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Not claiming expenses to boost a mortgage application

A self employed bricklayer client, under CIS, does not wish to claim expenses (mainly motoring at AMR) so as to increase his SA302 figure for a mortgage application. He is willing to for go an approx £1500 tax refund !  There would be no accounts for me to sign off  but I would be involved in preparing his Tax Return which would have an artificially high self employment profit figure. I am not at ease with this but I suppose no one is obliged to claim expenses if they do not wish to. I would appreciate any comments or guides as to whether not claiming expenses in these circumstances involves fraud or any other criminal activity.

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By BKD
28th Sep 2011 22:21

Interesting one

If he doesn't want to claim a deduction, no-one can force him to. But ....

If the tax return does not indicate all business expenditure incurred, whether or not claimed for tax, is there mis-representation? As far as I'm concerned, under-stating expenditure is as wrong as over-stating income, and I would decline to assist in this case, where the client has made his intentions clear. But what if he hadn't told you? Where you're only summarising income and expenditure, and not reconciling bank accounts etc, you can't include expenditure that 'doesn't exist'. I'd like to hear David Winch's expert legal opinion on this.

The other thing to watch for, of course - once the mortgage is secured, what happens when the client suddenly 'discovers' that he's 'forgotten' to claim certain expenses on his return and files an amendment?

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Legal for tax - BUTTTTTT

It's not illegal as far as the tax office are concerned. If you want to pay more tax and not claim all expenses you're entitled to then no one can make you (after all we'd all be prosecuted otherwise if we lost a petrol receipt or whatever). . So no problem with the return.

 

HOWEVER, his mortgage application is a different matter. He would be artificially inflating his usual profits by effectivly concealing business expenses, thereby deliberately lying on a mortgage application.. That is where his "cunning plan" falls foul of the law.

So you can happily do his tax return, but you don't want to be confirming his profits to the bank/building society.

 

 

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28th Sep 2011 22:52

I understand your disquiet.

One way of looking at this is to say that the client wishes to state that he has an income which is more than his true income (because he has deliberately failed to take into account all the costs he incurs in generating that income).  That deliberate failure could be described as dishonest.

He intends by doing this to cause a lender to make an advance to him (which he thinks he might not get if he revealed the true position).  Arguably by doing so he intends to expose the lender to a risk of loss (which is different from saying that he intends not to repay the mortgage - the point is that in an uncertain future there is a risk for the lender).

Now have a read of sections 1 & 2 Fraud Act 2006.  Do you think that what he wants to do could amount to a criminal offence of fraud by false representation? I do.

David

N.B. I assume you are in England / Wales / Northern Ireland.  The Fraud Act 2006 does not apply in Scotland (but other laws do - leading to much the same result).

Picking up on Owain's point, if you were to complete the tax return showing artificially high income and were then to sign off a reference for the lender saying (perfectly accurately) "Mr Client's 2011 income tax return showed income of £x" you also could commit a criminal offence - since that information is misleading for the lender and you would be implying that Mr Client's true taxable income was £x.

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28th Sep 2011 23:08

mortgage reference

davidwinch wrote:

 you were to complete the tax return showing artificially high income and were then to sign off a reference for the lender saying (perfectly accurately) "Mr Client's 2011 income tax return showed income of £x" you also could commit a criminal offence - since that information is misleading for the lender and you would be implying that Mr Client's true taxable income was £x.

Thats interesting, I would have thought you were ok if you stuck to stating facts as opposed to certifying they could afford it.

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zarathustra

Thats interesting, I would have thought you were ok if you stuck to stating facts as opposed to certifying they could afford it.

 

 

The point is that the tax return isn't defrauding anyone. It's hardly "fraud" to pay too much tax. Stupid yes, but not illegal. .

However, when you certify it to the bank you are doing so knowing it to be overinflated for the purpose of obtaining a loan which wouldn't otherwise be given - that is where it becomes dishonest rather than just stupid.

 

It's the knowledge & the known consequences that make it illegal.

 

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29th Sep 2011 07:15

Legal for tax?

