Deliberate concealment of income.....

Deliberate concealment of income.....

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A couple visited our office today asking for help. Seems they have deliberately understated self employed profits in one tax return for six years, what makes it worse is that they produced full set of 'reported to HMRC' figures and the real figures.

The business should have been VAT registered around 4 years ago based on the real numbers, and they have declared around half of the real profits. I am aware of what I need to do if they don't decide to come clean, however, would you accept the appointment or not?

I estimated an annual bill to HMRC Of around £8-£10k each year, not including interest and penalties for them.

Any words of wisdom would be appreciated

Replies (17)

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By andy4151
10th Sep 2014 20:29

How do you know it is deliberate?

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David Winch
By David Winch
10th Sep 2014 20:36

Probably not reportable to the NCA

Assuming your firm satisfies the criteria of s330(14) PoCA 2002 then it is most likely not reportable to the NCA under MLR 2007 / s330 PoCA 2002 as the information they have provided to you will be covered by 'PoCA privilege'.

See this recent thread for a full discussion.

If you are competent to deal with the case there does not seem any reason why you should decline to act.

David

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By Bor2903
10th Sep 2014 21:09

Andy4151....they told me that they knew the real figures, and reported the lower ones to pay less tax.

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By Cardigan
10th Sep 2014 22:05

Just curious

As David said if you are competent to deal with the case, then there shouldn't be a problem.

If it was me, I would want to be sure I trusted them before taking the case on. If I feel that a potential client is fudging or not telling the "whole" truth, I tend not to take them on.

Just curious, why are they coming clean now?

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By User deleted
11th Sep 2014 07:51

To the OP

A couple visited our office today asking for help

What is not clear is why is this couple making the confession before you? Is this a referral from an existing client? That said there is nothing wrong taking up a client having problems with their tax affairs; however do make sure the engagement letter addresses all your potential concerns.

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By bernard michael
11th Sep 2014 08:53

.....and get some payment up front!!

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By Bor2903
11th Sep 2014 09:03

Taxguru......one of their self employed people had a call regarding Business records, and HMRC are now coming out to visit the self employed individual. The people that came to me run the salon. They provide the self employed people with their details for their tax return....

They are extremely worried and upset, as they should be!

They came to me because my husband handed in my card to them six years ago when he used their services. Are you implying that perhaps I have dodgy clients who have referred them? If I have any concern whatsoever about a potential client, I don't engage.

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Replying to SteveHa:
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By Kirkers
11th Sep 2014 09:09

I think

Bor2903 wrote:

Taxguru......one of their self employed people had a call regarding Business records, and HMRC are now coming out to visit the self employed individual. The people that came to me run the salon. They provide the self employed people with their details for their tax return....

They are extremely worried and upset, as they should be!

They came to me because my husband handed in my card to them six years ago when he used their services. Are you implying that perhaps I have dodgy clients who have referred them? If I have any concern whatsoever about a potential client, I don't engage.

I think they were implying that if they'd been recommended by a friend that they'd 'trust' you more from the word go to explain their situation than someone they'd not heard of and/or had a recommendation for. Not that you have a dodgy client base. 

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Replying to SteveHa:
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By User deleted
11th Sep 2014 09:40

No I'm not

Bor2903 wrote:
 Are you implying that perhaps I have dodgy clients who have referred them?

No, I'm not.

From your OP it wasn't clear what made them decide to come clean all of a sudden. 

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By johngroganjga
11th Sep 2014 09:12

Agree with the above.  No

Agree with the above.  No reason why you shouldn't help them to the best of your ability, but my main concern would be keeping them out of jail.  How would you be introducing the new figures to HMRC and what action would you be taking to ensure that the settlement was wholly civil?

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the sea otter
By memyself-eye
11th Sep 2014 09:15

Hairdressing salon?

and six years at (say) £10k plus interest, penalties and VAT....interesting.

I don't think there was any suggestion about 'dodgy clients' though;  seems like your client was duped too.

Providing they have the resources to pay you up front, I see no reason not to take the appointment. 

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Stepurhan
By stepurhan
11th Sep 2014 09:16

Honesty and prudence

If you believe they genuinely wish to come completely clean, there is no reason you should not act for them. Their honesty being somewhat belated is no reason that they should be denied professional help in correcting matters. If you think the "real" figures may just be sufficient adjustment to keep HMRC happy, step away.

But, if you do take it on, insist on payment in full up front. With the amounts you are talking about, their attack of conscience could evaporate. They still might choose to bury their heads in the sand and hope this enquiry does not get to them. An MLR report won't recompense you for the time spent.

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By Bor2903
12th Sep 2014 09:38

Update

They called back saying that they presented incorrect information to me. I said I was not happy to continue and could not act....they said ' It is okay, we have heard about an accountant in the Village who does this sort of thing all the time....'

He is an ex tax inspector, no accountancy qualification - no regulation.......how do they guys get away with it?

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the sea otter
By memyself-eye
12th Sep 2014 10:37

get away with what?

You have declined the work, the other guy might actually be well placed (in terms of his experience) to deal with it.

Sour grapes?

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By Bor2903
12th Sep 2014 13:31

Never sour grapes over a potential crap client....


memyself-eye - I don't take a client on if I know they are lying to me. This individual did, as mentioned above, in that the 'real' figures were presented to me. I advised that the business should also have been VAT registered, and when asked advised the rough annual costs given the figures. The next day they called and said the figures were wrong, using the correct figures they should not have been VAT registered. I specifically asked a question in three or four different ways to ensure the numbers I had were correct during the first meeting. This is someone who has deliberately understated income to HMRC, when advised how serious this was and that a declaration has to be made to HMRC, still try to understate income. (see John's point above about keeping them out of jail)

The individual I refer to has a 'reputation' that goes before him - one that I will gladly never have!!!!  Indeed, the potential client today quoted ' he ( the ex tax inspector in the village) has been happy in the past to go with lower income for Mrs ABC during an investigation'. This was my point when saying...'how do they get away with it', albeit I tried to give minimal facts.

 

 

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By Cardigan
12th Sep 2014 14:47

Dodged a bullet

Well done. You've dodged a bullet, Bor2903! From your initial query, it sounded (to me) like you had a gut feeling that something was not quite right.

Imagine how much worse it could have been if you were half way through the work and they found this new guy.

Have a great weekend.

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By ShirleyM
12th Sep 2014 14:59

The grass isn't always greener

A dodgy accountant has no scruples, and any client asking a dodgy accountant to represent their dodgy dealings is likely to be ripped off by the dodgy accountant who wants his share of the booty.

I doubt the help would extend to an enquiry though, and can imagine the dodgy accountant would plead ignorance of the facts and leave the client to take the full blame.

Leastways, that is what I think may happen, and it all makes perfect sense (to me!).

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