Receipts soar from SME tax investigations

HMRC’s tax receipts from investigations into small and medium-sized businesses have increased by 31% in the last year, according to figures obtained by accountancy firm UHY Hacker Young.

“Compliance” investigations into SMEs raised £565m for HMRC in 2012-13, up from £434m in 2011-12 (year ending March 31), Hacker Young said.

In the 2010 Spending Review, the Chancellor set a target to net an extra £7bn a year in additional tax revenues from compliance activity.

“Small businesses are bearing the brunt of HMRC’s tougher approach to tax investigations,” said Roy Maugham, Tax Partner at UHY Hacker Young.

Small and medium-sized businesses are often... 

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Comments
ShirleyM's picture

'Compliance' investigations

ShirleyM | | Permalink

If the Compliance check I am involved in is typical, then they are achieving their targets by using wholly unreasonable tactics.

http://www.accountingweb.co.uk/anyanswers/question/snotty-hmrc-letter

JAADAMS's picture

Tax receipts will increase...

JAADAMS | | Permalink

I attended a talk given by Steve Ashworth from Smith and Williamson yesterday (he is the Bristol office's guru on Employment tax issues) and he was saying that the tax take will obviously increase due to the resources HMRC have ploughed into compliance checks ie along the lines of the 'more you put in - the more you get out'!

HMRC have put a lot of people onto compliance checking since it started and they are doing a lot of what you and I know as 'aspect' reviews.

They are currently targeting the P11D dispensation renewals (those wanting to be renewed after 5 years).  They write a letter to an employer saying that they would love to renew the dispensation but to do so want to see the last 3 months of expenses and for the employer to explain how the company's expense system works.

Whether they will reach their £90m a year is questionable. Taxpayers are becoming increasingly aware that HMRC are on the 'look out' and in the end they must run out of industries to target!

 

 

About time too    7 thanks

Jim100 | | Permalink

I am glad HMRC has finally got its act together and making an effort to get people to pay tax when the rest of us do.  I like the fact there are numerous campaigns, advertising and investigations.  Probably good news for us accountants too.

HMRC have been far too lenient in the past. It is obvious most people who do not have accountants either spend time avoiding tax or make elementary errors in their favour of course and then claim ignorance.

Some people I know are just putting their head in the sands and hope HMRC will not bother them which is infuriating to say the least. 

Even if HMRC does not get much tax the campaigns etc will prove a deterrent as more people will have the "fear"  factor which has been lost in the past 10 years.

 

 

 

 

johnjenkins's picture

@jim    5 thanks

johnjenkins | | Permalink

Great stuff, Jim, lets make everyone so frightened that nobody starts any business because compliance is costing too much.

What a stupid comment you make. I quote 

Even if HMRC does not get much tax the campaigns etc will prove a deterrent as more people will have the "fear" factor which has been lost in the past 10 years.

HMRC have lied and bullied their way in the last 10 years, for what? To raise more money, never mind about getting the tax "RIGHT".

The beauty of it is, though Jim, HMRC are on their way out. Very soon computers and debt collectors.

 

bookmarklee's picture

SMEs. Really?    1 thanks

bookmarklee | | Permalink

Any stats that reference SMEs are unreliable in my view as they can legitimately be interpreted in different ways.

The strict definition of Medium sized businesses includes those with turnovers upto £25.9m. This is clearly NOT equivalent to small or even to smaller businesses. Indeed over 99.5% of all UK businesses satisfy the definition of SME.

I therefore doubt it's correct that "Small and medium-sized businesses are often less likely to have accountants to manage their finances". Even if it were true of smaller businesses it's not the case for medium-sized businesses.

Mark

bookmarklee's picture

More investigations into smaller businesses tax returns    1 thanks

bookmarklee | | Permalink

A few years after self assessment was introduced I suggested that the 'process now, check later' approach operated by the Inland Revenue (now HMRC) was counter-productive.

Too many small business people were sharing stories of how they had got away with this that or the other. I was sure that it would be better if pubs and clubs were filled, instead, with stories of how dishonest business owners had been caught failing to disclose cash in hand receipts and putting  personal expenditure through the business. The more such stories were being shared of tax investigations the greater the disincentive to be dishonest. 

The number of tax investigations dropped significantly at the start of this century and is only now picking up. Inevitably therefore the yield from such investigations (into SMEs - which constitute over 99.5% of all UK businesses) is increasing. It had a low base. And, for some years, no one was checking things so some people were taking liberties and are now being caught. 

