morning as what makes sense at three in the morning seldom reads back how I thought I had written it the next day.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
That blogs worth it John. The autor (Tara) has done an excellent hack job on the business model and it's well worth a read.
The only comment that I almost posted on Tara's site was where she states that one of the companies involved is actually the registered address of an Accountants. My comment was going to be that someone offering Accountancy Services is not necessarily an Accountant.
But I considered this and found no reason to go on the defensive for the profession where the accountants / bookkeepers concerned are simply a registered office address rather than in any way promoting this clients business model.
Certainly it was interesting to see the bits about the quite famous American Attorney used in promotions only actually did a small bit of work for this client a year previous and totally denies any association with them in the correspondence with Tara. I believe the Lawyer as it's comon practice for less credible businesses to attempt to associate themselves with credible one's.
Sometimes you realise how as financial professionals with oodles of professional scepticism we view businesses totally differently to Joe Public. Even so, I found myself coming away from reading that with my faith in humanity somewhat dented and I can see that British couple promoting MAPS ending up featuring on Rogue Traders!
All the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
having stopped mid-reply to go and do something else, I should probably have reloaded the discussion before continuing with my reply. :)
I do that a lot Vince.
There have been cases where I've merrily been writing a first reply to a poster and by the time that I press send there's half a dozen posts happened in my absence.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
