Barrister convicted for £600k VAT fraud

A barrister who failed to pay more than £600,000 in VAT was convicted for tax fraud this week.

HMRC investigators found that Rohan Pershad, 44, from London failed to declare or pay £627,839 of VAT for 12 years.

Pershad, who practices in London, spent the cash on two luxury homes in Surrey and Somerset and private school fees for his children, according to HMRC.

Pershad was deregistered for VAT by the Revenue in February 2000 following a history of failure to submit tax returns and to tell HMRC about a change of address.

This meant he was unable legally to trade above the VAT threshold, which was between £54,000 in 2001 and £67,000 in 2008.

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davidwinch's picture

Two sides to every story    1 thanks

davidwinch | | Permalink

I think in large measure the article is based upon the prosecution case.  As I understand it from press reports (I have no other information on the case) the defendant's case was that he believed (mistakenly) that the barristers' chambers at which he worked was responsible for dealing with his VAT affairs.

When at previous chambers he was registered for VAT and had a VAT number.  He continued to use that number on his stationery after moving to a different set of chambers but ceased to prepare and submit VAT returns or make payments to the VAT authorities mistakenly believing (he asserted) that his new chambers were dealing with all that for him.

So, whilst when the true position came to light he accepted that the VAT had not actually been returned and paid (and was owed to HMRC), he continued to deny any dishonesty and denied any intention to cheat the public purse.  Hence his not guilty plea at trial.

In fact the chambers were not dealing with his VAT affairs and his VAT number, in the absence of any returns, was de-registered by the authorities.

It appears that over many years there was no cross-check by HMRC of the obvious discrepancy between his income tax returns and his (lack of) VAT returns.

The jury by their verdict demonstrated that they did not believe the defendant's assertions and found him to have been (deliberately) dishonest.

I understand he will be sentenced later this month.

Mr Pershad is a QC who specialised in professional negligence, insurance, personal injury and commercial law (including construction cases).

David

carnmores's picture

it was also mentioned

carnmores | | Permalink

that his defence that Chambers was dealing with matters was like trying to hold water in a sieve

The VAT Doctor's picture

The Small Stuff    1 thanks

The VAT Doctor | | Permalink

You know the book and saying, about not sweating the small stuff?  In this case, the small stuff was a little matter of collecting VAT but never paying it over.  Surely in all that period he would have wondered why he never had to sign a VAT cheque?  I don't believe any chambers pays a barristers VAT, so this excuse seems flimsy.

Presumably HMRC can get the tax back at least, from his houses etc?

I just hope he is dealt with in the same way as a working class guy who decides to fiddle his tax, or do educated men not deserve this?

carnmores's picture

of course they dont !    2 thanks

carnmores | | Permalink

ignorance of the law is no defence and down right flouting of it is even less excusable (if at all and there are times when it is but not here)

davidwinch's picture

Confiscation

davidwinch | | Permalink

The VAT Doctor wrote:

Presumably HMRC can get the tax back at least, from his houses etc?

I understand that Mr Pershad was convicted of one count of cheating the public revenue between 1999 and 2011.  So it would appear that he will be liable to confiscation proceedings under the Criminal Justice Act 1988 provisions (not the Proceeds of Crime Act 2002 provisions because the offence commences prior to the coming into force of PoCA 2002).

Under the CJA 1988 provisions he will not be subject to statutory 'criminal lifestyle' assumptions having been convicted of only one offence.

So a confiscation would be based on the amount of tax 'lost' uplifted for changes in the value of money (in other words, index-linked) possibly with statutory interest added (but no civil penalty).

It might be argued that index-linking AND adding interest would amount to double counting and would be disproportionate (and in breach of the defendant's human rights).

In practice the work will have already been done (in preparation for the trial) in order to quantify the amount due.  So the confiscation figure should be resolved fairly swiftly.

David

ali faisal's picture

VAT issues    1 thanks

ali faisal | | Permalink

wrong is wrong no matter who does it. 

Professional negligence in account preparation?    1 thanks

anne in basingstoke | | Permalink

It seems ironic that Mr Pershad thought he could advise on professional negligence when he so clearly was negligent himself.  Even if he did think that the chambers took care of his VAT (which seems extremely unlikely), how could he submit a tax return in good conscience if he never reconciled his income figures?  Or is there an equally negligent accountant in the background doing a cheap job and not reconciling this barrister's income and outstanding debtors/ creditors?  I always expect to see my client's VAT returns.  I am not surprised that the jury disbelieved him.  Well done to the jury!

jline199's picture

Did he prepare his own Self Assessment returns?

jline199 | | Permalink

What is not clear from the above is ... who prepared his Self Assessment tax returns? Himself? Or did he have someone preparing the returns on his behalf? If they were prepared by a professional person, and with his legal background, a possibility of a Professional Negligence claim?

