MLR and CIS

It would appear common practice for building contractors to report and pay over CIS deductions in tax months, even tax years, after the one in which the deduction was with-held.

It seems to me you can submit a monthly report with any old tosh on it to avoid the late penalty, but nothing will be done to you, even if the subcontractor has sent proof to HMRC that a deduction was made in a period prior to that in which it was reported. Whether negligent or deliberate, this is effectively tax fraud in my opinion, with both the HMRC and the sub-contactor the victims. My inclination is to submit a ML report on the contractor! (but other posts on this forum suggest that is a waste of time as they are never acted on anyway).

Comments
davidwinch's picture

Submitting incorrect figures

davidwinch | | Permalink

OGA

If a person submits incorrect figures and if (this is an important IF) that is done dishonestly and deliberately with the intention of paying less to HMRC (whether temporarily or permanently) that is a criminal offence.

One could have a jolly debate as to whether that is more appropriately described as false accounting contrary to s17 Theft Act 1968 or fraud by false representation contrary to ss 1 & 2 Fraud Act 2006 or an offence under specific tax legislation.  But from your point of view it doesn't matter a jot which offence it is - so long as it is an offence.

If (another IF) that has resulted in the person (individual or company, doesn't matter which) benefiting by retaining monies it would otherwise have paid out then a money laundering offence has occurred.  That money laundering offence triggers a duty upon you to report to your MLRO / SOCA.

So, you have to make a report.  Your report ought to give the relevant information in your possession (including the relevant tax references of the persons whom you suspect and the XX glossary reference - which is XXF3XX Business tax fraud).

The likelihood is that HMRC will lap this up because they are focussed on collecting taxes and penalties.

On the other hand more general fraud in the community is the responsibility of the police - who do not see chasing fraudsters as their number one priority and, since they are complaint driven and a report to SOCA is not actually a complaint . . . .

David

Old Greying Accountant's picture

but where is the boundary...

Old Greying Acc... | | Permalink

... the suspect is not a client, does that matter?

Surely whether it was negligent or deliberate is not my concern, do I not have to report suspicion, not knowledge, (as long as reasonable of course) - it is then up to SOCA to investigate and make that decision is it not?

My personal feeling is that the contractors systems are sub-standard and as soon as we pointed out the omission it was corrected, albeit in the wrong year - one wonders about their accountants though as their last accounts were made up to 31st March 2009, and these payment relates to that year!

HMRC are well aware of the situation, they have been given chapter and verse on when we received the payments, and that tax had been with-held but seem indifferent.

davidwinch's picture

Dishonesty is the key

davidwinch | | Permalink

OGA

You are required to report a suspicion (or knowledge) of money laundering.

It is irrelevant whether the person(s) whom you suspect are (or have ever been) clients or not (but of course you are likely to have much more information about clients & ex-clients than persons who never have been clients).

A money laundering offence can only occur following a crime of some sort.

Many crimes (including theft, fraud and tax evasion) have dishonesty as a necessary element.

The two necessary elements of dishonesty are (i) that the conduct was dishonest by the standards of ordinary and decent people and (ii) that the alleged offender realised himself that his conduct was dishonest by that standard.

So in deciding whether there has been an offence of, for example, tax evasion, you have to form a view as to whether you suspect that the alleged perpetrator himself realised that what he was doing was dishonest (which in this case has to do with DELIBERATELY putting the wrong figures on the forms).

If Mr X doesn't know the correct figure to put on his CIS return but he puts down a figure which he hopes and expects is about right then he is negligent but not (in my view at least) dishonest.  So there is no crime of tax evasion (even if the figure turns out to have been too low and tax is underpaid as a result) and so there is no obligation to file a money laundering report.

If, on the other hand, Mr X deliberately and dishonestly puts a figure on a CIS return which is too low then he commits an offence.  If that offence yields a 'benefit' in the form of a lower payment to HMRC (or an excessive refund) then there is also a money laundering offence.

If you know or suspect there is a money laundering offence then you have an obligation to report.

So a key question for you is "Do I suspect Mr X of dishonesty, or do I simply suspect him of negligence?"

OGA, have you forgotten everything from your Hogwarts courses for the mind reading exams??  More seriously, you will form a view based on your knowledge of the person and your observations of his behaviour.  Of course a person who fails to correct an error which he has made in his favour on a return when it is brought to his attention will normally be regarded as dishonest.  But many cases are not so clear cut.

Generally, mere muddle is unlikely to amount to dishonesty (but then of course some people get into a muddle deliberately, which is dishonest).

Use your undoubted skill and judgement as to what it is you suspect.  (But it sounds as if you suspect the person has inadequate accounting systems which fail to provide him with accurate information - so I am thinking negligence rather than dishonesty, so no report to SOCA.)

