HMRC gets heavy with ex-Lunn clients

HMRC has continued to pursue former clients of Christopher Lunn & Co, threatening “criminal investigations” if they fail to provide full disclosure.

Since early 2011 AccountingWEB members have been discussing HMRC’s investigation of every single Christopher Lunn & Co client, named ‘Operation Edgewood’.

Those with ex-Lunn clients have been trying to find out what was going on, and whether other accountants had agreed settlements, resisted or challenged requests.

One accountant, who chose to remain anonymous, said two of his clients were “threatened” by HMRC with criminal proceedings, and that in one case the investigators wanted to go back over 13 years of tax returns raising settlements under section 29 of the Taxes Management Act 1970.

Continued...

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Comments

Christopher Lunn Client

gpyyow | | Permalink

I asked for help from the community last year when I first picked up this client.  I am very wary of the cat & mouse game HMRC plays but, as your article suggests, my client was just trusting the accountant to do the professional thing?  By the way, CLAC must have had professional indemnity insurance - can my client claim against that for earlier years - 2005/06?  Don't know about others but for my client HMRC trying to pin the change between SA and CT on my client as a tax evasion exercise and that the intention was never to cease trading as self employed.  I am worried for my client as HMRC seem to want to go further and further back.  What I don't understand is this - the fraud was not perpertrated by my client but by the agent.  It seems to me that my client was also a victim.

 

johnjenkins's picture

We had a situation

johnjenkins | | Permalink

like this a few years ago, where an Accountant (got 7 years and still trading) did exactly the same thing. However HMRC picked up individual clients and went through one year with them and agreed a figure, but most weren't even contacted (and are still his clients).

It would seem that now HMRC are blanketing the whole client base to see what comes out.

There are two solutions:-

Say that there are no corrections needed and as far as you are aware the tax returns were correct.

Or re-do the last tax return to see if there is a problem then contact HMRC to see if a settlement can be reached.

@gpyyow The fraud promoted "discovery" so HMRC are well within their rights and have not overstepped their powers. Had we been in more affluent times they might have taken a slightly more informal direction, but Euroland needs all the money it can get.

Ex CLAC clients

gpyyow | | Permalink

Thank you for your advice.  Unfortunately, they spotted the usual tricks that CLAC applied to my client's accounts and on going back over the last few years, I spotted the 'errors' as well so cannot in all clear conscience claim that there were no errors and that they were correct.   My client was ill during one of the crucial years (with cancer) adn I am hoping that this will help mitigate the liability as she totally trusted CLAC.  Does anyone have any ideas about claiming against the insurers?  Is this possible for the years that he must have been insured as he was practising.

Have one ex lunn client

Fidodido | | Permalink

We have an ex lunn client.  When we took them on we advised that previous years needed amending.  This was all before the whole HMRC investigation started.

We went back 6 years at the time and made some changes and paid the tax over.

We still have received some letters from HMRC so have gone back with returns have already been amended. Not heard anything back yet!!

 

Excuse my ignorance with this

levelheaded1903 | | Permalink

Excuse my ignorance with this case, I havent been following the thread, but I am presuming that Lunn, was trying to" look good" to his clients, and deliberately inflating costs?

HMRC may contend that they

Dave Investigator | | Permalink

HMRC may contend that they have 'discovered' new information resulting in a tax loss but unless HMRC can prove the client acted deliberately the worse HMRC can then assess is the past six years on the basis of careless behaviour by the taxpayer. If the client could argue they couldn't possibly have known, relied wholly on their professional adviser and took reasonable care then HMRC can assess four years back only. Of course, if the facts are that the client colluded then there is a risk of prosecution and specialist advice should be sought.

Nowt on Telly

Andrew288 | | Permalink

Feel very sorry for you guys picking up the pieces. Think HMRC are going in a bit heavy. Having said that we lost a client to CLAC because we would not claim AIA on a TV in clients lounge. TV producer or not it just didn't get over the 'wholly and exclusive' fence. CLAC had a reputation in the industry for some time before things really got ugly, this may have attracted some sub prime clients. Our loss was not regretted, not for one moment but one of you is out there picking through the rubble and we wish you all the best with it.

CLAC image problem : levelheaded1903    1 thanks

Andrew288 | | Permalink

Yes, inflating costs and their own ego. The website had them paint balling which they interpreted as 'going to war with the revenue'. Not such a good idea then or now.
This may partly explain why HMRC are going in so hard now, the tables are turned and if the clients were attracted by CLAC apparent attitude you can't altogether blame them.

