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Accountant's Liability for MTIC Fraud

The contracts of all third Party investors had with Company A stated that the accountant would monitor all the VAT payments in the export programme. The accountant was aware of the use of their company name on the contact and in the publicity material. The directors of Company A also explained the role that accountant would play to reassure the investors that their money was safe, as all VAT payments in the export programme chain would be monitored. However, in one of the deals Company A was found guilty of MTIC fraud because HMRC ruled that Company A ought to have known about the fraudulent activity in the import/export chain they were involved in. The accountant now claims that although initially he said his company would monitor the export programme, in reality they only did this when problems arose. Can the accountant be held liable for the losses of these third party investors?

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11th Apr 2012 23:25

See a solicitor

I think you need to see a solicitor about this.  In a word my answer would be "maybe".

David

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By Hansa
12th Apr 2012 00:10

Seconded

 

 ... and I would add that the solicitor should specialise in this field - if you want to drop me a PM I'll refer one who will certainly know what to do.   Having said that, unless I'm either missing the point or being absolutely naive with this - I cannot understand this statement: - " the accountant would monitor all the VAT payments in the export programme"     Normally, 'Missing Trader' schemes are a series of transactions between (at least nominally) independent companies with one disappearing when the VAT payment falls due.   Therefore, how on earth could an accountant of one (A) take responsibility for B-C-D making the necessary VAT payment(s)?  If, on the other hand, A-B-C-D were all obviously connected (in both the legal and ordinary sense) as is suggested by things like apparently common "publicity material" what would be the point of it all? ... Unless the intention all along was to defraud HMRC?   I realise this is just a quick question by the OP and I really don't need or want to hear the detail, nevertheless this is a question that must be asked and quickly.

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12th Apr 2012 11:58

Sorry if I was not clear, but here is what I understand on the business model. Company A said the whole process was called VAT factoring and they purchase the whole chain. The accountant of Company A carries out due care on the whole chain involved in the export / import programme and if they give the green light the purchased is made and the input VAT is claimed back from the HMRC. The goods are in Spain and arrangements were made to sell them to a trader in Portugal. A UK trader then arranges to acquire the goods from the trader in Portugal and made arrangements to sell them to a trader in Germany but they would have to wait for the money from their VAT claim (imput tax) to be paid from HMRC. Company A purchases the whole chain and adds their percentage. The accountant of Company A carries out due diligence on the complete chain.

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By Hansa
12th Apr 2012 12:49

Oh dear ....

Thank you for your explanation.

At first sight this looks to have been a "ring" created specifically to defraud the VAT authorities. and, rather than one of the parties waiting for the refund before another did a "runner", they found someone (Company A) to fund the fraud for them OR Company A was involved throughout but thought they were untouchable as they were not part of the ring but simply providing a factoring service

Either way, it would appear that at best, "Company A"'s accountant was naive in the extreme.  The involved companies in such carousels are almost always "genuine" with real people behind them (and no obvious link between them). They bide their time (having built up a trading record) for "the big hit".  Normal (or even enhanced) "due diligence" would not show this although the first clue would be they (and the goods) were all in different countries.

If I were advising the accountant, I would say

1. See a solicitor

2. Ensure he has copies of as much supporting paperwork as he can get his hands on.

 

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