Move along now please..

Mark

Lies,Damn lies, and statistics

David Gordon FCCA | | Permalink

 

 The problem is these Gross figures quoted out of context are meaningless.

 How much of the additional receipts relate to the increased punitive penalties?

 How much relates to the fact that many small businesses simply cannot afford to contest HMRC claims?

 And,

 How much is due to the fact that if HMRC had done its job properly in the first place,  taxpayer's would not have got themselves into trouble ?

What a stupid comment you make.    3 thanks

Lears' Fool | | Permalink

 

 

Really?

Really not called for

You would think that there are no taxpayers out there that do not take liberties with the rules.

Jim makes a valid comment.

 

The whole picture

Diane Palmer | | Permalink

This article does highlight the need for qualified accountants in small and medium enterprises, it is imperative that the financial systems of the organisation  are set up to ensure statutory obligations are met and the proper accounting systems are in place. I just wonder though does anyone look at the bigger picture? I had an interesting conversation with a VAT inspector the other day one of the most common areas of non compliance for medium businesses in the not for profit sector is in fact the non-business / business split. Grants from the Public sector are classed as non- business activities. Although you're VAT registered you cannot claim the VAT back on purchases relating to grant activities as these should be paid for by the Grant funder. Any VAT that the HMRC inspection team manages to claim back is most likely therefore to be charged against the original grant to which it relates and this means the Government Department will fund the VAT element - so, in essence what the HMRC takes another Government Department pays for. Rather than just having a blinkered view of how much the HMRC has saved it would be interesting to know how much of that cost has ultimately been pushed onto other Government Departments i.e. what is the real saving to the public?

It's a start

The Black Knight | | Permalink

It's a start.

Poor results though.

What's the increase in numbers of investigations/enquiries and the take per enquiry. (Expressed as a percentage additional tax too would be useful)

I suspect the results and the test has been designed to prove HMRC is doing a good job but they are a bit short of their own target of £7billion when there's a potential £85billion out there.

They need to do some intelligence led policing, if you are conducting an enquiry from Wales, Scotland or the other side of the country you are bound to ask stupid non relevant questions and not notice that some builders are on their 11th PPR or have fantastic houses, cars etc having paid next to no tax.

They might be able to notice that the profits before AIA don't cover the mortgage payments, but while their Tax credits system knows this for ID telephone checks and avoidance to speak to you inspectors clearly are not allowed it.

Non compliant accounts filed at companies house show huge amounts of unpaid tax, perhaps HMRC should have some training in small company taxation.

You would have to be blind not to spot all this tax evasion or at least stuck in a darkened room in Cardiff and not allowed access to the internet.

 

johnjenkins's picture

@ Lears' Fool    2 thanks

johnjenkins | | Permalink

So you really think that it is a positive approach to say to small business "we don't recognise mistakes, your on the fiddle and we will penalise you up to the eyes. In fact we don't want small business we want everyone on PAYE so we can control tax payers".

It doesn't matter what I, you or anybody else thinks anyway, because with the advent of cloud systems it won't be long before every electronic transaction is logged, cash will be banned and HMRC will do away with tax returns and just send you a bill. There will of course be an appeals proceedure, but the onus will be on the tax payer to prove HMRC wrong.

johnjenkins's picture

@The Black Knight

johnjenkins | | Permalink

Ever wondered why the results are poor and always will be?

There were a few stats    1 thanks

bryce.weir | | Permalink

There were a few stats getting bandied around re the size of an SME.  This is the correct broad definition at 2003: (  EU recommendation 2003/361   ) Max 250 employees  AND  EITHER  Max T/o EU50M  OR B/S Total Max EU43M.  Having examined the accounts & the books of many SMEs, they are whiter than white when compared to larger businesses up to & incl plc re paying their correct taxes & on time. The SMEs who are most likely to have hidden earnings tend to be the one-man-bands with customers willing to pay cash in hand.  How many of us condone this by taking advantage of the "reduced" price yet will comment on here as if we know nothing about these practices??

Quite right

The Black Knight | | Permalink

bryce.weir wrote:

  How many of us condone this by taking advantage of the "reduced" price yet will comment on here as if we know nothing about these practices??

I never have! One client even explained to me that I had missed an important tax avoidance measure by not paying cash on my extension as this was then VAT free. He thought I would have known this being an accountant.

I drew sharp breath like a plumber then gave up the will to live.

