Jeremy Tauri: Enjoy the beer, beware of the advice

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Business is usually done over a beer but don't get your advice from the pub.

Years ago when I was a young accountant who frequented pubs I remember being intimidated by a guy who told me "I earn in a day what you earn in a year -- and I pay no taxes". Intrigued I listened, further confused and feeling somewhat insulted at the "advice" he gave me.

My insecurities were put at ease when I saw him on the news the following week, for unpaid taxes and illegitimate business schemes. He was a convincing guy who had me second guessing what I knew. Experience serves me well now but for those new to business, pub advice is the advice you shouldn't take without seeking a professional second opinion.

Here is some advice you may hear over a beer this summer. Don't take it.

"Don't declare your income including your cashies." If you run a cash business who's going to know what's not going into the till right? Pay no mind to the fact your declared income is peanuts yet you have the house, large-screen TV, nice car and the kids have the latest gadgets. The IRD's not going to probe you, surely.

"Don't bother about till receipts and booking calendars."

The guy at the bar will tell you they're not needed and neither are accounts for the bank.

The formula to work out your taxable income is as follows -- Income less expenses equals profit. And you pay taxes on profit. So the theory is if your expenses are higher you pay no tax. While you're at it throw away your receipts so the IRD can't prove these expenses and well, heck, why file a return anyway -- the guy at the bar will tell you he's never been audited -- yet.

Tax planning is legitimate and businesses are allowed to structure their affairs in a way that minimises the tax they pay. But tax avoidance is quite different.

Tax avoidance schemes allow people to pay extraordinary low rates of tax. Those who have had faith in tax avoidance schemes include George Michael, comedian Jimmy Carr, and David Beckham -- the guy at the pub will tell you he knows Beckham's accountant -- but they almost always result in massive fines and payments to the tax department when the schemes are unbundled.

Pubs are great places for a laugh, telling stories and a pint. Any advice you get from strangers? Just treat it as strange.

• Jeremy Tauri is an associate at Plus Chartered Accountants.