FALSE PETROL TICKETS

FALSE PETROL TICKETS

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I have posted as Anon, as you never know who reads these message boards and I want remain in control of events……………… for now!!!

During a routine Limited company PAYE enquiry the Inspector said he was aware of the existence of hand written petrol ticket pads that are “doing the rounds”, he went on to point out that my client has many hand written petrol tickets in his records and needs to satisfy himself that these tickets are genuine. In order to do this he has asked for details of the vehicles that were refuelled, so he can compare them to the fuel account that my client has –where registration numbers are recorded. This could not be supplied at the visit so I asked him to put it in writing. Upon receipt of the follow up letter I then copied it to my client asking for the information. My client turned up at my offices the next day and dropped the bombshell that these are false tickets hand written by himself.

I am fully aware of my ethical responsibilities and have advised him that he should come clean immediately, however I am unsure of the best way to approach this. Clearly this will not stop with the PAYE inspector, false petrol ticket have been included in previous years accounts, my client says that he has been doing this for quote “years”. Who should we contact, PAYE, CTSA ?. Is there any step by step guidance available for make a voluntary admission of this sort of problem. Your advice would be greatly appreciated.
Anon.
Anon

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David Winch
By David Winch
21st Apr 2007 17:13

Thinking aloud
Two thoughts spring to mind.

First is the current 'amnesty'. Whilst the 'amnesty' arrangements do cover employers' tax issues as well as tax on business profits and the same 'deal' is open to taxpayers whether or not their tax irregularities are connected in any way to offshore bank accounts, there is a problem here.

The problem is that, arguably at least, a tax enquiry is already underway (albeit simply a routine PAYE visit) and it is this that has triggered the client's 'confession'.

The 'amnesty deal' is not available to taxpayers where an enquiry is already underway.

At the end of the day though you could argue for a 10% mitigated penalty on the basis that this is being offered by HMR&C to taxpayers with offshore accounts who must know, or at least strongly suspect, that HMR&C has already got strong evidence against them - so why should it not be offered to your client who is in similar circumstances?

The second thought which springs to mind is the obligation to report to SOCA under section 330 Proceeds of Crime Act 2002 and the Money Laundering Regulations 2003. If you are a member of ICAEW or one of the other bodies eligible for the purposes of 'legal' professional privilege then there may be an argument that the information should not be reported. This would be the case if the client was seeking legal advice from you. I would think there is a good case to argue that he is indeed seeking legal advice from you, but I would need to know more details before forming a final view.

I would have thought your next step is to swiftly get a feel as to what has been done, for how long, and what are the tax implications (both for PAYE and income tax and NIC) in terms of how much tax has been 'lost'.

It may be relevant to know whether the client who created the false documents was a sole trader, a partner in a firm, a director of a company or an employee. (The situation in terms of criminal law gets progressively worse as you work down this list as we get into the realms of theft from the employer in addition to false accounting and tax evasion.)

The client's conduct was of course criminal.

The client will make things much worse now if he makes a disclosure which is incomplete or incorrect. Make sure that he understands that he needs to disclose all tax irregularities.

As soon as you have a good 'feel' of the size and nature of the problem you can consider the next step. Based on the information in your question I think your next step at that stage would be to respond frankly to the PAYE inspector whilst acknowledging the other aspects.

Don't overlook VAT aspects.

Also be sure to get the client to confirm in writing his agreement to the disclosure you are going to make to HMR&C. It might be a good idea to get a payment on account of your fees for dealing with the enquiry too.

If in doubt get specialist advice.

David
www.MLROsupport.co.uk

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David Winch
By David Winch
21st Apr 2007 17:38

Limited company

I have just re-read the question and realised this is a case involving a limited company.

Potentially an additional problem here is "What happened to the cash purportedly spent on that petrol?".

Did your client actually pocket the equivalent cash?

If so, this may be regarded as theft from the company (even if the 'thief' actually owned all the shares in the company and was sole director).