Not    1 thanks

Andrew Dinkenor | | Permalink

I have worked as an accountant in two barristers chambers for the past 11 years involving over 150 Barristers.. Barristers are well aware that they are responsible for their own VAT registration and returns, just as they are well aware that they are responsible for their own income tax returns.

I myself send out reminders every quarter to the barristers reminding them to get their VAT returns in on time, and quoting them their Box 1 and Box 6 fees figures for the quarter.

 

Time

The Rogue | | Permalink

How did it take so long for all this to come to light?

Missing Trader and cancellation of registration

davidross | | Permalink

One of my clients was recently marked as a missing trader because he had moved and correspondence had been returned, but we were still filing his Returns online and the tax was being paid.

With the move to online this could happen more often, and I wonder why HMRC would give up so easily - why assume that someone who has gone unknown has ceased trading? Seems like HMRC negligence to me (though not an excuse for the Defendant here)

HMRC check on Barristers

Andrew Dinkenor | | Permalink

I understand that it came to light because HMRC are chasing up barristers, particularly those who submit their own income tax returns. I presume the convict in this case did not use an accountant, but submitted his own income tax return.

I also understand that barristers who do their own income tax return, are less likely to understand the 7 year rule, (change of assessment from cash to work done with catch up charges to be calculated) which is why the HMRC have picked on them.

pembo's picture

Greed    2 thanks

pembo | | Permalink

Presumbly he did his own tax returns otherwise surely MLR implications for the accountant who did. In which case presumbly he included his income on the basis of net income ex VAT. He also knew he had not paid any VAT over for 12 years and that he was deregistered and had not re registered. Finally as a negilgence lawyer he more than most would know the basis of a claim that his predicament was as a result of failings by others.

Open and shut and down to sheer greed nothing more. Just hope he gets the sentence he deserves but I suspect he won't.

mydoghasfleas's picture

It's no defence

mydoghasfleas | | Permalink

Carnmores is right. 

Pershad must have known his registration was cancelled but he continued to allow his chambers to use it. 

Even if he thought chambers was dealing with it, which in my experience would be unusual, how did he think it was getting paid?  Had he not noticed the payments he received were consistently larger than the net amounts charged?  Who did he think was signing the returns?

As for HMRC cross-checking between VAT and income, can we have a touch of reality here?  You could only expect that from a joined up organisation, as recently as 2011 we received a letter from HMC&E?

Barristers still hark back to cash basis accounts for most purposes the WIP and debtors are some wondrous calculation prepared for them.  Some of them still want to keep the cheques in the drawer so they fall into the next accounts.  For that reason, I think it extremely unlikely his agent, if any, would have picked it up as most barristers would not want you to prepare a balance sheet.  The source material for the accounts as regards fees is the extract from chambers records which deals with the billing.  If it shows VAT charged and paid to the barrister and the turnover is high enough the indications are he is registered.  Do your clients show you a VAT registration each year?  Do you check it is still valid?

Final thoughts, Pershad was (perhaps still is a silk) this means he is considered one of the bar's finest, a Leader not a Junior.  The tax evaded equates to a minimum turnover of £300,000 per annum.  He would have had a string of communications from HMCE, as it was then, due to non submission of returns (who has not had a reminder even when they have filed).  The only experience I have of HMRC deregistering without an application to deregister occurs when there are a stream of nil returns other than that they are like a dog with a bone.  I guess there is more to this point than meets the eye.  Has anyone seen the case report or are we all shooting from the hip?

 

Look at the detail.

lgravatt | | Permalink

I think you should review the full detail of the case.  I sat through all the evidence and the HMRC and press are putting out one particular picture.

 

Yes, Pershad knew about his obligations to pay VAT and failed to do so.  But the Revenue didn't appear to do very much to chase him when he first 'fell off the radar', even when they knew where he was.  His accountant prepared his self assessment forms and didn't seem to ask many questions at all.  His chambers didn't provide the level of support in doing VAT that some other chambers did.  He was a man who appears to have been totally absorbed in his work, to the detriment of almost everything else in his life, including his family and sadly, his tax obligations.  Yes he should have known better but it wasn't wholly clear that he set out to defraud the public purse or that he intentionally lived any high life from the proceeds.  Now he's paying the price of not being professional in all areas of his work.