David

weaversmiths's picture

MLR & CIS

weaversmiths | | Permalink

It all seems a wasete of time to report to SOCA.  I had a builder who has had three Ltd companies, not done record keep[iong, not operated CIS, not registered for VAT etc etc. SOCA were not interested - too small. £100,000 to £200,000 lost to HMRC?  Going back over about 5 years. 

I discovered that he has been using my private address to register these companies, has gone bankrupt with one and now has the other two in liquidation - all at my address.  I temporarily allowed him to use my address when he was moving about 2 years ago and he has since been told he does not have permission to use it (in writing). He had set up a PO Box at my address so I did not know what was going on.  I have had extremely angry customers on my doorstep - one of them hit me, plus a constant stream of bailifs.  He has turned a lot of people over. Companies House refuse to remove my address (there is an official complaint currentlywith them), the Police have  very carefully gone "through the law" (their words) and he is doing nothing illegal and we are not the losers - the customers, banks and suppliers are the losers.  All this was set up to deceive customers and suppliers.  My address was written on the back of 60 cheques totalling over £30,000 and he is still insisting   that he actually lives here.  I have consulted a solicitor who says it would cost £4,500 plus VAT to take out an injunction - but then there is no one to enforce it as we are back to our idle Police Force. The solicitor says we should not even be considering an injunction and that we should just go to the police.  At present there is an IPCC complaint.

It obviously pays to be dishonest - police protection, no suppliers to pay, take  money in advance for jobs and do a runner, take out loans with no intention of paying them, never turn up at court and, if you do get traced set the dogs on whoever calls.

The Revenue appeared to have no record of him - they do now!

 

TheAncientOne

 

Old Greying Accountant's picture

Thanks David

Old Greying Acc... | | Permalink

Seems to humble me, there are so may people thinking up and drafting laws and regulations there is no one left to enforce them!

I think ars gratia artis has become lex gratia legis these days :o)

@weaversmiths

alistair_king | | Permalink

You appear to have several frauds here.

  • If this builder is claiming to live at your address and is doing business on that basis - this is fraud in that he is comitting deception in his contracts with intent of personal gain
  • If this builder is taking money in advance for jobs then doing a runner - this is advance fee fraud
  • You also appear to have short firm fraud where a seemingly genuine business is set up, but with the intention of defrauding customers and suppliers

If your local police have "very carefully gone "through the law" (their words) and he is doing nothing illegal" they are mistaken. But reporting it to your local police is probably the wrong starting point.

The National Fraud Authority (NFA) is the government agency co-ordinating the counter-fraud response in the UK. These include identity fraud, mortgage fraud, accommodation addresses, mass marketing fraud and fraud affecting small and medium sized businesses. http://www.attorneygeneral.gov.uk/nfa/Pages/default.aspx

To report these frauds go to http://www.actionfraud.org.uk/home (which is run by the NFA) or phone 0300 123 2040. Their claim is "Every fraud, no matter what scale, is important to us". You will be given a crime reference number and the case will be passed on to the National Fraud Intelligence Bureau (NFIB), which is run by the police service.

Action fraud should also be able to give you advice on anything else you should do.

I'll be interested to know what response you get from them.

 

davidwinch's picture

The roles of SOCA

davidwinch | | Permalink

SOCA (the Serious Organised Crime Agency) has a variety of roles.  One of those roles is the investigation of serious organised crime.

The situation which "The Ancient One" describes is not what SOCA would regard as serious organised crime and so they would not be interested in investigating it.  Similarly the SFO (Serious Fraud Office) generally are looking at frauds in excess of £2 million and so would not be interested in investigating this one.

However another role of SOCA is the collection and dissemination of information gleaned from Suspicious Activity Reports (SARs) in relation to known or suspected money laundering.  These are the reports made under the Money Laundering Regulations 2007 and s330 Proceeds of Crime Act 2002.  SOCA would be interested in receiving a SAR and making information from it available to the police and HMRC, DWP, etc.

It is then a matter for the police, HMRC etc as to what action (if any) they take.

As I have said many times before, fraud is not the number one priority for the police.

Another problem with dealing with the police is that it can be difficult to persuade them that a crime has been committed.  If, for example, you supply goods to someone who doesn't pay you may feel you have been defrauded.  The police on the other hand may view this as simply a bad debt which is a normal incidence of business life - and not something in which they should be involved.  The key difference is dishonesty (again!).  If the goods were ordered with no intention to pay for them then that is a crime.

So if you report to the police (unless you can make a good case for dishonesty) they are likely to respond along the lines of "No crime has been committed, it is a civil matter".  On that basis they will not even issue a crime reference number.  That can be very frustrating if you are the victim!