I feel sorry for..

Ian McTernan CTA | | Permalink

the clients, who in most cases would have had little or no idea what was happening.

Anyone acting for one of these clients needs to find out whether there was professional indemnity insurance in place and if so, get a protective claim in, in case it goes out of date.  I'm not sure exactly how the cover works in cases such as these- maybe I should ask my own insurers and find out!

 

 

rbusfield's picture

LDF

rbusfield | | Permalink

We are specialist tax investigations consultancy and have some ex Lunn clients - they are being treated on a case by case basis in relation to the scope of enquiry and penalties.

If the taxpayer also has undeclared offshore assets (not opened in the UK) they may be eligible for the Liechtenstein Disclosure Facillty (LDF) which provides immunity from prosecution for tax evasion.

We're happy to have a no obligation, confidential discussion:

http://www.wattbusfield.co.uk/meet-the-partners/ 

Ex CLAC clients

gpyyow | | Permalink

Dear Dave,

Thank you for your reply, can you confirm that if client relied entirely on CLAC then HMRC can only go back 4 years?  They are implying they can go back to 2005/06.  That was the year just before my client started trading as a limited company and looking at the 2005/06 sole trader's accounts, CLAC 'created' a Cost of Goods figure that was way higher than previous years.  My client had cancer in 2006 and was undergoing treatment for a long period, so, I know, CLAC took matters into their own hands - but, how does one prove it?  I have asked her to obtain medical letter to back her up. 

Someone else suggested checking to see if CLACs professional indemnity would cover costs - can anyone tell me how to go about doing this?

Thank you all for this update.

Lunn

thomas34 | | Permalink

I've had involvement with the Edgewood Operation and just gave full cooperation. The case has now been closed with no penalties. The amount of tax underpaid was around £1,000. I must say that I'm surprised again that this subject is being discussed on a public forum when very serious Court proceedings are ongoing. In my client's case, this proved to be the worst example of misrepresentation of accounting facts that I've encountered in nearly half a century in accountancy. I just hope that CLAC don't contend that their case is prejudiced unfairly by exposure to a public forum. Sorry about the lack of paragraphs but still getting to grips with a new computer.

johnjenkins's picture

@thomas    2 thanks

johnjenkins | | Permalink

Your lucky your not living in South Africa. Actually their system is pretty good. The judges are immune to claptrap and media speculation. They are only concerned with the evidence presented to them. Really that should be the case here shouldn't it? What we think or say shouldn't make any difference to the outcome or are we starting to believe what we read in the newspapers?

The beauty of this forum is that it is open (and so it should be), and we all air our views either from personal experience or mystic airways.

What did the Public Accounts committee say "name and shame", bit late For Jimmy Carr and Starbucks etc. I think you'll find that HMRC will always "name and shame" those involved in unacceptable tax avoidance, certainly evasion.

HMRC know full well that most clients leave it up to the Accountant to sort out the paperwork and normally if things are put right (as you have found) there are no penalties.

In this case, I have to say, that HMRC are doing their job. It's not often they get carte blanche to go on a fishing expedition knowing in advance where the fish are. Yes they will make a meal out of it.

Negligence claims against Christopher Lunn & Co    1 thanks

Trevor Berkley | | Permalink

If clients have suffered loss through the actions of CLAC then it seems that they may have grounds for a negligence claim. Does anyone know of a firm of solicitors who may already be dealing with such claims?

DMGbus's picture

Regulatory body should be seen to be helping victims

DMGbus | | Permalink

If CLAC were supervised by a regulatory body (ICAEW? ACCA? ICPA? I don't know which) then I would have hoped that such regulatory / supervisory body would prove their worth to society by assisting the victims of what (allegedly) went wrong at CLAC (*).

The thought does come to mind that if some inadequate regulation / supervision has taken place here, then if victims' claims were to fail against CLAC (though lack of funds therein?) then the relevant supervisory body should step in and compensate the victims.

 

(*) Assistance to the victims should realistically include setting up a claims line and advising the victims how to go about their claims, with an assurance along the lines of "victims of poor accountancy services can rely on us, as supervisory body, to assist victims in their legitimate claims (+) for consequential losses where our member firms have been seen to have failed to act professionally".

 

(+) Has it been established if any alleged victims were aware of assisted untoward tax declarations or were they all naive and innocent?    In my experience clients do sometimes query if fee per accounts differs from fee per invoice.