It is about time there were some hangings for tax evasion and money laundering when house holders have participated. There is the additional point of where the £50K cash came from for the extension, and why the builder is not a high value cash dealer.

How much drugs money etc do you think may be laundered extension home improvements and PPR.

Why has this been set up this way? You don't need fancy lawyers or accountants to launder money. The government provide their own schemes that are fully protected from the legitimate entering your patch.

johnjenkins's picture

Does one really expect anything else?    1 thanks

johnjenkins | | Permalink

We can't deport National Security Risks. The EU spends (some of our) money bailing out countries who don't give a monkeys about paying tax. Our MP's claim whatever they want. Large companies don't pay tax (or very little). Bankers, etc. get bonuses for losing our money. Need I go on?

Little wonder that Joe Bloggs wants a bit more in his pocket.

Of course it's not right, but tax payers (and the electorate) will only put up with so much and the results can and will be seen.

HMRC "fear" factor

the.hoarse.whisperer | | Permalink

Even if companies are found out isn't it just a matter of closing up on Friday and reopening on the following Monday with a new name.

     2 thanks

Lears' Fool | | Permalink

 

What I think is - people who voice a personal opinion which is both worthy of consideration and inoffensive should not be insulted.

That was all.

 

whodunnit?    1 thanks

andrew.hyde | | Permalink

johnjenkins wrote:

So you really think that it is a positive approach to say to small business "we don't recognise mistakes, your on the fiddle and we will penalise you up to the eyes. In fact we don't want small business we want everyone on PAYE so we can control tax payers".

John, you have put this in as a direct quote, but without attributing it.  I want to know who actually said this - they clearly need taking to task (and not just for their grammar).

 

YEP    1 thanks

The Black Knight | | Permalink

the.hoarse.whisperer wrote:

Even if companies are found out isn't it just a matter of closing up on Friday and reopening on the following Monday with a new name.

But you only need a new name if it's a formal liquidation s.216 IA 1986

You can also therefore trade fraudulently with impunity s.213 IA 1986 and s.993 CA2006.

Quite common is this type of fraud, never reported, and or acted on.

No need for an expensive avoidance scheme HMRC provide their own more effective Evasion product. Public private initiative funded too.

It would be easy to detect and stop. So Why Not?

 

johnjenkins's picture

Thankyou for putting

johnjenkins | | Permalink

me on the "straight and narra" Andrew. It was, of course, the plumber with his Bentley in the foyer of RBS.

@Lears' Fool. I wasn't insulting the poster (read my post). I said the comment was stupid. Then I went on to explain why I thought it was stupid. To put "fear" into business is not good which ever way you look at it. This country NEEDS more small business and they need encouragement not compliance crap.

johnjenkins's picture

@The Black Knight    2 thanks

johnjenkins | | Permalink

How many companies trade for two years then opt out??????

There are many theories as to why something simple won't be done to stop it. My own is that HMRC treat it like bankrupcy. If they think they can't get any money go for the business that they can - oops back where we started.

"What a stupid comment you make"    2 thanks

Lears' Fool | | Permalink

John,

I have read it again and I am happy to agree to disagree on this one I think.

you are right.    1 thanks

The Black Knight | | Permalink

johnjenkins wrote:

How many companies trade for two years then opt out??????

There are many theories as to why something simple won't be done to stop it. My own is that HMRC treat it like bankrupcy. If they think they can't get any money go for the business that they can - oops back where we started.

you are right.

Some when you check are on their tenth or eleventh company (no accounts no tax) if only they had been clever and realised they could have run ten concurrently They could have stolen ten times as much.

but if there's no enforcement then it works every time.

The fact is HMRC are bloody useless

The enquiries I have seen recently both during and the aftermath indicate HMRC do not know what they are doing, pick the wrong cases argue futile points which they can't justify, conduct poor enquiries and when they get a live one miss most of the missing tax. It really is quite shameful.

johnjenkins's picture

@Lears' Fool    1 thanks

johnjenkins | | Permalink

[What a stupid comment you make. I quote

Even if HMRC does not get much tax the campaigns etc will prove a deterrent as more people will have the "fear" factor which has been lost in the past 10 years.] 

To me that is quite clear. Have you never made a stupid comment? I know I have and, no doubt will continue to make them.

Do we really want to "fear" HMRC so that every tax payer says "Oh HMRC said I've got to pay so it must be right". Do you honestly think that the people getting away with fiddling and paying no tax etc. would ever "fear" HMRC or any other organisation?