You can increase the likelihood of the police investigating your complaint if you 'sell' it to them well.  This means putting together a dossier of documents and a covering letter explaining the dishonesty, the loss to you (and perhaps to others), any aggravating factors (such as breach of trust by the perpetrator - for example where he is an employee, the victim's vulnerability - for example where the victim is aged, the impact on the victim - no-one would care if Tesco were defrauded of £100,000 but if the corner shop loses that amount it is important to them, the risk of on-going similar offences, etc).  Sometimes it works to put all this in the post as a letter addressed to the Chief Constable of your local police force at police headquarters.

The National Fraud Authority (NFA) is a relatively recent innovation which seeks to address the lack of recognition in the criminal justice fraternity of the serious implications of fraud.

However the NFA is seeking to change attitudes and priorities, it is not itself 'the answer' to the under investigation (and under reporting) of fraud.  It is a step in the right direction.

David

davidwinch's picture

Latin

davidwinch | | Permalink

OGA

I'm afraid my Latin never got past "The poet wages war to the table" which apparently was all the Romans ever talked about!

Can you enlighten me?

David

Old Greying Accountant's picture

David, me too...

Old Greying Acc... | | Permalink

... thank God for google and online translators.

The first, the MGM motto, "Art for Arts sake" - my probably crude corruption hopefully says "law for law's sake"

 

 

davidwinch's picture

Thanks!

davidwinch | | Permalink

My very bad latin for "The poet wages war to the table" would be "Poeta mensa bella gerant" which sounds like a useful phrase to drop into any conversation, don't you think??

David

cymraeg_draig's picture

Injunction

cymraeg_draig | | Permalink

I have consulted a solicitor who says it would cost £4,500 plus VAT to take out an injunction - but then there is no one to enforce it as we are back to our idle Police Force.

 

Posted by weaversmiths on Wed, 14/07/2010 - 10:29

 

If you have an injunction the police will have no choice but to enforce it - unless they want to incur the wrath of the court.

As for the cost - do it yourself.  Complete a form FP3 available on the HMCS site, and, a draft of the Order you are seeking.  It's fairly obvious that this guy isnt going to turn up in court to oppose the injunction so you can do it yourself in a few minutes at the local County Court.  Often these can be done without even speaking to the judge, although most will have a couple of questions to clarrify matters. Nothing to worry about.

I cant recall the filing fee offhand, but its around £150-£200.  That all it will cost you.

Old Greying Accountant's picture

A motto for accountants...

Old Greying Acc... | | Permalink

... particularly apt in the current climate:

Nil illegitimi carborundum

but if they do you can always "Corripe Cervisiam"

Online Injunction

chatman | | Permalink

Good tip. Handy to know.

Caber Feidh's picture

Latin for All Occasions

Caber Feidh | | Permalink

If you wish to have more Latin expressions than you will ever need, may I suggest Henry Beard's "Latin for All Occasions" and "Latin for Even More Occasions". As far as I know, he is a New Yorker and no relation to Mary Beard, the Professor of Classics at Cambridge University.

According to Henry, OGA's suggested expression for accountants (Don't let the bastards wear you down) is actually:

Noli nothis permittere te terere

Henry himself suggested for accountants "This amount here, is that what I made or what I owe?"

Haec summa, estne quod merui aut quod debeo?

After which, the readers of this column may now wish to say to me:  Fac ut vivas  (Get a life).

weaversmiths's picture

SOCA/FRAUD/ETC

weaversmiths | | Permalink

Thank you all for your advice it has been extremely helpful.  I will certainly take it up.

 

 

TheAncientOne

Old Greying Accountant's picture

CD, that would be Caveat Lector I think...

Old Greying Acc... | | Permalink

... unless of course you wish to send me some aurei or denarii!

I have references that say that in classical Latin there are two ways to translate the phrase “Don't let the bastards get you down“.

1-“Noli sinere te ab improbis  opprimi “.

2-“Noli   arrogantium  iniurias  pati “

http://en.allexperts.com/q/Ancient-Languages-2210/english-latin-translation-phrase.htm

I am aware my quote was mock or dog latin, but used it in the ironical English way we have of bastardising other languages, as I thought it may be more widely understood.  

 

More useful latin...

alistair_king | | Permalink

Age. Fac ut gaudeam! Go ahead. Make my day!

Utinam barbari spatium proprium tuum invadant! May barbarians invade your personal space!

Parturient montes, nascetur ridiculus mus. Mountains will be in labour, and an ridiculous mouse will be born (all that work and nothing to show for it)

Working late... Domino vobiscum. The pizza guy is here.

Recedite, plebes! Gero rem imperialem! Stand aside plebians! I am on imperial business!

And for those moments of complete insanity, Imus ad magum Ozi videndum, magum Ozi mirum mirissimum. We're off to see the wizard, the wonderful wizard of Oz.

