Fraud Act 2006

Fraud Act 2006

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On a sales ledger, there's an old credit note for several thousand pounds, which dates back more than 6 years, and which the business owner wants to write back to turnover.

The "person" to whom the credit note was issued no longer exists, and there is considerable confusion as to whether a successor in title exists - so presumably it would devolve to the Crown.

I understand per the blurb for various legal courses, that under the Fraud Act 2006, it would be an offense to write this amount back to turnover, as it is apparently a conversion, even though the amount is not recoverable under the Limitation Act 1980 ( - and cue reporting to the secret police.)

So how do we clear all those irritating differences on the purchase and sales ledgers without breaking the law or leaving ourselves open to reporting obligations under the secret police regulations?

(Strangely, under Scottish law, I hear that commercial debts older than 5 years are extinguished so the problem does not appear to arise.)
Greg Hayes

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By AnonymousUser
21st May 2007 18:52

How about an overpayment?
Thanks David,

So how would the picture change if it were an overpayment that has sat on the purchase ledger for say a couple of years?

Quoting from accounting web's article "Money Laundering Regulations 2007 pose new compliance problems" of 15th March 2007, there's this:

"In my view the act of removing an entry from a client ledger is an act of concealment and a money laundering issue."

(Adrian Gibbons of SWAT)

(Is there any kind of de minimis on this?)

This seems to suggest that it is the making of a change to the ledger that is the fraud and as such would be the trigger for a secret police report, whilst apparently leaving old balances there to gather dust is OK.

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By Chris Smail
22nd May 2007 11:08

Intent
If attempt was made to refund but overtaken by events then no fraud.

If concealed then fraud.

I guess

David, David, inferred <> implied

L Tec Sorry mate that was a different planet you were visiting.

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David Winch
By David Winch
21st May 2007 18:12

Check the blurb!

Greg

Hopefully any blurb you have about the Fraud Act 2006 points out that dishonesty is a necessary element of the offence of fraud (as it was in the Theft Act offences the new Act replaces).

There is a longstanding legal 'test' for dishonesty which is a two-part test as follows:-

"Whether the accused was acting dishonestly by the standards of ordinary and decent people and, if so, whether he himself must have realised that what he was doing was, by those standards, dishonest.”

The case is R v Ghosh [1982] 2 All ER 689, [1982] QB 1053. This test still applies today notwithstanding the recent changes in legislation.

Now, ask yourself, "In these circumstances is the proposed write off dishonest?"

From the information provided I would suggest that your answer to this question will be "No".

In that event the write off will not be fraudulent and no crime is committed by it. Where no crime is committed there is no obligation to report to SOCA.

David
www.AccountingEvidence.com

P.S. The difficulties in 'credit note' cases arise chiefly where the company issuing the credit note fails to issue it to the customer, or fails to issue statements to the customer showing the credit note (and credit balance, if there is one), or fails to pay the balance to the customer when he requests payment of it. If this failure is deliberate, or is continued after it has been drawn to the attention of the person making it, it may be dishonest. Then a criminal offence may occur. Have a look at section 5(4) Theft Act 1968. Where a criminal offence of this type is suspected then you are obliged to report it under PoCA 2002 and MLR 2003.

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David Winch
By David Winch
21st May 2007 19:11

Purchase ledger / sales ledger

Greg

If you have someone else's money (whether on purchase ledger or sales ledger) and you have an intention not to pay it back to them then that is likely to be dishonest.

But who can say what your intention is apart from yourself - since it is something going on inside your head?

Well, your intention can be inferred from what you do or what you deliberately fail to do.

So if you write off the over-payment on purchase ledger that looks as if you don't intend to pay the money back. Bingo! You are being dishonest. Now what's the website address of SOCA . . .

David
www.AccountingEvidence.com

P.S. There is no de minimis in the legislation. However if the administrative cost of contacting the supplier / customer and sorting out who owes what, and paying it, exceeds the amount involved - then maybe it would not be dishonest to write it off and save everybody the hassle!

(Like most things in life, if you get right down to it, it is not black and white, it's shades of grey!)

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