HMRC spend too much time on the small fry (easy targets - frightened tax payers etc.) so the real evaders get away with it.

Stupid not stupid at all.    1 thanks

Jim100 | | Permalink

John

We all have opinions good and bad but none of us would patronise fellow accountants by labelling it - stupid. I don't think the comment was stupid at all - you just disagreed with it which is perfectly fine.   Thanks Lear's fool

I stand by my comments that HMRC have been under-resourced and therefore weak hence many have decided its upto HMRC to catch them.  If I know the probability of getting caught is high then I wouldn't you think twice of avoiding paying tax ? 

Some have blatantly decided not to pay tax and we know the black economy is huge and for some its just ignorance.  A more powerful HMRC should encourage more to put their tax affairs in order otherwise some disorganised individuals without accountants will just make the same error time and time again 

Only now the government due to partly the huge debt has started to put pressure on HMRC hence the increase in surveillance which is not a bad thing.  When I pay my taxes but then I see other people not paying taxes then it does make me so angry. We all come across clients that do not pay taxes and personally I try to make sure they do.  

I have dealt with tax authorities in many other countries e,g US, Russia, Turkey and they are far tougher than HMRC.   Of course we will all get unreasonable investigations and curse HMRC for being too aggressive but again you will get horrible people in every walk of life but doesn't mean the rest are horrible too. 

johnjenkins's picture

@jim    1 thanks

johnjenkins | | Permalink

I'm glad you came back to me Jim. The beauty of this site is that people can make comments and others comment on their comments. I actually agree that HMRC should be re-structured so as to tackle evasion. However the bit I thought (and still do) was stupid (not just disagreed with) is, somehow you think that by putting "fear" into people will make the evaders think again. Do you want to live in Russia? They live "in fear" of everything yet still there are those that evade. The US are shutting up shop. If you really want to see "the black economy" then you can't do much better than Turkey.

Turning to our own "black economy". Most of it goes back into the "real economy" so HMRC don't actually lose much. There has been a long standing theory that the more governments get the more they will waste. Gordon Brown proved that one.

Now the real problem. HMRC has become a predatory institution. Horrible people thrive in such circumstances and nice people get brushed aside. I have dealt with HMRC for 48 years and all the good work that Accountants and Inspectors have done over the years to achieve a workable scenario has in the last 5 - 10 years been completely wiped out. There is no respect on either side anymore. "Agent strategy" was supposed to re-generate that, but we live in hope.

So, Jim, you probably are a very nice bloke, but when someone says "let's put the "fear factor" back in HMRC, to me that is a stupid remark.

calm down calm down

The Black Knight | | Permalink

John and Jim

I think you are both arguing the same point.

"Taxation without representation is tyranny"

that's what we are here for to manage that balance, Integrity, objectivity and independence.

had three apologies last week.

I would like to see more activity against evaders because it supports legitimate business which is under pressure from cash jobs no vat , no tax pricing. It pays for itself and does not encourage a nation of scroungers and thieves.

The public expenditure attitude of lets spend as much as we can needs to stop. I for one have been quite happy with some of the results of the recession e.g. less speed cameras and less CCTV open prison surveillance.

However because this expenditure is political the useful services were cut first as this would have the most effect on hearts and minds.

The approach to taxation and spending needs to be less rule changes, more enforcement, lower tax, more business, reinvestment in more business rather than wasted expenditure.

The rest would take care of itself as in if it's a service that's needed it will be commercially viable.

For that we need some politicians with some brains. In short supply at the moment.

wouldn't disagree

The Black Knight | | Permalink

johnjenkins wrote:

How many companies trade for two years then opt out??????

There are many theories as to why something simple won't be done to stop it. My own is that HMRC treat it like bankrupcy. If they think they can't get any money go for the business that they can - oops back where we started.

Wouldn't disagree with that. It is where they seem to stop.

They could insist on accounts or question the reason for the failure with evidence, failure to do either would result in disqualification as a director.

A posting of an at risk if you do business with these people on a factual basis. Even if it's just a list of people the company owed money to when it went under so people can make informed decisions whether to trade with new co. Perhaps a statement of assets and liabilities should be provided in all insolvencies not just the ones that can afford a liquidator. There's not much protection for creditors in reality or any information to decide whether it's effective to take action or not.

The fines are personal, nothing gets the accounts done as quickly as a £5,000 fine threat.

They could check company defaults and for overdrawn directors loans.