But really you know all this Latin is non gratum anus rodentum

Old Greying Accountant's picture

so what you are saying is

Old Greying Acc... | | Permalink

Fac ut vivas, obesa cantavit.

 

yippee ki yay matris futuor - reveniam!

 

carnmores's picture

frankly some of you should join the police force

carnmores | | Permalink

and dont even think about injunctions especially as you may have to indemnify the injunctee

cymraeg_draig's picture

Indemnity

cymraeg_draig | | Permalink

and dont even think about injunctions especially as you may have to indemnify the injunctee

 

Posted by carnmores on Thu, 15/07/2010 - 14:21

 

That would possibly arise if you were seeking to restrain someones lawful freedom - but in this case it is to restrain them from using an address they are not entitled to use.  What possible circumstances could any claim for compensation arise from?

ummm yeah

alistair_king | | Permalink

 Part of my day to day work is anti-fraud:

 - thinking up ways to defraud my company and then thinking up ways to prevent/detect it

 - opening up peoples minds to stop being so naive and recognize that fraud can and does happen around them

I love my job

Caber Feidh's picture

injunctions and indemnities

Caber Feidh | | Permalink

C_D's view seems to be supported by Chapter 9: Injunctions of the Civil Bench Book from the Judicial Studies Board
www.jsboard.co.uk/publications/pdfs/9_injunctions.pdf

There could only be an indemnity if the court later held that the injunction was not justified and the other party could demonstrate a resultant loss. As C_D says, that is improbable in this case.

In passing, I believe an injunction is not effective until it has been served.

Caveat: I am not a lawyer, so do not act or refrain from acting on the basis of what I have just said.

cymraeg_draig's picture

mrbdunsmore

cymraeg_draig | | Permalink

In passing, I believe an injunction is not effective until it has been served.

 

Posted by mrbdunsmore on Thu, 15/07/2010 - 17:21

 

Correct (almost) - but in this case it would have the effect of getting rid of creditors/bailiffs etc who may turn up or continue writing to this address.

In fact, as the injunction is to stop this person fraudulently using an address (ie committing a criminal offence) then whether he is actually served with the injunction is almost irrelevent, as he should not commit the offence anyway. 

 

carnmores's picture

i probably lost the thread of this (let alone the plot)

carnmores | | Permalink

so apologies , but you must be absolutely sure when issuing and serving

mere suspicion will nothelp

cymraeg_draig's picture

I hate to argue - but -

cymraeg_draig | | Permalink

 probably lost the thread of this (let alone the plot) so apologies , but you must be absolutely sure when issuing and serving mere suspicion will nothelp

 

Posted by carnmores on Thu, 15/07/2010 - 20:01

 

Sorry to seem argumentative, but, in fact injunctions can and are granted on the basis of no proven facts at all.

Pursuading the court that you genuinly fear that something MIGHT happen can be sufficient grounds for the granting of an injunction to stop it happening. All that is needed is a genuine fear on the part of the applicant, and some understandable basis (however tenuous) for that fear).

So, suspicion is more than enough to justify an injunction being issued.

In a case where someone has fraudulently used an address and letters chasing debts have been received it is more than reasonable for the applicant to fear that -

a) At some point bailiffs may arrive at those premises,  and,

b) that the other party will continue to attempt to falsely use that address.

An injunction against the defendant forbidding him from claiming to operate from that address, AND, forbidding any third party from pursuing the defendants debts at that address, would be perfectly reasonable.

 

Caber Feidh's picture

Interim injunctions

Caber Feidh | | Permalink

I thought fear was only a reasonable basis when requesting an interim injunction, over a defined period, and that was in a situation where the claimant feared that the defendant would do something irreversible before the matter of the dispute could be settled at a trial. (To introduce the elegance of Latin again, the basis used to be quia timet - because he fears) As I said in my previous post on injunctions, more guidance can be found in
www.jsboard.co.uk/publications/pdfs/9_injunctions.pdf

As that document indicates, when deciding whether or not to grant an interim injunction, the court would consider the balance of the risks of doing an injustice to one of the parties.

Same caveat as before: I am not a lawyer.

cymraeg_draig's picture

.

cymraeg_draig | | Permalink

As that document indicates, when deciding whether or not to grant an interim injunction, the court would consider the balance of the risks of doing an injustice to one of the parties.

 

Posted by mrbdunsmore on Fri, 16/07/2010 - 00:18

 

And in this case where the property address is being used illegally there is no possible injustice which can be done, therefore no risk to balance.

Clearly there is an element of "fear", namely fear of bailiffs etc if the defendant continues his illegal use of the address. And do you think for one second that at a full hearing the defendant would turn up and try to justify an illegal act ? 

fear

alistair_king | | Permalink

You have already been hit by one unhappy customer

 

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