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VAT returns not done

Wow, this is new

Thought I would sit down today and do the books for a new client picked up this week as they have all arrived, two years worth he is behind but all good!

Until I find the VAT records and returns that is....

He has dilligently prepared them all (not sure if at the time or just recently when getting the records up to date) going back 2 + years BUT has never submitted a single one, instead he has been paying the HMRC assesments that have been arriving.

Problem is the assesments are far lower than what his calculations are, I make it £10k+ shortfall from my initial review.

I am not yet appointed to act for VAT and haven't applied to be as he has always done his own returns (or so I was told...) so an immediate "holding" conversation with HMRC is not possible.

Before I launch into this one, my proposal would be to approach this as follows;

  • Discuss with the client WHY he has not submitted the returns, (I suspect cashflow based on his description of where he is at financially)
  • Get appointed with HMRC ASAP and arrange for the returns to be submitted (will he / I be able to do all the last 10 returns in one go online?) although owing to the amount I suspect it will be a voluntary disclosure in full as cumulatively it is £10k+
  • If he is OK for me to submit and disclose in full now do I need any SOCA reporting OR is that dependant upon his answer as to why he has not submitted any returns.
  • Obvioulsy there will be some intererest and penalties - which will need negotiating - when this is all resolved, but I will approach that later.
  • And yes - I will insist on some fees up front on this one......

Any experiences readers could pass on before I approach would be most welcome as a sense check!


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14th Apr 2012 18:03

SOCA report (or not)

Presumably the reality here is of a penalty under Sch 24 FA 2007 of up to 30% of the VAT under-assessed (but mitigated for unprompted disclosure).

As far as a Suspicious Activity Report to SOCA under s330 PoCA 2002 / MLR 2007 is concerned I would suggest that a report is required UNLESS either of the following two options applies:

1)  The failure was not dishonest - for example if the client genuinely believed he was fully complying with his obligations by paying the assessments without filing the returns (and so had not realised he was doing anything wrong), or

2)  The client has made a disclosure of this to you in 'privileged circumstances' - for example where he has disclosed this to you for the purpose of obtaining your advice on how to regularise his VAT affairs (which amounts to legal advice).  Note that this will NOT apply if the client has simply handed over the records without drawing your attention to the VAT problem, with a view to you performing routine accounts / returns compliance services (since in that event he would not be seeking legal advice from you). [Based on the information in the question this option looks like a non-starter since he has not asked for your assistance in relation to VAT.]

If neither of these apply then the failure to make returns could amount to a criminal offence, for example contrary to common law as 'cheating the public purse', or contrary to s72 VATA 1994 as being knowingly concerned in the fraudulent evasion of VAT, or contrary to s3 Fraud Act 2006 as being fraud by failing to disclose information when under a legal duty to do so.

If you suspect that a criminal offence has been committed from which someone has benefited (and here you clearly suspect the client has benefited by under-paying HMRC) then that triggers an obligation to report to your MLRO / to SOCA (because the client is deemed to have obtained a sum of money equal to the liability unpaid and that 'money' is criminal property which he has 'acquired' contrary to s329 PoCA 2002 - so it is a reportable suspicion of 'money laundering').


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