Directors should be required to list personal assets so creditors can see whether their obvious defaults are worth pursuing would be good information for HMRC too.

They could prosecute for fraudulent trading and take down some of the advisers and employees that assist! You would soon be left with the hardcore enabling you to get to grips with serious and organised crime.

Trouble is even the correct advice when you have traded as a limited company for five years without paying your tax and now can't afford it because you spent it: is to cease trading and tell your creditors that there's no money for a liquidation. Job done no tax, start up a new company. HMRC effort none, didly squat, accounts? "no sir we don't want to know how much we lost would make our performance look bad and we won't get a pay rise."

johnjenkins's picture

One of the things that    1 thanks

johnjenkins | | Permalink

amazes me is that a Director/Shareholder (one man band business) can take a high salary pay the tax and nic out of corp tax vat and creditors money and nothing is done. Yet you have to make a profit before a dividend is declared. Although it is not good to upset Customs as they can, and do demand deposits on future ventures.

In a nutshell...

andrew.hyde | | Permalink

...what we all want is a system where wrongdoers do indeed suffer from the 'fear factor' and the rest of us don't.

Anyone disagree?  Thought not. So actually there is no fundamental difference.

Now, what is clearly wrong is that a number of wrongdoers continue blithely to break the law in the knowledge that the odds of discovery are small enough to make it worthwhile.  Meanwhile, many members of the majority who try to abide by the law are concerned about the possible consequences of being misjudged.  The duty on all tax professionals, whether in government or private practice, is to work together to move from that position towards the one I first described.

This is not easy.  God apparently created the world in 6 days, but didn't install a perfect tax system. He (or She!) would have needed considerably longer for that.

johnjenkins's picture

@Andrew

johnjenkins | | Permalink

Yes Andrew I disagree.

HMRC have, for some time, treated errors and mistakes in the same vein as deliberate. The only difference being mitigating penalties. A System that penalises genuine mistakes is wrong and will not survive. We are seeing that now. Common sense and flexibility have been replaced by compliance and rigidity. It works for a while then........... well you can see what's happening to HMRC.

The real wrong-doers don't get frightened, they get smart and have clever dicky Accountants and Lawyers behind them. So there is, and always will be, one target for HMRC to go after with ease and that's the smaller business. HMRC know that they can't afford to employ the staff to run the admin 100% so mistakes will be made and that's what HMRC pounce on.

When you get large companies offering to pay some money towards a non existent tax bill then you know for sure the "system" has broken down.

simple truths

David Gordon FCCA | | Permalink

 

 We ought to thank God that HMRC institutionally avoids employing accountants experienced in public practice. Even though I doubt the civil servants would allow such persons to use their initiative and knowledge effectively.

 The greatest glory of the UK tax system, I am not joking, is that over the centuries, we have developed a style of government wherein, despite all the acid comment and bad jokes, 99.9% of taxpayers pay up without protest. They grumble and moan, but they pay. They pay because on balance they believe that there is a presumption of corporate honesty within the state machinery.

  A reliable reputable tax system is an absolute necessity for a decent society.

Many of us that have direct family, historical, or ethnic grounds to be well aware of the alternative, China, Russia, Greece, Zimbabwe, to name but four obvious states.

 HMRC's civil service trained executive leaders are bidding fair to destroy that trust.

 Not least it is crazy PR to spend years convincing us that HMRC is doing this work in a fair and respectable manner, and calling us customers, in order to prove the point.

 Then to go at small businesses, and boast of it, as Elliot Ness and the original FBI.

There is fear out there. Especially amongst the groups mentioned above. My observation is that fear does not generate compliance, it generates the desire to hide.

 Regrettably my personal observation is that HMRC is not using limited resource to target the most appropriate miscreants, but to target the easiest and softest, which is not at all the same thing.

I put a practical definition on "Small business", as being one in which the working owner(s) do not require a second line of formal management to administer the business.Especially they do not employ that favourite get-out of HMRC and other large organisations, "Ask your IT manager".

 

 

 

God

The Black Knight | | Permalink

God? Was with you until I realised no grip on reality!

Why shouldn't a plumber who has evaded hundreds of thousands of pounds in tax and vat be brought to book. Is it because they have a fear of writing cheques.

They get off pretty lightly if you ask me.

If they are worth defending then do so!

I have no problem in HMRC enquiring and doing their job so long as they play by the rules in a firm but fair manner, much as I would deal with them.

