UNDER DECLARED PARTNERSHIP INCOME

UNDER DECLARED PARTNERSHIP INCOME

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My client used to be a partner with a firm in the construction industry. Because his partner was doing work on the side the partnership broke up in 2005 but now there is an investigation into undeclared earnings. My client has been told by the inspector that even though they realise that he is not guilty he will be assessed for half of the lost tax/VAT and penalties etc. My client has been able to produce copy invoices for all the income he was aware of and has cooperated fully. Has anyone had experience of this and have any hints/tips as to what to do next?
Anon

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David Winch
By David Winch
20th May 2008 07:07

Reporting to MLRO / SOCA

Do not overlook your responsibility to report to your MLRO / SOCA under MLR 2007 / PoCA 2002 if you have reasonable grounds to suspect your client's former partner of dishonest deliberate under-declaration of his income for tax / VAT purposes (i.e. tax evasion).

David

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By AnonymousUser
19th May 2008 22:19

Not partnership income
I would say to HMRC can they demonstrate that legally this was income of the partnership, as opposed to something which as you say one member did on the side. Were the people the other partner did the work for contracting for him to do the work, or the partnership? I imagine the former. Is there any other evidence at all that the work was intended to represent partnership income eg paid into a partnership account?

I know with construction industry these situations can be loose arrangements but look back & see on what basis the partnership came together & what sort of jobs they took on & then really try & find the facts which show that the "partner" was not doing "partnership" work. Put it to HMRC that former partner was actually a failure to declare self-employment, not that partnership income was underdeclared.

The current position will suit the other partner and HMRC so your client needs to be ready to defend himself very hard.

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