Share this content
33

Soca or not to soca

Soca or not to soca

Didn't find your answer?

Client has profitable business with large cash reserves and no creditors.

She effectively wants to follow the “Spongebob Plan” to extract the cash reserves.

She will then, as if by magic, open another company and start again.

I’ve gone through everything with the client but she still wants to proceed. I will sack her, but is a report required. I think a big yes but my brain is fried as my wife is quite ill at the moment amongst other things.

Any input by the friendly community or Portia would be appreciated.

Replies (33)

Please login or register to join the discussion.

avatar
By Wanderer
01st Oct 2015 12:17

Why SpongeBob??

If she has large cash reserves & no creditors why is she considering SpongeBob?

Just go for a members liquidation & make it legitimate?

Thanks (1)
By cheekychappy
01st Oct 2015 12:19

Company is solvent and will continue to trade.

 

She wants the cash out but doesn't want to pay the tax.

 

She won't be declaring the cash extraction as income.

 

Thanks (0)
avatar
By Wanderer
01st Oct 2015 12:25

Can't continue to trade

Company can't continue to trade once liquidated / struck off, it won't exist.

Cash extraction will be probably be capital rather than income (if done properly).

Thanks (0)
By cheekychappy
01st Oct 2015 12:30

Apologies.

 

What I should have said was: "the trade will continue through a new company".

 

Cash extraction will be neither capital or revenue for tax purposes as it will be simply a bank transfer followed by Spongebob.

 

I think I've answered my own question in my last post anyway.

Thanks (1)
Quack
By Constantly Confused
01st Oct 2015 16:55

Whoa!

cheekychappy wrote:

Cash extraction will be neither capital or revenue for tax purposes as it will be simply a bank transfer followed by Spongebob.

Has someone slipped LSD into my tea...?

Thanks (1)
avatar
By Wanderer
01st Oct 2015 12:50

Cash extraction almost definitely WILL be capital or revenue for tax purposes.

Whether she returns it or not is another matter. If she doesn't then of course resign & SAR.

Thanks (0)
avatar
By ATS_ACCA
01st Oct 2015 13:02

cheekychappy

@ cheekychappy  wrote:

"Cash extraction will be neither capital or revenue for tax purposes as it will be simply a bank transfer followed by Spongebob".

Could you please explain what do you mean by "as it will be simply a bank transfer followed by Spongebob"?

Thanks (0)
avatar
By taxwizard
01st Oct 2015 13:14

ethics

Glad you are taking the route of sacking her as some accountants would go along with her illicit practice

Phoenixing is so common and immoral yet the government and HMRC turn a blind eye even when there are debts owed to HMRC

Yes report her but nothing will happen and she will continue to avoid tax as well as perhaps leaving the poor creditors out of pocket while she lives happily ever after. 

 

Thanks (3)
avatar
By HeavyMetalMike
01st Oct 2015 14:48

Phoenixing when creditors are stuffed is immoral but this is not.

Extract the cash and pay the tax and start again is no problem.

Your problem, as accountant, is what tax, IT or CGT.

Transactions in securities rules are effectively self assessed. This should be liable to IT but the mechanics for declaring it are, I believe, wholly an SA issue.

Thanks (1)
By cheekychappy
01st Oct 2015 14:51

Thank you

taxwizard wrote:

Glad you are taking the route of sacking her as some accountants would go along with her illicit practice

Phoenixing is so common and immoral yet the government and HMRC turn a blind eye even when there are debts owed to HMRC

Yes report her but nothing will happen and she will continue to avoid tax as well as perhaps leaving the poor creditors out of pocket while she lives happily ever after. 

 

 

It seems you have fully understood the situation.

 

I will be disengaging and making a report.

Thanks (1)
avatar
By HeavyMetalMike
01st Oct 2015 14:55

I'm new to this site, then???, what's the SpongeBob plan???

 

If CT and VAT is paid, what HMRC debts are not being paid? Ooo, PAYE.

Are you saying HMRC is going to be unpaid? Sorry I missed that. I thought you were complaining about the phoenix to avoid IT on that. Sorry. I'm half-cut.

Thanks (1)
By cheekychappy
01st Oct 2015 14:58

Spongebob Plan
http://www.ukbusinessforums.co.uk/threads/closing-a-limited-company-wth-...

Essentially she is emptying the bank without paying any tax personally on the funds extracted.

Thanks (4)
avatar
By HeavyMetalMike
01st Oct 2015 15:05

My apologies, I didn't realise they/she was going to shaft our beloved Govt.