Rubbish inspectors are at the end of the day easy to deal with, even if they are a bit stressful at the time.

fear that's basic Freud and why we do anything at all.

johnjenkins's picture

@The Black Knight

johnjenkins | | Permalink

Therein lies the myth

[Why shouldn't a plumber who has evaded hundreds of thousands of pounds in tax and vat be brought to book. Is it because they have a fear of writing cheques.] 

Show me any small business that has evaded that sort of money. Privates (not parts) yes, to the tune of maybe £500 tax yield per year. That may apply to 2% of the construction industry. Where does that money go? Back into the real economy. Let's not send the EU anymore "bailout" money. That should cover the overstated tax yield on the black economy.

HMRC make their own rules up as they go along.

However I do agree that HMRC are entitled to enquire and investigate, but it shouldn't be driven by the governments need to fill coffers.

lifestyle

The Black Knight | | Permalink

I think If HMRC started of with lifestyle questions, like they used to in the old days they would have a better idea of how much they were looking for.

I argue to be fair to all taxpayers why should one plumber pay more tax than another.

£500 a year? My view would be £6K to10K pa the fact that HMRC might only find £500 per case is down to their ineptitude. Laundered through PPR

Most of it is wasted granted.

johnjenkins's picture

The old style    1 thanks

johnjenkins | | Permalink

Inspectors (through local knowledge and pub talk) knew who was taking the pea and who were genuine. That is why, if there was an investigation, Accountants would be worried, because an investigation wasn't a fishing trip, Inland Revenue actually had evidence.

In my view, nowadays there is no trust on either side and as long as government spend tax payers hard earned money on shite and allow the big boys to pay next to nothing, the chasm will get wider.

fishing trip

The Black Knight | | Permalink

ye olde fishing trip.

the modern version this year is

"we are opening an enquiry into the previous 4 years (not the one we just missed the deadline on) as we have discovered some missing tax"

"no you haven't what do you think is missing"

"We don't know that yet it's a chicken and egg situation until we look and discover we can't know"

 

johnjenkins's picture

We had a great

johnjenkins | | Permalink

aspect enquiry a few years ago. This is true. Question - Why has your insurance expense gone up 27.8% to last years claim. Answer - (not mine, the clients) I have no idea but this is the brokers number. Once you have found out would you please let me know.

As far as I'm aware the enquiry has never been closed nor have we had a reply.

best one was    1 thanks

The Black Knight | | Permalink

Best one was prospective client.

"accountant has cocked up my tax and I have all these tax and penalties to pay "

"yes he has hasn't he, hes got it all wrong"

"can I come to you"

"Yes on the condition you put your house in order and declare all your income and employees income and pay your tax and vat"

"what all of it"

"yes"

"I can't do that"

"why not"

"because then they will know I lied in the enquiry they only got me for extra takings of £2K per week where it was £4K"

"then we can't act for you"

"you don't understand my nationality don't pay tax or they don't work and I pay you and you put down what I tell you"

"I do not want you as a Client"

repeated 7 or 8 times getting louder and louder

Real laugh was HMRC had missed the vat on the additional takings entirely so chap was better off even after the enquiry than he would have been if he had been honest.

LVW4's picture

Small businesses are not immune from paying tax...    1 thanks

LVW4 | | Permalink

...yet many (one-man-bands) believe they are a law unto themselves, and are so clever, that they can fool their accountants, Police, Customs, and HMRC, and defraud their shareholders.

It is not an excuse to not pay for an accountant. Unfortunately, there are accountants out there who will turn a blind eye to what their clients are saying or, worse still, will proffer bad advice.

These 'small' frauds have gone unchallenged for far too long. They damage the economy and also shareholders. The Police do nothing. So, HMRC needs to step up to the plate.

I am fed up seeing Directors getting away with blatant fraud, while I go out of my way to understand what I need to do as a director, and make sure I do it and pay for it.

I know of one example where a small consultancy based in a village just outside Bath, has defrauded its co-shareholder to the tune of nearly £100,000, and because the directors say they haven't, the Bath Police simply believe them rather than the victim, despite having been provided with one set of accounts which alone clearly shows serious irregularities worth some £23,000 to the co-shareholder at the very least, with supporting commentary from 2 experienced forensic accountants. That's not taking account of a very high minus score against the HMRC Business Entity test because the ex-director and sole employee, worked full time for and at Lloyds Banking Group since 2006, yet the company manages to 'spend' many £000s on 'marketing'!  

