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theft from client

theft from client

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cash based retail client has just had to let someone go as it turns out they have been helping themselves to the till

client is obviously out of pocket, how do we treat this in the accounts?

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By occca
07th Nov 2011 10:27

Takings down?

Surely there will be a difference on the takings control that needs writing off against P&L

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By The Innkeeper
07th Nov 2011 10:28

More to the point

have you made a MLR report to SOCA

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
07th Nov 2011 10:57

Theft

I am pretty sure there's no tax deduction for this, unfortunately. I would have thought it's a case of Dr Loss, Cr Till, and add back the loss on the taxcomp.

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Time for change
By Time for change
07th Nov 2011 11:19

Take a look at

http://www.hmrc.gov.uk/manuals/bimmanual/BIM45855.htm

I think that this will be allowed, as a deduction against profits and, I would treat this as

Debit: Defalcation on the P&L

Credit; Business income (turnover)

 

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By JC
07th Nov 2011 11:23

Proper systems ...

For the future perhaps some advice about using a proper EPos system

These systems actually make it difficult (not impossible) for this to happen. For instance:

Z readings require the till to be balanced at the end of each day - over/unders recordedAll customers provided with an invoice & amount due shown of LED readout - so everything has to be entered, otherwise no amount shows & customer cannot payAll cancelled sales recorded, otherwise lay-aways etcEtc.

Of course it doesn't prevent staff walking out with physical stock but will prevent majority of till thefts

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By Old Greying Accountant
07th Nov 2011 11:26

VAT ...

... is still due on the takings, if applicable!

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By MARKJET
07th Nov 2011 11:28

From HMRC SiteBIM45855 - Specific deductions: losses: defalcation by employeeThefts by employees, deductible; thefts by directors/partners, not deductible

Losses arising from theft or misappropriation by an employee are normally allowable. For this purpose you should not regard a director as an employee; also the proprietor of the business (sole trader or partner) is not an employee. So losses arising from theft/misappropriation by directors or business proprietors are not allowable. (See Curtis v J & G Oldfield Ltd [1925] 9TC319 (see BIM37810) and Bamford v ATA Advertising Ltd [1972] 48TC359.)

 

Also Would the employee face a proceeds of crime order against them?

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
07th Nov 2011 11:34

Thanks

It must have been VAT I was thinking of.

Thanks for the link TFC and MarkJet.

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David Winch
By David Winch
07th Nov 2011 12:43

@MARKJET

The employee is unlikely to face court action requiring him to cough up monies which he stole.

IF (and it's a very big IF) he were prosecuted for the theft and convicted then the court could order him to pay compensation to his victim (not exceeding the amount which he had been convicted of stealing).  Also if convicted he could face confiscation proceedings under Part 2 (in England & Wales) PoCA 2002.  Confiscation would require him to pay an amount to the government (which could exceed the amount stolen).

IF (another very big IF) the monies stolen could be identified with specific monies or assets which he held then he could be subject to 'civil recovery' under Part 5 PoCA 2002 which would enable the Crown to get hold of that money or assets.

In practice it is unlikely that the evidence would be strong enough for a criminal prosecution or that the amount involved would warrant action under any of the PoCA 2002 provisions.

Also the employer could sue the ex-employee in the civil courts for repayment of the monies stolen.  But the legal costs involved and the limited prospects of recovery are likely to render this an unattractive option.

David

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By Roy Price
09th Nov 2011 12:17

Employee Theft

I had a similar experience and went through the following stages:

The business was cash sales and money was either being removed from the till or items were being under rung or not rung through at all.

The member of staff was only caught with video evidence and the police laid an ambush - at the time they only had a small amount of cash but the thefts had been going on for a while.

Quantifying the loss - this was not as easy as it seems but I managed to agree a figure with the client and derived a reasonable set of workings should they be disputed.

Output VAT is still due on the lost takings as appropriate - this bit hurts.

The lost income and loss subject to any insurance recovery is transfered to P & L.

There will be underlying stock losses similarly go to P & L.

Obviously my client once bitten implemented some sensible procedures.

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