Christopher Lunn sentenced to five years
Accountant Denis Christopher Lunn has been sentenced to five years in Southwark Crown Court for evading £6m in tax. As Lunn starts his sentence, the firm’s ex-clients are now facing increased penalties.
Lunn’s trouble began when the tax authority discovered his clients had higher than average refund claims. Lunn reasoned in his client letter that this “was to be expected because of the nature of work we were undertaking within the media industry”.
AccountingWEB has previously reported on Lunn’s cavalier attitude towards the tax authorities. A source familiar with the Christopher Lunn & Co’s activities told AccountingWEB how the firm considered its fraudulent behaviour “a bit of a joke”.
Lunn’s sentencing was previously postponed after his QC, Geoff Cox, argued that Lunn should only be held responsible for £65,000. The QC called Lunn “a man of good character” and noted how Lunn’s arrest has had “cataclysmic effect on his family”.
Lunn’s clients now liable to high penalties
During the HMRC investigation, in letters sent to clients and subsequently shared with AccountingWEB, Lunn remained defiant and denied any wrongdoing.
Lunn was keen for any ongoing work on the correction of tax returns to be suspended until after the trial. Lunn repeatedly reassured his clients that the matter would be resolved and his name cleared. Clients who followed Lunn’s advice are now liable to higher penalties if they delayed. HMRC has offered Lunn's clients a chance to put things right for themselves by paying any tax and interest due. But it is understood that clients who heeded Lunn’s advice and are yet to come forward face penalties of 20% to 30%.
The clients who ignored Lunn and approached HMRC at an early stage received a smaller penalty of 10% or lower. AccountingWEB member Robertnz inherited three Lunn clients. “I was amazed at the scale of the cosmetic accounting they used,” he said. “It cost these clients the best part of £20,000 to settle everything. However they were smart enough to take our advice to settle and so the penalties were minimal, despite Lunn still emailing them to assure that everything was in good order and not to settle.”
Lunn also alleged Dave Hartnett and HMRC officers of lying under oath during the investigation. “We have received a letter from HMRC (subsequently endorsed by Dave Hartnett, permanent secretary for tax) in which it was apparent that they condoned the practice of taking false evidence and fabricated allegations to court and furthermore thereby also condoned the making of false statements oath. (Some people refer to such a perjury),” wrote Lunn.
In an email attachment titled ‘the story so far’, Lunn also accused HMRC officials of making “statements under oath that were totally and unequivocally false.” This included statements that they had no intention of closing CLAC down.
Lunn claimed HMRC acted ‘unlawfully’
Lunn also sent an email to clients on 1 March 2012 claiming HMRC was acting unlawfully. The email suggested clients who have been approached by HMRC relating to disclosures to write to their local compliance officer or HMRC Leeds Edgewood Office stating that these letters are illegal, and included a paragraph draft of what should be sent. The letter said: "I am therefore suggesting that any client who has any letter, telephone call or documents relating to disclosures, at whatever stage such a disclosure might be, should write to their Local Compliance Office or the Leeds Edgewood Office (or in some cases both).
Christopher Lunn further denied any wrongdoing in a letter dated 24 June 2013, using the letter to alleviate his client’s concerns following HMRC labelling three key areas criminally. He summarised: “We hope that these explanations will allow our clients the opportunity to insist that any examination into their affairs be held over. Further they should then be dealt with fairly and appropriately only at the end of any legal proceedings."
Lunn didn’t go down without a fight and continued to dissuade clients from cooperating with HMRC in a letter from September 2014, instructing his clients to reverse any subsequent “ill-founded” changes to their tax returns. “The clients figures should be returned to those put forward by CL&Co,” Lunn said.
Even after his son Jon was found guilty of fraud and received a suspended sentence, Christopher Lunn continued to maintain in letters to clients that the pair were innocent and that HMRC was acting illegally by refusing to allow use of home claims and re-examining out-of-time tax returns.
After Lunn's sentence was announced Jennie Granger, director general of enforcement and compliance at HMRC said: “Lunn believed he could make up fraudulent claims to benefit both himself and his clients. Hard work from HMRC officers across the department proved him wrong. This long-running investigation has already recovered £20m as Lunn’s former clients settle their tax liabilities, with more to come.
“I hope this result serves as a reminder to those who try to cheat the public purse – particularly those in the tax profession – that no one is above the law and that HMRC will relentlessly pursue tax evaders to bring them before the courts."
HMRC has now started confiscation proceedings to strip Lunn of any financial gain he made as a result of his criminal activity.