Is it really OK to exclude expenses from a tax return? Like BKD says, aren't we supposed to present a fair & true (and the rest of the blurb) picture? Also, isn't it our duty to lower our clients tax bill as much as possible?

Even if the accountant was unaware that some expenses had been excluded shouldn't they be asking why the expenses had changed significantly from the previous year? And what happens next year when the expenses go back to normal, or maybe the client will want inflated expenses to compensate for those lost, especially if he needs additional income for the mortgage repayments. Ditto for amending the artificial tax return. If he is prepared to fiddle once then it is good odds he will fiddle again.

I really wouldn't be very happy doing this. Even if I was unaware that the client wanted a mortgage, it would be obvious that something was 'not right'.

 

 

 

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Difference between what is professionally acceptable, and what i

ShirleyM wrote:

Is it really OK to exclude expenses from a tax return? Like BKD says, aren't we supposed to present a fair & true (and the rest of the blurb) picture? Also, isn't it our duty to lower our clients tax bill as much as possible?

Even if the accountant was unaware that some expenses had been excluded shouldn't they be asking why the expenses had changed significantly from the previous year? And what happens next year when the expenses go back to normal, or maybe the client will want inflated expenses to compensate for those lost, especially if he needs additional income for the mortgage repayments. Ditto for amending the artificial tax return. If he is prepared to fiddle once then it is good odds he will fiddle again.

I really wouldn't be very happy doing this. Even if I was unaware that the client wanted a mortgage, it would be obvious that something was 'not right'.

 

 

 

 

 

I didnt say it was ethical, or indeed very bright, BUT, it is legal.

There is nothing in the legislation which says you MUST claim all your expenses, merely that you can.

 

 

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By BKD
29th Sep 2011 07:23

As always, David

Thanks for the advice - clear, concise and supported by appropriate legislative reference

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29th Sep 2011 08:14

Many thanks for your replies. I want to help the client but was obviously uneasy.  I had not been asked to sign a mortgage reference, and would not in these circumstances, but the client says the mortgage advisor just wants a copy of the SA302. One thought in my mind was that if the client had been an site based employee using his own vehicle, the figure on the P60 would have been used for the mortgage application and this would equal his income before expenses as self employed so whats the difference ?. (He could claim for use of own vehicle as an employee but it would not affect the P60 figure). Seemed a bit 'unfair' . However David's reference to the Fraud Act has clarified things and I agree with him that it is fraud by false representation.

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Does he have adequate records to back up his AMAP claim?

He would be the first builder that did! He he doesn't then put him right for the current year and legitimately forget the current one.

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29th Sep 2011 08:52

Bit of conflict here

Ok - I accept Steve's point that the mileage may, or may not, be fully documented, but I cannot help comparing this to the thread on mortgage references.

http://www.accountingweb.co.uk/anyanswers/question/mortgage-reference 

.... where David didn't think that was reportable, and others did, and this case where the accountant knowingly excludes costs to inflate profits and David thinks this is dishonest, and others don't!

Personally, I go for dishonest unless someone can persuade me otherwise.

 

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By Flash Gordon
29th Sep 2011 09:04

Dishonest

I'm bowing to David's infinitely superior judgement & voting for dishonest. 

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The mortgage application part is clearly dishonest and I don't think anyone is arguing about that.

 

However, filing accounts which, for whatever reason, do not claim all the allowable expenses is totally legal. Can anyone point to any legislation which states that you MUST claim every allowable business expense?

Indeed, if that were the case then I would hazard a guess that 99% of accounts submitted would be illegal because I have yet to meet an accountant who always claims every possible penny in every possible way. I've yet to meet a client who doesnt lose a few receipts during the year too.

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By BKD
29th Sep 2011 11:42

Filing incorrect accounts

Owain_Glyndwr wrote:

However, filing accounts which, for whatever reason, do not claim all the allowable expenses is totally legal.

What about filing accounts that the accountant/company knows have deliberately understated expenses - not in order to obtain any direct pecuniary advantage, but to make the company look more attractive for trade creditors, external investors etc? Is that not misrepresentation?