 

But it does seem questionable as to what real good is achieved from charging and putting someone like this in prison when, if allowed to work, they could repay the funds due several times over in the future. Other options were open to HMRC to recover the funds rather than taking the course they did. The only benefit is as a warning to others and showing that no one is above the law.

Just as an aside to this, but

Supertorben | | Permalink

Just as an aside to this, but relating to the legal "profession" ( I use the word cautiously ) I am frequently contacted by an organisation which provides funding for capital expenditure and also funding to pay tax bills. I always respond that, as a Yorkshireman , I find the idea of having to borrow money to pay tax bills  anathema to me. I recently asked them if this wasn't the general response to their offer and was surprised to learn hear that this was the side to their business which was the busiest. "Who does this?" I asked and the reply was "Solicitors". Nuff said.

johnjenkins's picture

I think the benefit

johnjenkins | | Permalink

to HMRC is quite clear. Make an example of this one and see how many more start "coming clean". Then watch the "deals" being done.

Steve-EBL's picture

Donald toon

Steve-EBL | | Permalink

Made me laugh , "HMRC will not stand by" so taking 10 years or more to catch up with someone is certainly not running or even a brisk walk, sounds like standing by to me.

mydoghasfleas's picture

I have not looked in the detail but thank you

mydoghasfleas | | Permalink

If your summary is correct, I have no doubt it is then the first sentence in your second paragraph damns him.  If he knew he had to pay VAT but did not, he set himself apart from those of us that knew we had to pay VAT and did. 

I am not interested in what he did with the money as that is the politics of envy.

It seems to me that he was looking around to blame someone else, he thought chambers did his accounts, HMRC did not press home, he fell off the radar (ducked below its horizon), HMRC knew where he was, his accountant did not ask many questions.

Most barristers I know have a terror of a penalty of any description affecting their right to practice even late filing penalties; enquiries fill them with dread.

I know it is unfair that he may be punished harder than someone who does not have a legal background but as a Silk he may have been in line for the Bench.  The upholders of the legal system have a duty to set an example and the higher up the greater the fall.

I sympathise that he will lose his livelihood, his liberty and his assets whilst violent criminal acts result in community service but there you have it.

Steve-EBL

hiu612 | | Permalink

my thoughts exactly - he was filing tax returns, paying tax, and was easy enough to find if he managed to generate the level of turnover he did. Maybe the teams who write to us noticing our client's haven't declared the £150 of bank interest HMRC are "aware" of might be better re-tasked with finding other non-registered persons. Sounds like easy money to me.

Steve-EBL

hiu612 | | Permalink

my thoughts exactly - he was filing tax returns, paying tax, and was easy enough to find if he managed to generate the level of turnover he did. Maybe the teams who write to us noticing our client's haven't declared the £150 of bank interest HMRC are "aware" of might be better re-tasked with finding other non-registered persons. Sounds like easy money to me.

Tom 7000's picture

4 years...I would imagine...

Tom 7000 | | Permalink

 Higher or lower?

Rohan Pershad

Shay Daly | | Permalink

This case as determined is straightforward.HMRC convinced a willing jury that he simply trousered the VAT thereby stealing from the public purse.No mention is made of income tax liability so presumably his income tax liability was calculated on the basis of  VAT exclusive figures.

What would have made this case very interesting is if he had not charged VAT on his fees (as the Revenue had deregistered him) but continued to earn and to file income tax returns declaring turnover well in excess of the exemption threshold.This might have put him at an advantage to his colleagues.HMRC in their pursuit of tax defaulters always defend themselves on the basis that inaction on their part would give an unfair advantage to other businesses.So why wait 10 years as in this case or was this a case that they stumbled upon accidentally 10 years later.

Also,HMRC were culpable in de-registering him.If he stopped earning when he reached the threshold  that would have caused him to lose work which would have been taken up by other barristerswhilst putting him at a disadvantage.They should have intervened much earlier to ensure that he did remain registered and paid his VAT liabilty.

HMRC 's duty is to ensure that all due taxes are paid when due.Clearly,they failed and are now proclaiming a great victory despite their own failings.Will HMRC learn anything from this case????

Rohan Pershad

philfromleeds | | Permalink

I think that he should have been allowed to pay all the VAT and a 30 per cent penalty and the interest. Then he would not have to go to jail at £46000 per year on the taxpayer. Also he saved the country a fortune by paying for his chilrens education. I heard that he is a really nice chap

some observations

Andrew Dinkenor | | Permalink

It is a requirerment in my Chambers,set out in the Constitution, that all Barristers are registered for VAT.

