What is the Ruling on a Partner Under-Reporting Income?

Answered by Mawlana Ilyas Patel

Question

What is the ruling on a partner under-reporting income to save around £700 annually in taxes?

The partner owns 20%, the other 80%. He asks if this makes his earnings impermissible and how to handle it.

Answer

In the Name of Allah, the Most Merciful and Compassionate.

I trust you are well. Thank you for seeking an answer on business practices.

If a partner earns income from a halal business, his share of the profits will not become impermissible due to the other partner’s deception and tax avoidance.

Underreporting is a deception and could cause serious trouble if discovered, including embarrassment.

It is our duty as Muslims to obey the law of the land that we are in, and that doing so is a covenant we enter into–explicitly or implicitly–when we enter any land.

Allah Most High says, “Honor your pledges, for you will surely be accountable for them” [Quran 17:34]

Pursue Lawful Tax Planning

It is our duty as Muslims to obey the law of the land that we are in, and that doing so is a covenant we enter into–explicitly or implicitly–when we enter any land.

One may pursue lawful tax planning or use legal loopholes to reduce taxes, consulting a tax professional or lawyer for guidance.

Hudhayfa (Allah be pleased with him) reports the Messenger of Allah (Allah bless him and give him peace) said, “It is not befitting for a believer to humiliate himself.” The companions enquired, “How does one humiliate himself?” He replied, “To expose oneself to a calamity beyond his capability. [Ibn Majah]

If a Muslim resides under the guarantee of safety in a non-Muslim land, it is forbidden for him to take any property or shed blood. [Al-Fatawa al-Hindiyya]

In the future, it would be better if the partner ceased false reporting, regularized the matter, and maintained accurate accounts.

[Mawlana] Ilyas Patel
Checked and Approved by Shaykh Faraz Rabbani

And Allah knows best.

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Mawlana Ilyas Patel has received traditional education in various countries. He started his schooling in the UK and completed his hifz of the Quran in India. After that, he joined an Islamic seminary in the UK, where he studied secular and Aalimiyya sciences. Later, he traveled to Karachi, Pakistan, and other Middle Eastern countries to further his education. Mawlana has served as an Imam in the Republic of Ireland for several years and taught the Quran and other Islamic sciences to both children and adults. He also worked as a teacher and librarian at a local Islamic seminary in the UK for 12 years. Presently, he lives in the UK with his wife and is interested in books and gardening.