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Investment Fraud, Capital Loss?

A client invested sums of money which has turned out to be scam - what next?

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A client has made a substantial investment and to cut a long story short, it has turned out to be a scam.  It has been reported to the bank, the police and his insurance company.  The investment sums were made from a Ltd Account. There is no paperwork with the Ltd Acc name on it, only the name of the director.  The issues therefore are...

1. Is it a company investment or would it have to be treated as a personal investment.  The 'intention' was that it was a company investment, but we have no paperwork to that effect.  Is it enough (for HMRC purposes) that it has been paid from the Ltd Bank Account?

2. Could it be a capital loss or would it not fit appropriate criteria?  I saw somewhere that HMRC doesnt consider theft to be a loss, but they may be able to make a negligible value claim, but I cant find the HMRC manual link for this to find more information. 

Has anyone experienced similar? Any advice appreciated.

Replies (9)

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By memyself-eye
08th Feb 2021 11:20

I vote loan to a director(?) as he/she instigated it.

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By Paul Crowley
08th Feb 2021 11:37

Did the investment in any way relate to the trade of the company?

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Replying to Paul Crowley:
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By KAT49
08th Feb 2021 11:41

How would I relate it to the trade of the company? You mean like if the company activity was XYZ and they invested in a related commodity or something? Like there was a direct/obvious company link?

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Replying to KAT49:
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By Paul Crowley
08th Feb 2021 17:59

Probably, but not necessarily, better result if it was a company matter
Hence if some trade connection a bit more believable as company investment.
But really if everything is in his name it could be stretching it a bit

What did client records show the payment to be?

Brand new shares or second hand has relevance

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By pauld
08th Feb 2021 11:46

I think directors loan too if only paperwork you have is in their name. If NV claim an option, is there any personal income to set off against? what about S455 charge?

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By Montrose
08th Feb 2021 17:48

What was the contract under which the money was paid? Regardless of whether it was fraudulent it is still open for you to argue that it was a "chose in action",that is an intangible asset, on which a loss can be claimed.
This argument can be pursued for a classical"boiler house" scam.
Who can make that claim would require a thorough examination of all the documents, emails, file note etc.

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By Wanderer
08th Feb 2021 18:24

Re 2. I've got it in mind that this issue was discussed a few years ago on here and the conclusion was there was no claimable capital loss as there was no asset in the first place.

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By frankfx
08th Feb 2021 21:22

A good question ,if only to serve as a constant alarm.

How much involved?

That magic number £ concentrates the mind.

Is there a risk that DLA takes a hit, with tax implications that follow.

You as advisor may have to steer a tax path for client.

Risk client argues it's a company investment.

Company loss.

With no tax relief.

Whereas "facts" would suggest a DLA.

You may have to see both sides of the coin. When assembling " facts".

To enable you to prepare "true and fair " accounts , per engagement letter.

Disclosure.

With consequences.

Are there other shareholders?

Again, consequences.

Let us know how matters unfold.

Btw

Is company solvent after the cash loss.

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