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By BKD
29th Sep 2011 09:29

Don't confuse ....

... accounts with tax returns. One does not claim expenses in accounts, it is done through the return. In this case, of course, accounts are not being prepared, so the distinction is academic.

But if I were preparing accounts, I would want to ensure that they reflected a true and fair commercial view of the profitability of the business - whether or not to be used in support of a mortgage application. Whether or not certain expenses are claimed. or disclaimed, for tax purposes is another matter entirely.

Again, David's view would be welcome on this.

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29th Sep 2011 09:39

Relevance

If we were talking about a few missing fuel receipts then it isn't worth getting upset about.

However, the OP says the client is willing to write off a £1500 refund. This indicates that the profiits are being overstated by approx £5,000, which could be quite significant in percentage terms for a CIS subbie.

I also would appreciate Davids opinion on the legality of this, as I view it, misrepresention of the profitability of the business.

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Clarification

To avoid pedantics, for the purposes of my comment, I am assuming that the figures from the accounts are those used on the return too.

 

 

@Shirley

The amount is irrelevent - either you claim everything or you dont - the rest is merely a question of scale.

 

 

 

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29th Sep 2011 10:29

A coincidence...

... take a look at this announcement:

http://www.bsa.org.uk/mediacentre/press/mortgage_verification_scheme.htm

 

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29th Sep 2011 10:40

Mortgage verification scheme

If you would like more information on the mortgage verification scheme it has been covered on AWEB in the Money Laundering & Crime discussion group HERE and in the HMRC Agent Strategy discussion group HERE.

David

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By BKD
29th Sep 2011 11:00

It's not pedantic

Of course the figures in the return should come from the accounts. But accounts show the commercial/financial position of the business, the tax return shows the tax position - the two are quite different and there is no pedancy in making the distinction.

If a significant business expense is deliberately omitted from the accounts, in order to inflate accounts profits - and, merely as a consequence, taxable profits - that is in my view misrepresentation. Deliberately omitting genuine business expenditure from the accounts is misleading and therefore falls foul of the legislation referred to above by David, whose expert advice I agree with. It's no different from someone deliberately omitting expenditure from accounts in order to inflate the price of the shares on a potential company sale - due diligence may of course pick up the omission, but then again it may not, and in any event does not alter the fact that the vendor has attempted to mislead.

Including the expense in the accounts, but disclaiming it in the tax return - even though legitimately deductible - is that wrong? There is, as has been pointed out, no legal requirement to claim every business expense for tax purposes. But if it's in the accounts, the adviser knows that it is deductible, but he is being asked not to deduct it he must surely ask the question why? And if the answer is in order to secure greater mortgage funding, time to walk away.

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29th Sep 2011 10:54

@BKD

I agree.

I fail to see this as any different to the mortgage reference thread I posted a link to earlier. The views on that thread were the complete opposite to what is being said here.

In that thread, the possibility of concealing relevant data was determined (by some) to be a reportable offence, but not by David. In this thread there is actual omission of relevant data, and this is viewed as acceptable, and not reportable, except by David and like minded individuals. The OP has expressed their concern, and I would have exactly the same concerns.

@OG Will you please explain why one is acceptable, but not the other?

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29th Sep 2011 11:04

Reporting to SOCA (not)

ShirleyM

Just to clarify, I am not suggesting that this is required to be reported to SOCA - and in the other thread to which you refer I was not suggesting the matter need be reported to SOCA.  So I don't think there is a conflict.

Remember that what is reportable to SOCA in England & Wales is knowledge or suspicion of 'money laundering' (as defined by s340(11) PoCA 2002) or certain offences related to terrorism. (There are wider reporting responsibilities in Scotland.)

There is no suspicion of anything related to terrorism in these situations.

'Money laundering' is necessarily a second-stage offence.  It can only occur where there is 'criminal property', defined in s340(3), which arises as a result of an offence (sometimes referred to as the 'predicate offence') e.g. theft / fraud / tax evasion or whatever.  The predicate offence does NOT of itself trigger a need to report - but the reality is that in many cases the 'money laundering' will necessarily follow the predicate offence almost immediately.  So, for example, if I steal a loaf of bread from a shop that is theft (the predicate offence); my physical possession of the stolen loaf is 'money laundering' and that money laundering offence triggers the reporting requirement.