A VAT inspection of my Chambers own Vat Returns last year required me to provide the VAT inspector with a list of all VAT numbers of each and every barrister.

There are 3 options open to the way Barristers Chambers prepare VAT returns. For cash flow purposes, Option 3 is far and away the best option, as it allows Chambers to claim back all its inputs on a monthly VAT return such as on rent to landlords, whilst the Chambers itself has next to no outputs, as all fees are recorded on the barristers own VAT returns. Under this option, Chambers does not have to charge VAT to the barristers on its levy it raises to Barristers to cover the costs of running Chambers.

It is a requirement of Option 3 that it cannot be operated without all barristers in Chambers being registered. 

The Bar Council issues to all barristers guidance on tax matters which is regularly updated.

Yes, Barristers do not need to raise finance to pay for their tax bills, because those with 7 or more than 7 years practice are assessed on a work done basis, and sometimes the case goes on for years.

It is not surprising that the tax office let this man get under their radar, because barristers are among the last people you would expect to fiddle their figures as they are governed by a regulatory body which would take an exceedingly dim view of this kind of behaviour and put a stop to the practice of anybody found guilty. The very nature of their profession means they have a far grater awareness of the law then the vast majority of other taxpayers.This case hopefully is just a one off. 

 

Steve-EBL's picture

Butlins

Steve-EBL | | Permalink

If he got 4 years as someone above suggested, he would serve 2. I'm sure after losing his lively hood he would rather serve that in a low security unit with home visits etc than get himself indebted with repaying the vat plus interest and a fine.

Baristers/solicitors

kim walsh | | Permalink

..in my experience have little understanding or inclination to understand their own finances.

Even partners in a firm of solicitors consider it above their understanding - most of them are treated and act like employees.

I know of several barristers that don't even know where their income comes from, having 'delegated all that' to their Chambers. Except they don't see it as delegation. Most Chambers set the terms and decide which barrister ranks first when receiving funds from the same client for the same case. Most senior first even if he comes in at the end.

Some Chambers administer everything for their barristers -'staff'?

I agree with philfomleeds.

We all know people who are so focused on what they are good at, they have no brain space for anything else. Idiot-savante?

I think shame, loss of professional and social standing, loss of career etc, paying back with penalties and interest is enough.

His mistake was not ensuring he had competent support, he could afford it - many people at the lower end of the income levels cannot.

 

 

johnjenkins's picture

At The end of the day    1 thanks

johnjenkins | | Permalink

Ignorance is not an excuse and someone who has aspired to that degree of achievment cannot claim ignorance. As for Barristers not knowing where their income is coming from - priceless.

I agree

kim walsh | | Permalink

[quote=johnjenkins]

Ignorance is not an excuse and someone who has aspired to that degree of achievment cannot claim ignorance. As for Barristers not knowing where their income is coming from - priceless.

[quote=]

....hence my comment about competent support, but intention is important. Some of the most intelligent and highest achievers are rubbish at many things.

We all have clients that find it bewildering. Which is why they come to us.

 

And I meant which clients, not for what!!

Some have arrears dating years back, but seem to be ignorant of the fact of whether the sums they receive are relating to services provided several years ago or are current. They don't prepare their own invoices nor chase their own debts. They just receive money from Chambers.

 

I come back again to the assumption that everyone can 'self assess'. They can't.

Igravatt    1 thanks

J Lessels | | Permalink

Igravatt

"Putting someone like this in prison" is not OK, but putting someone working class who had fiddled his benefits would be, I suppose?

I think you should reconsider what you are saying here.

 

 

 

davidwinch's picture

VAT owing    2 thanks

davidwinch | | Permalink

Just to be clear, a term of imprisonment (if that is what he gets) is not an alternative to paying the VAT.  It is closer, if you like, to being an alternative to the penalty which would have been charged on an investigation settlement.

The VAT remains payable.

David

johnjenkins's picture

@Kimwalsh

johnjenkins | | Permalink

If these barristers were on megre sums then I might have some sympathy with your arguement, but they are not. They earn huge sums because of their knowledge and what they have achieved. During their training they would have had to have paid attention to detail. These are highly educated people that know the difference between right and wrong.

Your arguement could be likened to MP's claiming expenses they shouldn't because they couldn't find a pen to cross out something they knew to be wrong.

Please don't tell me "chambers" do not have a system by which they can't tell who is being what from what case.

carnmores's picture

the general council of the bar produce

carnmores | | Permalink

a booklet called

TAXATION AND RETIREMENT BENEFITS HANDBOOK

its all in there

J Lessels

lgravatt | | Permalink

Putting anyone in prison who is not a danger to society and who could make a greater contribution to society by other means is a waste. Don't let him off but find a way that doesn't stop him repaying what is owed and costs us more in the long run.