How else will we pay for Trident or more World Cup bids now without any tax revenues (I really shouldn't look at Any Answers after liquid lunches).

 

So to answer you question, yes do a SOCA, for what it's worth. If you feel ANY good will come from it..............

Thanks (2)
David Winch
By David Winch
02nd Oct 2015 07:39

Clarification
So we are saying that this client is planning to deliberately & dishonestly evade tax due on the money currently in the company?

On that basis a report to the NCA (formerly SOCA) should be made once the evasion has happened (or the OP suspects the evasion has happened).

Of course until it has happened there is no suspected money laundering to report.

David

Thanks (3)
avatar
By Tomazaan
02nd Oct 2015 11:15

As David says...

The soon to be ex-client is not trying to avoid tax (legal but possibly not effective), she is planning to evade tax (illegal, go straight to jail without passing "Go").  There is a huge difference.

Thanks (0)
By Duggimon
02nd Oct 2015 11:15

Still confused

By spongebob do you just mean that your client will just wind up the company herself without a liquidator? My understanding of the term was that it referred pretty exclusively to a company being struck off via a creditor's liquidation and didn't apply to solvent companies but perhaps I'm missing something.

 

In any case, if you've advised her that any method of making the company money her money is taxable and she's unwilling to take the 10% on the capital distribution and instead wants to evade the tax then I would agree there's no way you can continue to act for her. I think you need to have reasonable cause to believe she has already broken the law before you are obliged to report her though and if you distance yourself before that happens then I'm not sure how that would be possible.

Thanks (0)
avatar
By Younis
02nd Oct 2015 11:39

Yes still confused

As long as the OP uses unrecognised and undefined term "Spongebob" and also insist not to explain what he/she means by this term, no prober advice can be given. 

Thanks (3)
By Duggimon
02nd Oct 2015 11:46

Spongebob

Younis wrote:

As long as the OP uses unrecognised and undefined term "Spongebob" and also insist not to explain what he/she means by this term, no prober advice can be given. 

 

It was linked earlier, the term refers to a widely circulated post by a forum user named Spongebob who offers guidance on striking off a company too insolvent to pay an insolvency practitioner.

 

http://www.ukbusinessforums.co.uk/threads/closing-a-limited-company-wth-...

The confusion really is that in no way does the situation described relate to the OP's client's situation, other than the fact she wants to wind up the company.

Thanks (0)
avatar
By Steven Dring
02nd Oct 2015 12:02

HA!

cheekychappy wrote:

Younis wrote:

As long as the OP uses unrecognised and undefined term "Spongebob" and also insist not to explain what he/she means by this term, no prober advice can be given. 

Firstly, it is a well known insolvency "plan". But in this case will be half used by a solvent company in a ploy to evade taxes.

Secondly, I have already provided a link to the plan. Had you bothered to click the link, you would understand what it is.

Thirdly, I no longer need advice as per my post yesterday at 12:30.

Lastly, you are now just an irritating noise.

 

Thanks to those who understood the predicament and answered accordingly.

 

 

So we're not talking about hiding cash in a pineapple under the sea? This has just made my Friday much better.

Thanks (4)
avatar
By ATS_ACCA
02nd Oct 2015 12:55

Offensive words

cheekychappy wrote:

Younis wrote:

As long as the OP uses unrecognised and undefined term "Spongebob" and also insist not to explain what he/she means by this term, no prober advice can be given. 

Firstly, it is a well known insolvency "plan". But in this case will be half used by a solvent company in a ploy to evade taxes.

Secondly, I have already provided a link to the plan. Had you bothered to click the link, you would understand what it is.

Thirdly, I no longer need advice as per my post yesterday at 12:30.

Lastly, you are now just an irritating noise.

 

Thanks to those who understood the predicament and answered accordingly.

 

I don't see anything wrong with Younis' comment to make you so angry to the limit you describe him/her as Simpleton and Irritating noise. I think we should not use such words on this respectable website. 

Thanks (6)
By cheekychappy
02nd Oct 2015 12:56

Read

ATS_ACCA wrote:

cheekychappy wrote:

Younis wrote:

As long as the OP uses unrecognised and undefined term "Spongebob" and also insist not to explain what he/she means by this term, no prober advice can be given. 

Firstly, it is a well known insolvency "plan". But in this case will be half used by a solvent company in a ploy to evade taxes.

Secondly, I have already provided a link to the plan. Had you bothered to click the link, you would understand what it is.

Thirdly, I no longer need advice as per my post yesterday at 12:30.

Lastly, you are now just an irritating noise.