In the case of a dishonest false application for a mortgage, making the application is the predicate offence.  If the application is refused there will never be a money laundering offence (and hence no need to report to SOCA).  If the application is successful there will be a money laundering offence when the mortgage advance is used to purchase the property.  At that stage the requirement to report to SOCA is triggered.

Does that clarify the position?

What I am saying on this thread is that making the dishonest application for the mortgage would be an offence - and so would misleading the potential lender by dishonestly supplying a figure of (taxable) income which the accountant knows is inflated.

David

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By BKD
29th Sep 2011 11:01

Excellent, David

Couldn't be clearer

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29th Sep 2011 11:07

Thanks David

I think I understand what you say.

To put in my own simple words ... if the tax return was deliberately misleading, by overstating profits, that in itself would not be considered dishonest. However, if the same tax return was used for the purposes of making a dishonest mortgage application then it would be an offence.

I am really surprised by that. I would have thought that submitting a tax return in the knowledge that the figures were misleading (even if not used for fraudulent purposes) would be considered to be dishonest.

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ShirleyM

@OG Will you please explain why one is acceptable, but not the other? 

 

 

 

I thought I had but I'll try again.

Submitting a tax return which does not claim all (or even any) allowanble expenses is not illegal. There is no gain - in fact the opposite. And there is no law stating that all expenses MUST be claimed.  It may be unethical but it is not illegal.Filing a mortgage application (or confirming figures on it) knowing that they have been artificially inflated by purposely ommitting expenses from the calculations IS illegal. It is attempting to gain a pecuniary advantage by deception as the client is obtaining monies by deliberately lying to the lender.

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29th Sep 2011 11:18

Fraud Act 2006

ShirleyM

Have a look at the Fraud Act 2006, especially s2(1)(b).

Suppose my ego is such that I put an income of £1m on my 2011 tax return (sadly this is far from the truth!).  I do not tell anyone else about this or show anyone any documents about it.  I (somehow!) pay the tax shown on the return.

I think I have been dishonest - but have I committed a fraud?

Unless you would say I have done that intending to create a gain for another (HMRC) I don't think it falls within s2(1)(b) so it's not fraud.

David

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29th Sep 2011 11:23

Sorry @OG & David

I understood what you were saying, but I find it difficult to accept concepts merely on the say so of one person. I like to understand the principles behind the concept.

In my defence, there were others who found the concept difficult to accept, too.

I appeciate the efforts of everyone who is trying to explain, but I still can't get my head around the acceptability of deliberately understating expenses to inflate profits as being anything other than dishonest, but I bow to the greater knowledge of others here.

EDIT: Thanks for you latest comment David, which you posted while I was writing my post. It did help :)

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29th Sep 2011 11:22

Dishonest

ShirleyM

I am not saying it is not dishonest - I am saying that although it is making a dishonest representation it is not fraud because of s2(1)(b).

David

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Dishonest v Illegal

 

People seem to be confusing dishonesty with illegality - there is a difference.  

 

Something can be morally wrong, can be unethical, and indeed can be totally misleading, but that does NOT mean it's illegal.

 

With the exception of certain offences, before an offence of dishonesty is committed there must be either -

a pecuniary advantage of some sort (lower tax bill, obtaining a loan etc)Or, an intention to achieve a pecuniary advantage.

Filing a tax return with an inflated profit does not, and is not intended, to gain a pecuniary advantage.

Filing a tax return with a fraudulently deflated profit is an offence as it falsely reduces tax liability.

 

Filing accounts to make the compamy appear more attractive to creditors / investors would be illegal if and when some pecuniary advantage was obtained by doing so.

 

 

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By BKD
29th Sep 2011 12:24

Going around in circles

Dishonest is what it says - not telling the truth. That applies to both under- and over-statement of profits. (Please, let's not re-open the debate about the Ghosh definition of dishonesty.)