These directors do not fear HMRC or the Police, because they do not believe their crimes are of interest to the authorities. Indeed, the Police's comment is their investigation was 'proportionate' ...against what tariff? They've done it before, and will keep doing it with impunity, unless someone brings them to account.

Let's see more of this from HMRC ...and the Police!

well said that man    1 thanks

The Black Knight | | Permalink

LVW4 wrote:

...yet many (one-man-bands) believe they are a law unto themselves, and are so clever, that they can fool their accountants, Police, Customs, and HMRC, and defraud their shareholders.

It is not an excuse to not pay for an accountant. Unfortunately, there are accountants out there who will turn a blind eye to what their clients are saying or, worse still, will proffer bad advice.

These 'small' frauds have gone unchallenged for far too long. They damage the economy and also shareholders. The Police do nothing. So, HMRC needs to step up to the plate.

I am fed up seeing Directors getting away with blatant fraud, while I go out of my way to understand what I need to do as a director, and make sure I do it and pay for it.

I know of one example where a small consultancy based in a village just outside Bath, has defrauded its co-shareholder to the tune of nearly £100,000, and because the directors say they haven't, the Bath Police simply believe them rather than the victim, despite having been provided with one set of accounts which alone clearly shows serious irregularities worth some £23,000 to the co-shareholder at the very least, with supporting commentary from 2 experienced forensic accountants. That's not taking account of a very high minus score against the HMRC Business Entity test because the ex-director and sole employee, worked full time for and at Lloyds Banking Group since 2006, yet the company manages to 'spend' many £000s on 'marketing'!  

These directors do not fear HMRC or the Police, because they do not believe their crimes are of interest to the authorities. Indeed, the Police's comment is their investigation was 'proportionate' ...against what tariff? They've done it before, and will keep doing it with impunity, unless someone brings them to account.

Let's see more of this from HMRC ...and the Police!

The police I think have become a recording crime service so the insurance companies can put up your premiums. I wouldn't bother reporting any more. It is a tortuous process and nothing comes of it. The sooner crime rates fall to zero and we no longer need the police the sooner we can get justice by stealing the thing back and giving them a good kicking in the process.

I think you may need to be more forceful with the police complain 3 times and insist that you wish to press charges for what are criminal offences.

Report it to Action Fraud, the BIS, companies house, SOCA, HMRC, and also take civil action but I agree you may need to take action yourself and post all the details in the public domain and force someones hand. If it's true it can't be libel.

kick up a right fuss and embarrass them all!

Look at fraudulent trading s.993 Companies Act 2006.

LVW4's picture

Action Fraud referred it to Bath Police for investigation...    1 thanks

LVW4 | | Permalink

...which is unusual, given the volume of fraud complaints they receive each day. So, there is a prima facie case, which you would have thought worth investigating, and which would be substantiated if they obtained the other 3 years of accounts (and bank statements for good measure). Inexplicably, Bath Police are refusing to obtain them, but won't say why.

The one thing Fraudsters hate is exposure. It would be perfect if they could be exposed by a newspaper or the BBC, but they won't do anything unless the fraudsters are charged.

Maybe, the answer is to take direct action which will challenge them to take action themselves e.g. accusation of libel or harassment, or the shareholder petitions for winding up. Harassment would involve the Police, who would then need to consider the evidence. I don't know enough about winding up, but it sounds costly.

If I knew of a way to get HMRC interested, I would use it!

special resolution

The Black Knight | | Permalink

A special resolution is required from the shareholders.

Is your director a creditor

petition on grounds of unable to pay its debts following a statutory demand.

or

on just and equitable to wind the company up.......s.122 IA 1986

..Oppressive management and misconduct...Bad faith failure to hold meetings, produce accounts etc etc (Loch v John Blackwood Ltd (1924) all ER rep 200)

company was established on mutual trust and confidence that had broken down irreparably ..(Zinotty properties ltd (1984) 3 all ER754)

Illegality

Fraudulent purpose (Thomas Edward Brinsmead & sons)

the company's affairs needed to be investigated Peruvian Amazon Co ltd (1913)

then go and find a good IP or an ambulance chaser.

LVW4's picture

Special Resolution

LVW4 | | Permalink

Thanks Black Knight.

I am assuming the 50% shareholder would be a creditor because she received no dividends, whereas the other 50% shareholder did. However, she would not be recorded as such because the company is denying it and won't provide the accounts.

