X More information - and probably some kind of qualification in tax law / accountancy - is required. I have no idea what the tax implications of this set-up are. Although given the context, I assume dividends are taxed at less than salary and so he's minimising his tax by setting a salary below the market rate and paying himself in dividends?? I assume this is a pretty common option for small businesses, and that therefore there are well known guidelines which he is either following or breaking. Look forward to learning the answer!

Re the customer: no moral issues at all; they were given an invoice which I assumed looked non-dodgy to them, and they paid it. That's certainly all I would do... -N