If the intention is there, it should not matter whether or not a pecuniary advantage is actually obtained. But there is in fact no requirement to obtain, or intend to obtain, a pecuniary advantage. A person is also guilty if he intends to expose another to risk of loss through dishonest misrepresentation. It seems to me that knowingly filing accounts with inflated profits with the express intention of misleading creditors/investors falls squarely within that. But I'm not the lawyer here - David can confirm if I'm correct or not.

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Dishonesty isnt necessarily illegal

BKD wrote:

Dishonest is what it says - not telling the truth. That applies to both under- and over-statement of profits. (Please, let's not re-open the debate about the Ghosh definition of dishonesty.)

If the intention is there, it should not matter whether or not a pecuniary advantage is actually obtained. But there is in fact no requirement to obtain, or intend to obtain, a pecuniary advantage. A person is also guilty if he intends to expose another to risk of loss through dishonest misrepresentation. It seems to me that knowingly filing accounts with inflated profits with the express intention of misleading creditors/investors falls squarely within that. But I'm not the lawyer here - David can confirm if I'm correct or not.

 

 

You're talking about an entirely different matter to the original question.

As stated filing a tax return with an inflated profit and therefore paying more tax than the law requires you to pay is not illegal.

In law there is a difference between intention and the actual act.  Most offences require a benefit to actually be obtained before a crime is committed. Happily in the country we are not yet at the point where people are imprisoned for what they think. "Intent" is a subjective concept. Exactly how do you prove that someone "intended" to defraud someone by filing incorrect accounts. They might just be rubbish accountants, careless, or just plain stupid. And its only a matter of scale - I absolutely guarantee that you and I have filed accounts that are "inflated" compared to what someone else might have filed. Maybe you disallowed an expense that someone else would have claimed - who knows.

Whilst you may not approve of dishonesty - that does not mean it is illegal. The two are different things.

 

 

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By BKD
29th Sep 2011 14:05

Principles

Owain_Glyndwr wrote:

You're talking about an entirely different matter to the original question.

In a sense yes, because the OP is not talking about filing accounts, only a tax return. But we are talking about the principles involved in intending to commit fraud. No-one in their right mind would choose to pay more tax than they had to by deliberately over-stating profits,  unless there was some other financial advantage - possibly expsoing another party to the risk of loss.

Owain_Glyndwr wrote:

As stated filing a tax return with an inflated profit and therefore paying more tax than the law requires you to pay is not illegal.

Agreed - but if someone deliberately and dishonestly overstates profits - whether they use a tax return or any other document to support that - with the intention of exposing someone else to risk they are within the scope of the Fraud Act. I'm not talking about the mere filing of the return, I'm talking about presenting that return to another party.

Owain_Glyndwr wrote:

In law there is a difference between intention and the actual act.  Most offences require a benefit to actually be obtained before a crime is committed. Happily in the country we are not yet at the point where people are imprisoned for what they think. "Intent" is a subjective concept. Exactly how do you prove that someone "intended" to defraud someone by filing incorrect accounts. They might just be rubbish accountants, careless, or just plain stupid. And its only a matter of scale - I absolutely guarantee that you and I have filed accounts that are "inflated" compared to what someone else might have filed. Maybe you disallowed an expense that someone else would have claimed - who knows.

Whilst you may not approve of dishonesty - that does not mean it is illegal. The two are different things.

And now you're talking about something else. The issue is not about how or if you can prove intent. The Fraud Act does not require a benefit to actually be obtained before a crime is  committed - in fact it does not require any benefit to be obtained, if someone intends to expose someone else to risk of loss through dishonest conduct that is enough. As I say, the question about how you prove intent is another discussion altogether - the law simply states that if the intent is there you can be guilty under the Fraud Act. 

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29th Sep 2011 13:14

OK - back to the original post

I guess this puts the OP in a sticky position if the client will not be honest and submit an accurate return.

If he submits the tax as the client requests, he is aiding the client in being dishonest, but if the client then uses those figures to obtain a mortage then the client has commited fraud, and the OP must report this to SOCA or risk being complicit in the fraud.