 

Thanks to those who understood the predicament and answered accordingly.

 

I don't see anything wrong with Younis' comment to make you so angry to the limit you describe him/her as Simpleton and Irritating noise. I think we should not use such words on this respectable website. 

 

Had they bothered to read ALL of the sodding thread, they wouldn't have posted such a daft comment.

Thanks (3)
avatar
By meadowsaw227
02nd Oct 2015 13:19

Mr Angry

 With your attitude your clients etc must love you.

Thanks (3)
avatar
By john hextall
02nd Oct 2015 12:30

Clarity on obligations

My understanding of the 'spongebob plan' (winding up the company yourself) is that it is useful when a company is insolvent and has no means to pay any outstanding debts, indeed it may be the only option left. However, in the OPs case, we are looking at straightforward tax evasion. His question is whether he is obliged to report someone who is no longer his client and whom he suspects is seeking to evade paying income tax. I am not an accountant myself but am interested in whether professional obligations to report suspected misconduct extend to people for whom you don't act.

Thanks (0)
avatar
By Ammie
02nd Oct 2015 12:31

SHAMEFUL

I applaud you for distancing yourself from this [insert your choice of word].

Clearly a reportable offence and shameful on the part of the client and more so the authorities if they do nothing.

Unless of course if the declarations are made and correct tax paid, which judging from the intention are unlikely to be. In which case the proposed action would be unnecessary in the first place!

All very awkward and distasteful.

Thanks (0)
avatar
By David Green1
02nd Oct 2015 12:37

Spongebob

I thought he was off planning a musical - that water soaker sure gets around!

Thanks (0)
David Winch
By David Winch
02nd Oct 2015 12:52

@ John hextall
In a word "Yes". The statutory obligation to report suspected money laundering applies to clients & non-clients alike.

It occurs where there is a suspicion (note NOT necessarily a belief) based on information which came to you in the course of your work in the 'regulated sector' that a 'person' (includes a company etc) is engaged in 'money laundering'.

David

Thanks (1)
By cheekychappy
02nd Oct 2015 13:22

Mr Angry

I'm not angry, just frustrated at professionals that comment without reading the thread in its entirety.

 

My clients do love me because I do a tip top job, give them excellent service, and all for a reasonable price.

Thanks (2)
avatar
By meadowsaw227
02nd Oct 2015 13:26

Mr Angry

Being so perfect I am surprised that you need or take anybodies advice  

Thanks (5)
avatar
By pauljohnston
02nd Oct 2015 13:34

@David Winch

David in both your responses you have clearly said "is engaged in 'money laundering'".  Therefore as I see it Cheeky Chappie and the rest of us have a prediciment in situations outlined above where we are told that a "Money Laundering" offence is likely to take place but it has not so far.

CheekieChappy is going to dis-engage so if the the ex-client carries on as she suggests he will not be able to make a SAR.  This to me seems wrong but that is the law.  Is there any way that the is a supicion of any an offence (to take place in the future)  can be reported

Thanks (0)
avatar
By carlh
02nd Oct 2015 14:05

do it the legal way

 and get her a remuneration trust, still pay creditors, still trade, never phoenix shafting suppliers thats just wrong 

@meadowwsaw227, thats how he is, typical rotherhamite 

Thanks (0)
David Winch
By David Winch
02nd Oct 2015 14:06

The OP's suspicion
Paul

The courts have concluded that "is engaged" in money laundering includes "has been engaged" in money laundering.

But I do not think they have concluded that it includes "is intending to become engaged" in money laundering.

It may be that at the time the client is disengaged or soon after that the OP considers himself suspicious that the ex-client "is engaged" in money laundering & files a report.

David

Thanks (0)
avatar
By pauljohnston
02nd Oct 2015 14:10

@David Winch

Thank you for this useful help

 

 

Thanks (0)
By mydoghasfleas
03rd Oct 2015 10:57

Suspicious activity

I have been beaten to the punch by David Winch.  At the moment, you suspect she may engage in acts that are suspicious.  You have no evidence of that engagement and, until she engages in it, there is no activity.

Disengagement is your choice.  If you keep her on and she goes ahead, you have no choice with the SAR.  If you disengage and you monitor the situation and suspect suspicious activity, I believe you may still be required to make an SAR; as a registered person, it is the activity that you report whether or not by a client.  It's your choice whether or not to continue to watch but if you do make the report, then if anything happens you do not have the fear of allegations that you were non-compliant. 

If I were you, I would disengage and do not let curiosity get the better of me later on.

Thanks (2)
Share this content

Related posts