See for example R v Foggon.

We can also get into issues about section 419 tax liabilities.

If there are 'outside' shareholders and / or other directors things could get messy.

If you act as auditor you need to think about the implications of that too.

Sorry to sound so glum!

David

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By billgilcom
21st Apr 2007 21:31

It's serious and what else has he done?
You have to have an open mind but if the client has been committing fraud with petrol tickets - assuming that he didnt in fact purchase the petrol for which he made out the tickets - could he potentially have prepared false invoices in relation to other "COMPANY " payments. Clearly if he hasn't got a healthy participator's loan account notonly could you have the possibility of evaded corporation tax but also S419 liabilities.

While it might be ideal to put your clients hands up and pay whatever PAYE the enquiry officer demands to keep hm/her away from referring such fraudulent acts to the Company Tax Inspector - he may in fact already be working in tandem.

You really need to get to the bottom of what he has been doing in all areas and then decide to approach the company tax Inspector if he has been extracting funds from the company "illegally".

To be honest I interpret the 10% "Offshore Disclosure Facility" to be only available, at the best, to brand new enquiries where HMRC have not had the opportunity to challenge the client or other voluntary disclosures that might already have been in the pipeline without HMRC having issued their challenge. Mind you this is not to say that I won't be trying for 10% in all my new disclosure cases from here on in until 22-06-2007( andI think it should achieve a degree of success if not wholly successful
regards
[email protected]
http://www.wamstaxltd.com

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By billgilcom
21st Apr 2007 21:32

on 2nd thoughts
e-mail me if you want to discuss after reviewing my website
http://www.wamstaxltd.com

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David Winch
By David Winch
22nd Apr 2007 15:06

And another thing . . .

There is always the outside possibility that HMR&C may consider this a suitable case for criminal prosecution as your client has apparently created many false documents over a period of years.

If the client is prosecuted the ultimate financial penalties could be very severe indeed as he may be subject to confiscation. The figures in confiscation cases can be mind boggling!

David
www.AccountingEvidence.com

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By User deleted
23rd Apr 2007 11:11

Not very clever
Some of the tricks people get up to are quite smart but this one fails a simple test. When were you last given a hand written petrol station receipt?

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By billgilcom
23rd Apr 2007 11:15

Keep it in perspective?
David,
I personally cannot see HMRC raising a prosecution here if under the terms of the "amnesty" - hardly that as nothing forgiven - they induce a person to make a full disclosure in return for a monetary settlement to include a penalty in respect of the offences that they would have to prosecute for....... After all under the terms of the amnesty they even ask you to fill up the letter of offer which if you wanted an inducement of any kind that certainly would be in my view

If you could get it in under the amnesty this looks like an ideal opportunity to take advantage of the disclosure opportunity - however word of caution - the enquiry already seems to have been started and you cannot afford to do it without experience. You would need to make sure that no stone is left unturned and it has all to be done and dusted before 26th November 2007 (an uphill task if other "frauds" have been committed.

Alternatively if matters are large enough it might pay dividends to approach a CIF team and if they arent then disclosure to the local company inspector might be the better opportunity

Let me know what you think
regards
[email protected]
http://www.wamstaxltd.com

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David Winch
By David Winch
23rd Apr 2007 11:50

An "outside possibility"

Bill

I referred to prosecution as an "outside possibility" - by which I mean that I think it is unlikely but not impossible.

What concerned me a little was that the tax office are apparently aware that this sort of fraud is uncomfortably common. For that reason it might be attractive to prosecute someone "pour encourager les autres".

The reality is that there is an enormous amount of work for HMR&C in mounting a prosecution and so they are generally loathe to do it - but this guy might just be "asking for it"!

David
www.AccountingEvidence.com

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By User deleted
24th Apr 2007 12:44

Thanks
Many thanks for all your advice and comments, plenty for me to ponder over.

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