Personally, I wouldn't like it. Maybe the OP will give us his decision?

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29th Sep 2011 13:57

Australia

Richard

Funnily enough my daughter rang me today from Bondi Beach.  But the Australian law is different is some respects from that in England & Wales.

David

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29th Sep 2011 14:09

Consider Annual investment Allowance

Just for kicks, suppose the situation the OP outlined did not involve expenses but Annual investment Allowance - say the client bought a new van in the year for £20k that he chose not to claim under.

The problem seems to be the fact that the mortgage lenders base their definition of earnings (as do others) on taxable profits when they should be accounting profits. For example, a soletrader who spends a lot on client entertaining as a necessary cost of obtaining business will have a higher income in the banks eyes than they do in reality.

 

 

 

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By BKD
29th Sep 2011 16:22

That's a very good point

Roland195 wrote:

Just for kicks, suppose the situation the OP outlined did not involve expenses but Annual investment Allowance - say the client bought a new van in the year for £20k that he chose not to claim under.

The problem seems to be the fact that the mortgage lenders base their definition of earnings (as do others) on taxable profits when they should be accounting profits. For example, a soletrader who spends a lot on client entertaining as a necessary cost of obtaining business will have a higher income in the banks eyes than they do in reality.

 

There is a difference in legitimately arranging capital allowances so as to maximise taxable profits (safe in the knowledge that allowances not claimed in one period will be available in future periods) and deliberately excluding genuine business expenditure in order to artificially inflate accounts profits. the difficulty, as you say, is that lenders tend to look at taxable profits rather than the economic profits. But then again, lenders still ask for sight of audited accounts for sole traders.

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29th Sep 2011 14:17

David

I didn't spot that; I navigated there after a page on the CPS site and didn't see the 'au'!  However I think that British law relating to a False Instrument would apply in the same way if the client used his dodgy accounts to acquire a mortgage.  If the OP was privvy to the information and did nothing I reckon conspiracy law could nab him if nothing else!

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Fine lines

BKD PM |

The issue is not about how or if you can prove intent. The Fraud Act does not require a benefit to actually be obtained before a crime is committed - in fact it does not require any benefit to be obtained, if someone intends to expose someone else to risk of loss through dishonest conduct that is enough.

 

 

Exactly - it comes down to "intent".

If the client just asked the OP to file a return without expenses saying he wanted to help the government out of the financial mess by paying more tax - the OP could file the return with a clear concience.

However, this client is obviously stupid, and has told the OP that he "intends" to use the figures to obtain a mortgage by inflating his profit - which of course is illegal.

Yet another example of how under Brirtish law ignorance really can be bliss.

 

 

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By BKD
29th Sep 2011 15:55

At last

Owain_Glyndwr wrote:

Exactly - it comes down to "intent".

If the client just asked the OP to file a return without expenses saying he wanted to help the government out of the financial mess by paying more tax - the OP could file the return with a clear concience.

However, this client is obviously stupid, and has told the OP that he "intends" to use the figures to obtain a mortgage by inflating his profit - which of course is illegal.

Yet another example of how under Brirtish law ignorance really can be bliss. 

We are in agreement. The act of committing an offence, and being successfully prosecuted for it, are two entirely separate matters. Even so, I'd be very wary about any client that told me that he wanted to inflate profits solely for the purpose of boosting HMRC's coffers.

And of course, it is for the courts to decide on guilt or innocence - whether or not the OP had been made aware of the client's intentions, if the client were to submit his 'weird' tax return in support of a mortgage application, and then default on the loan, the court may well take the view that it had been his intention all along to mislead the lender. Or they may not, depending on the evidence in front of them.

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BKD

And of course, it is for the courts to decide on guilt or innocence - whether or not the OP had been made aware of the client's intentions, if the client were to submit his 'weird' tax return in support of a mortgage application, and then default on the loan, the court may well take the view that it had been his intention all along to mislead the lender. Or they may not, depending on the evidence in front of them. 

