Financial abuse - can a forensic accountant help?

Question from domestic abuse charity officer about the situation of a female client

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Situation: Client (As) recieves income of 25% from husbands (Bs) Ltd accountancy practice which enables him to pay less higher rate tax. (A) has never seen the practice accounts and has no idea how much she 'earns'.

1. Is (A) entitled to see these accounts? She believes she is a shareholder. 

2. Before the business was incorporated her sole trader husband (B) used (As) inheritance to pay off unsecured debts that she was unaware of. The inheritance substantially disappeared into the business and was used to fund (Bs) addiction. B has hidden debts of around 200k using inheritance and family money to pay interest.

Can a forensic accountant help with the above situation as B will not disclose information. Situation goes back 12 years. B is an ACA and member of the ICAEW. 

Replies (14)

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By David Ex
24th Apr 2024 23:26

What you need is a solicitor who specialises in matrimonial disputes.

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Replying to David Ex:
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By FactChecker
24th Apr 2024 23:40

... or rather I suspect the 'client' does.

OP: what is a "domestic abuse charity officer"?
Or, more importantly, what authority do you hold to represent your 'client' (both in terms of being privy to confidential matters and in terms of representing your 'client' whether to HMRC/ICAEW or the courts)?

As it stands, no-one here would be able to offer even gentle pointers to questions like "Is (A) entitled to see these accounts?" ... since we aren't (and shouldn't be on a public forum) informed as to all the salient facts.
But someone has some fairly basic fact-finding to do before anything else - such as if this is an incorporated company, what does CH show with regard to articles, shareholdings, officers, etc?

And, however unfair it sounds, your comment "B has hidden debts of around 200k using inheritance and family money to pay interest" suggests that there may not be much left in the pot ... so before dashing into battle, A really needs to have a clear think about what she wants to achieve.
Only then could a (probably very expensive) investigation be commenced - with a clear objective of seeing how much if any of what A wants might be 'gettable'.

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By DKB-Sheffield
24th Apr 2024 23:56

I agree with David Ex... this is a legal matter.

Whilst the use of a forensic accountant may be required, they would need to be officially instructed - either by the company, or by a court, or other such authority.

Whilst your OP indicates that A may be a shareholder (albeit, there is an element of doubt in that she only 'believes' she is a shareholder), the 25% ownership, and no mention of directorship, would suggest she may lack the required authority to directly engage anyone to review the company's books.

However, she (or her lawyer) should consider...
- CA2006 - in particular the references to provision of accounts
- Employer legislation - particularly surrounding provision on payslips, P60s etc.
- CA2006 (again) - surrounding dividends including vouchers

It may be worthwhile her (or her lawyer) looking up the Co House records for the company... in particular directors and PSCs, or filings relating to share capital (including subscriber shares on incorporation).

What may be ill-advised in this case would be to make demands on B to provide information (this would normally be a first step BUT more relevant to unrelated shareholder disagreements). Furthermore, whilst ICAEW has a robust disciplinary policy - I can certainly see that being more of a potential issue than a resolution (it may be that they are less likely to take actiin, and a complaint to the PB may also cause issue with any other 'family' legal matters - considered sour grapes etc.)

Alas, I am not a lawyer... these are mere recommendations of some avenues A may wish to consider. It certainly shouldn't be considered advice (legal, otherwise).

Good luck!

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By FMJ
25th Apr 2024 08:00

Thanks to you both for your valuable opinions and for taking time to respond. Since the new laws on domestic abuse came in (2015), DAL has developed to include financial abuse and coercive control. Financial abuse does not always relate to a divorce issue. Cases between siblings are also common. This particular case is very complicated. I am sorry If I have asked questions in the wrong place. We have been looking at legal advice and a legal professional suggested accountancy services. We are a charity and person centred organisation. We just did a web search for 'accountant financial abuse domestic' and found useful but non-specific info about the role of financial professionals. Thanks for your further insights. With gratitude for all you have provided.

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By taxdigital
25th Apr 2024 08:16

Clearly there are serious legal issues at play here as you start with domestic abuse, and then talk about company finances. I presume you're an accountant or adviser acting for A and are instructed to look after their compliance obligations, accounting, tax etc. May be your client will be looking at engaging two specialist solicitors; one for the domestic abuse/matrimonial issues and the other for corporate law/common law matters. That said to answer your questions on this free forum:

FMJ wrote:

Situation: Client (As) recieves income of 25% from husbands (Bs) Ltd accountancy practice which enables him to pay less higher rate tax.

This appears to be an allegation as opposed to a fact as you may not have access to the husband's or his company's financial affairs.

FMJ wrote:

(A) has never seen the practice accounts and has no idea how much she 'earns'.

1. Is (A) entitled to see these accounts? She believes she is a shareholder. 

If you're querying if your client has the right to inspect the books, the answer is NO,unless your client is a director of the company. In the absence of any paperwork such as share certificate or access to the Register of Members you wouldn't know if she is even a shareholder. Neither it's clear what she has been receiving is even income. So, one for a solicitor specialising in corporate/common law.