One law

The Rogue | | Permalink

That's one law for the rich and another law for everybody else, then.

Same for all

lgravatt | | Permalink

No - the same should apply all round.  Meaningful sentences that rehabilitate the offender and reduce the cost / increase the return to society.

But the issues of prison reform are probably for another forum!

johnjenkins's picture

As I see it

johnjenkins | | Permalink

there are two choices for rehabilitating offenders.

One is making life in prison as difficult as possible so they won't want to go back.

Or, spending loads of money on experts etc. like what is done for other addictions.

There just doesn't seem a happy medium. Just think what a skilled work force the prison society could offer, with no employment laws to worry about.

So we seem to be split on punishment, although we all know he's going down.

VAT numbers

The Rogue | | Permalink

The man used a de-registered VAT number.  Does anyone ever check these?  We put our VAT number on all our invoices, in line with regulation.  I don't suppose our customers do any checking and we don't check them on the purchase invoices.  Should we?

We had a routine VAT visit some years ago and I have no idea if the inspector looked at any VAT numbers on our purchase invoices.  That is the only opportunity for HMR&C to find rogue VAT numbers because we don't report them at all.

So why is it necessary to put your VAT number on an invoice?

In fact, is a customer at all responsible if an invalid VAT number is used?

Apologies if I am going off-topic here.

pembo's picture

@ ingravatt    1 thanks

pembo | | Permalink

Dare say the vast majority of people in prison would say they are not a danger to society and could make a greater contribution by other means (whatever that means). Thats the trouble with subjective assessment of such cases and the reason Lady Justice has been blindfold since the fifteen century. There may or may not be mitigation but thats for the judge. Bottom line is he fraudulently obtained over £600k from the public purse. Anything else is pure speculation and irrelevant unless the judge considers it relevant. 

I'd like to think that if an    1 thanks

Supertorben | | Permalink

I'd like to think that if an accountant prepared some accounts for anyone earning over £100k a VAT control account would be prepared, or am I being naive?

carnmores's picture

@ David W

carnmores | | Permalink

I thought all debts were extinguished if a sentence was a certain length

!

The Rogue | | Permalink

I hope not.

Box 6 reconciliation

Andrew Dinkenor | | Permalink

Quite right. I always ensure that the VAT return Box 6 figures reconcile to the accounts figures, whenever the client is VAT registered.

Chris Smail's picture

I never cease to be amazed    1 thanks

Chris Smail | | Permalink

 at how innumerate solicitors & barristers generally are. They just seem to turn off when it comes to numbers.

Barristers (& Judges) also come fitted with HUGE EGOS and consider anything that does not interest them as trivial.

He was a fool, but also it would seem let down by his accountant.

davidwinch's picture

@carnmores

davidwinch | | Permalink

carnmores wrote:
I thought all debts were extinguished if a sentence was a certain length

Nope!

Perhaps if you get transported to the colonies . . .

David

TomMcClelland's picture

He didn't notice?

TomMcClelland | | Permalink

I wonder if he'd have noticed and questioned the payments if he'd paid £600,000 too much VAT to HMRC rather than £600,000 too little.

johnjenkins's picture

As that is a specific

johnjenkins | | Permalink

and not a general wondering I would have to refer it to "the committee" (the comedians, years ago).

davidwinch's picture

Imprisonment

davidwinch | | Permalink

Mr Pershad has been sentenced to 3½ years imprisonment for the offence.

David

davidwinch's picture

Appealing conviction and sentence

davidwinch | | Permalink

Press reports indicate that Mr Pershad will be appealing both his conviction and his sentence.

An appeal against conviction such as this, from the Crown Court to the Court of Appeal is not a 're-hearing'.

In other words he cannot appeal simply on the basis that the jury should have believed him but didn't - he has to appeal on the basis that something went wrong in the trial procedure with the result that the conviction is 'unsafe'.  For example if there was some error by the judge in deciding what evidence should be admitted, or in summing up the relevant facts and explaining the law in the case for the jury.

So in order to get a hearing in the Court of Appeal he would have first to show (at a preliminary stage) that he had an argument worth hearing regarding some sort of failure in the trial process in his case.

Even if the Court of Appeal were to hold that the verdict was unsafe - and quash the conviction - that might not be the end of the matter as a re-trial in the Crown Court may be ordered.

He will go to prison pending any appeal.

So he faces an uphill struggle!

David