 

 

They would need evidence that the OP KNEW of the clients intentions, there are 101 reasons why someone might not claim all, or any. expenses.

A risk averse client who has lost all his receipts in a fire or flood might well rather just pay up than risk having HMRC sniffing around with no records to fight them with. There are taxpayers out there who are that terrified of "the taxman".

 

 

 

 

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By BKD
29th Sep 2011 16:42

.

Owain_Glyndwr wrote:

BKD

And of course, it is for the courts to decide on guilt or innocence - whether or not the OP had been made aware of the client's intentions, if the client were to submit his 'weird' tax return in support of a mortgage application, and then default on the loan, the court may well take the view that it had been his intention all along to mislead the lender. Or they may not, depending on the evidence in front of them. 

 

They would need evidence that the OP KNEW of the clients intentions, there are 101 reasons why someone might not claim all, or any. expenses.

I don't think the OP's awareness of the client's intention has anything to do with the client's own position (I had assumed that, as you suggested, the taxpayer had not informed the OP of his intention). I was simply entertaining the scenario whereby the lender has suffered a loss and decided to investigate the matter. It is not your place or mine to comment on whether the client would in this particular case be found guilty - one jury might find him guilty based on the available evidence (whatever that may be), another jury might acquit him. Hence the final sentence in my previous post.

Unless you thought that I was referring to the possibility of the OP being prosecuted as an accessory? In which case I agree - again it would be down to the court/jury to decide whether or not the OP was aware of the client's intention to defraud the lender.

But back to the original post. Does the OP have reason to be concerned? Yes, I believe he does - particularly if he assists the client with his plan and someone in the lender's office happens to read Any Answers ;) 

I'd perhaps give the client the benefit of the doubt, as being a bit naive, and advise him that it cannot/should not be done. If he insists, I'd walk away. (And consider my need to report the intended offence - not under money laundering but under common law - as we are being constantly reminded, we have a duty to report anyone that we believe to be planning to commit a criminal offence.)

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29th Sep 2011 19:55

Again many thanks for your interesting answers. I have formed the opinion that not claiming expenses on the SATR is probably not illegal but certainly unethical to me as his accountant and any use of that SATR figure in a mortgage application is fraud by misrepresentation. I have informed the client either accept my figures, approach a different mortgage advisor or find a new accountant. I will sleep easier tonight but at the back of my mind is what reply do I give to a new accountants clearance letter !

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29th Sep 2011 20:02

Reporting under common law??

I have to say that apart from cases of treason, terrorism or money laundering I would not (in England & Wales) be reporting any suspicions based on information which had come to me in the course of my professional work.

The reason is that I have a contractual obligation and a professional duty to keep my client's information confidential, and those obligations overwhelm any common law duty to report suspicions to the police (but do not of course over-ride my statutory duties re terrorism and money laundering).

David

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By Bluffer
01st Oct 2011 14:40

I've joined this discussion somewhat late

I have a (very) small sole trader client whom no matter what I say will not keep petrol receipts etc nor a mileage log. Consequently I don't introduce motor/travel expenses into his accounts, and he doesn't mind.

Would anyone view my client's or my actions as unethical?

If not, then isn't refusing to keep a mileage log another way for the client of the poster of this thread to achieve his desired result?

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By BKD
01st Oct 2011 14:57

@Bluffer

As I think is clear from the views of David W and others on this thread, it is the motive behind the taxpayer's actions (and the ability to prove his intentions - which may be the difficult part) that gives rise to the problem. If  your client can't be bothered to keep petrol etc receipts just because it's too much like hard work, and he's happy to accept a higher tax charge as a consequence, there is little problem with that. The problem that the OP has is that the client has already advised that he intends not to claim expenses with the sole intention of obtaining greater finance than he otherwise could, thereby exposing a specific mortgage lender to risk of loss.

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Where the client went wrong was in telling the OP of his intentions.

Had he simply thown 3/4 of his receipts away and told the OP he'd had a "good year" then the OP may not have formed a suspicion.

As it stands I dont see how the OP can be anything but suspicious (in fact certain).

 

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