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Company Tax Evasion

Company Tax Evasion

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If a Ltd Company makes a disclosure to HMRC of tax due, due to undeclared income in previous years, and then can't afford to pay it, and applies for striking off (DS01, writes to HMRC advising them), can HMRC come after the director personally for the tax? Obviously, had the accounts been done correctly, and the tax not paid at the time, there would be an overdrawn DLA, but I'm specifically asking about whether HMRC can come after him personally in the event of a disclosure? It's been a while since I've done one.

I've spoken to my professional body, am aware of ethical issues, aware of MLR, and aware of when I need to decline to act, I'm just trying to pre-empt a question I am likely to be asked, which is basically, could he lose his house? I am, of course, trying to steer him into doing the right thing.

Oh for a straight forward set of accounts! 

*goes to make a coffee*

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By DJKL
18th Apr 2018 12:53

The liquidator of the company who might be appointed due to non payment by company of its tax liabilities ( CT, S455 et al) might decide to pursue the director re him repaying his overdrawn loan account

Are sales diverted significant, sustained over multiple years and are there falsified documents (beyond the obviously incorrect accounts/ CT600/ vat returns etc) involved?

Depending upon back history you need to point out to client potential increased prosecution risks if he does not make full voluntary disclosure (without of course tipping off)

If large sums involved (house at risk suggests there are) I would steer him to a specialist, this might be one where you would not want to offer incorrect advice and open up your own firm to potential damages claims from the client.

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By Monsoon
to DJKL
18th Apr 2018 13:15

Thanks. There are no funds to appoint a liquidator, so it would be a DIY DS01 by the director himself.

I'm still trying to ascertain the figures involved. I'm guessing about £10k in tax and penalties but he says he can't afford that.

No falsified docs, its undeclared cash.

But yes, might we worth getting him to call a specialist just for advice.

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18th Apr 2018 14:04

I depends on why he didn't declare the income. Was it with fraudulent intent ?
If you try to strike it off with a DSO1 HMRC will probably object and come calling. If they're not happy they may present a Winding up Petition and your client will have to deal with the Insolvency Service

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By Monsoon
to bernard michael
19th Apr 2018 11:37

Thanks Bernard. Yes, undeclared cash.
In my experience HMRC will object to a DS01 once or twice and then let it go - I know it doesn't always happen like that, but it's what I've seen. Insolvency service would be fine, but my client doesn't have the funds to initiate a formal winding up themselves.

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By Monsoon
19th Apr 2018 11:39

From the HMRC helpsheet:

5.8 Who’s liable for a company’s penalties

A company officer or officers may be liable to pay part, or all of a company’s penalty for a deliberate inaccuracy, failure to notify or wrongdoing, but only where the:

inaccuracy, failure or wrongdoing was attributable to the officer
officer gained or attempted to gain personally from the offence
company is, or is likely to become, insolvent

https://www.gov.uk/government/publications/hmrc-your-guide-to-making-a-d...

Interestingly it doesn't say the tax, it just says the director could be liable for the penalty.

I really wish they'd put the statute reference on their helpsheets for those of us who like to look at them!

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