If an order was made on the company to pay the shareholder what she's owed, it would not have the assets to do so.

Unfortunately, I do not know where to look for someone who would act on a contingent fee basis.

 

S.423

The Black Knight | | Permalink

S.423 CA 2006

Offence at s.425 CA 2006

How can any company pass a resolution to do anything, voting a dividend for example if less than 50% approval and no proper notices.and or even approve the accounts? You have evidence of criminal offences popping up everywhere!

Dividend may be invalid,

Insolvency practitioner will not be interested if no Money to pay his fees, however the company may well be owed money by said director re: unlawful dividends and other such defaults.

Does that director have personal assets?

If your shareholder is being defrauded then I would look at the wording of s.993 again.

Is she on the annual return and does she have a share certificate you can demand that you see the statutory books (needs to be in the correct format look up details before doing it) for a fee (£7 I think) the company must make these available for your inspection and reply within a certain time frame. Otherwise they commit another offence.

Failure to keep these records has fines ranging from 3 to 5 on the standard scale.

How do you know she is a shareholder?

 

P S

The Black Knight | | Permalink

P.S. I don't think she would be regarded as a creditor, but that really a question for an IP.

If she is a shareholder she can call a meeting giving the proper notices, if he don't turn up then that's his problem and she can pass her own resolution to wind up? on just and equitable grounds. Official receiver would then be involved.

But that is the point    1 thanks

David Gordon FCCA | | Permalink

 It is not that all small business persons spend their entire working live concentrating on fiddling tax

 Nor is it in doubt that HMRC have every justification and right to purse tax evasion of all sorts.

 The tragedy is the executive officers of HMRC have pursued and held out a policy of going for the easy target. They are therefore perceived as being "Unfair" This has to be a cancer at the centre of any tax system.

Simply because a tipping point will be reached where sufficient taxpayers are sufficiently angry so that the system will break. At that point welcome to Greece.

 Counter tax evasion measures have become as discredited and as similar to the green and red exits at the airport.

 Wherein most travellers know that the chances of getting caught with the extra bottle of wine are so small that it is worth taking the risk.

 Tyranny is in small things.

 On 20th Sept last, we were unable to file two sets of ltd co accounts (due 30th Sept) because of a glitch in HMRC's computer. HMRC online officer admitted the problem, helped us, we finally got the accounts accepted, but 3rd Oct. We received £100 fine. We sent the inspector a copy of the notes explaining what happened, including the online officer's recommendation that we should do this. We asked for the fine to be cancelled. We have received back a letter stating that nevertheless we have to go through the full formal appeal procedure, because other wise "It would not be fair to other taxpayers". You think, over £100, the company or we have the time for this?   It is constructive dishonesty, on the part of HMRC.

 Constructive dishonesty is where the action may be in accordance with law and regulation, but the result is unfair and or oppressive. The important crucial element is, it was in fact possible within applicable law, regulation, and or practice, to arrive at a fair and equitable result.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LVW4's picture

She is a shareholder...    1 thanks

LVW4 | | Permalink

...evidence at Companies House. 50%, but there appear to have been various filings listing different percentages over the years. 

She could call a members meeting, but with just 2 members, and assuming the other member turned up, the vote would be deadlocked. Then what?

I take your point about an IP needing money, and maybe that's what needs to happen. Next question ...who to turn to ...London firm, local Bath/Bristol firm?

Stalemate

The Black Knight | | Permalink

Stalemate, Just and equitable to wind up or move forward the choice is yours.

What do the statutory records say? s113 and s114 CA2006 then s116 CA2006 and read s117 CA2006 too.

Companies house is just a filing of the information on the company register. Again criminal if this has been completed fraudulently the IP has to report to the official receiver of any wrongdoing/breaches.

If they haven't even got the basics right I bet there are a load more defaults.

If she kicks up a fuss as a company shareholder/ director cos house or their BIS wing may take notice. But they won't take any notice of an accountant on principle.

I wonder if the accountants have reported the fraud and other criminal offences to SOCA.

LVW4's picture

Accountants are in this up to their necks...

LVW4 | | Permalink

The company accountants know everything. They will also know the employee should have been IR35 registered since 2006. See no evil, hear no evil... Why else would a small company in Bath use a small accountant in the back streets of East London!

I cannot understand why an accountant would jeopardise his business and living for the sake of a couple of cheap fraudsters. The fee income is negligible anyway. We've asked them to do the right thing, but they've refused to play ball.