FMJ wrote:

2. Before the business was incorporated her sole trader husband (B) used (As) inheritance to pay off unsecured debts that she was unaware of. The inheritance substantially disappeared into the business and was used to fund (Bs) addiction. B has hidden debts of around 200k using inheritance and family money to pay interest.

 

This is a serious allegation as it implies theft. Again, one for a solicitor who has specialism in this area.

FMJ wrote:

Can a forensic accountant help with the above situation as B will not disclose information.

A forensic account is no Sherlock Holmes - they need to be instructed by someone. The husband obviously won't do it, and the wife has no authority.

FMJ wrote:

Situation goes back 12 years. B is an ACA and member of the ICAEW. 

ICAEW membership will be in point only if the husband has violated any codes which, going by the OP alone, a reader will find it difficult to comment on.

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By paulwakefield1
25th Apr 2024 08:29

Re Question 1: IF (Note: IF) she is a shareholder, she is entitled to a copy of the accounts (S423, Companies Act 2006).

That is the law. Practicalities may be more awkward.

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By paul.benny
25th Apr 2024 08:54

It's worth contacting CABA. As spouse of an ICAEW member, your client is eligible for all manner of support. They may not be able to address the specifics raised in the post but nonetheless can provide some excellent, often free, support.

Try also the ICAEW ethics helpline. May also be able to provide some pointers on disclosure. If husband has stolen from wife to fund addiction, he may have stolen from clients and there could be other rule breaches. You may be doing other people a favour by raising it.

And one final point. Addictions are an illness rather than a moral failure. Remember that for all he has allegedly done, husband is still another human, entitled to be treated as such.

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By bernard michael
25th Apr 2024 09:59

Definitely legal advice is needed
However and also
I assume checks have been made @ Companies House regarding B's shareholding and the accounts
Does B sign off her annual tax return..................................if they are being submitted, which will show "how much she earns"
Addiction to Alcohol,drugs,sex,gambling,???

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By Paul Crowley
25th Apr 2024 10:13

This is not the place, but consider why you feel you need the information on the company.
The balance sheet is in the public domain.

25% means that she is not a PSC.
What exactly is the point of trudging through the accounts if this is not a divorce situation.

Any charity looking to take on financial abuse clients really needs the skill base to be able to deliver the service, in a confidential way.
You have identified ICAEW, runs his own company, and some prior history of wife
Was this a wise posting.

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Replying to Paul Crowley:
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By paul.benny
25th Apr 2024 10:26

To be fair, OP just talks of domestic abuse of which financial abuse is a subset. From very limited experience, it's typically things like abuser taking out debt in victim's name or simply depriving victim of access to funds. These usually don't need the support from a finance professional.

The case described is rather more complex, at least as regards ascertaining the facts.

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By lesley.barnes
25th Apr 2024 16:18

On a practical level you and your client needs to be clear on what outcome she is looking for. Is she looking for financial restitution for her possible shareholding in the company? Is she looking to pursue her husband as an individual.

As a start point she can set up a personal tax account www.gov.uk/personal-tax-account, this will show any employment income that has been reported to HMRC in the last 5 years. Whether she has received it or not is another matter.

You can go into Companies House and view the Confirmation statements and accounts that have been filed. You can see shareholding etc. If these documents have been completed accurately it will give a clue (especially if the accounts filed are full accounts rather than micro accounts) whether there are any funds in the Company. You may be able to see the Dividends paid and IF the client has a 25% shareholding how much they should have received. If there are no funds in the Company going down this route could be a dead duck.

There is no way of checking what resources the husband has personally.

If its as complex as you believe it could be costly for your client - you need to weigh up if there is any hope of getting a financial settlement and if the costs can be justified.

As an aside pursuing this could spark HMRC interest www.accountingweb.co.uk/tax/personal-tax/tax-penalties-overturned-for-ab...

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By Postingcomments
25th Apr 2024 17:23

You could write a long list of reasons as to why you're not the person for this job. I'd pick one and then run. Run for the hills!

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By FMJ
25th Apr 2024 18:06

Huge thanks to Paul Benny. The female I am representing had no knowledge of CABA. This is the way forward. As Domestic Abuse charity workers we often work with marginalised and vulnerable people, often women. Our main work is to listen and find the appropriate support. Thanks to Paul Benny for recognising the destructive nature of addiction for all involved, including the ICAEWA in this case. As most of you have correctly pointed out, I am not a 'financial' or 'legal' person. We do refer people to professionals and have a retired human rights lawyer volunteering on our team. The obvious situation is often to go to the police. There are often reasons why the victim feels unsafe doing this for reasons of psychological or possibly physical violence. An ICAEW has some obvious possible advantages over a person who is not financially sophisticated. Likewise, as Paul has pointed out the ICAEW and possibly other clients are also vulnerable when addiction is a driver of behaviour. Thanks once again for helping a non-financial person signpost appropriate support to a person who is vulnerable.

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By taxdigital
25th Apr 2024 18:43

I would also thank @paul.benny for the comments about CABA helpline being available to family members, as ICAEW only ever meant the tax faculty for me!!

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