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Disciplinary orders round up February 2019

4th Mar 2019
Editor AccountingWEB
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Examining financial data

AccountingWEB rounds up two disciplinary cases where the accountant was excluded: the first failed to pay HMRC £1.5m in tax, while the other didn’t hold a practising certificate but still engaged in public practice.

As always, the Accountants National Complaint Services’ Chris Cope gives his take and explains what accountants can learn from these cases.

Disqualified director

The ICAEW has excluded the co-director of four companies, who the Secretary of State for Business (BEIS) disqualified in December 2018 from acting as a director for seven years after his companies collectively failed to pay nearly £1.5m in tax.

Kenneth Munn, who represented himself at the ICAEW disciplinary tribunal, denied the complaint despite the disqualification, claiming he had no alternative to accepting the disqualification undertaking as litigation would have brought with it crippling financial consequences.

The secretary of state brought the ‘matters of unfitness’ against Munn after one of his companies failed to file its corporation tax return for the year ended 30 April 2004.

The BEIS investigation also found Munn responsible for only paying £18,620 in corporation tax for the same company, when he knew the true amount due by 31 January 2005 was £201,348.

The complaint also found Munn and his co-director for all four companies failed to pay PAYE, NIC and student loan deduction contributions, which resulted in an estimated liability to HMRC of nearly £1.5m. The four companies have since been liquidated.

Munn contested the secretary of state’s proceedings and the figures of alleged losses by HMRC, blaming bad legal advice for accepting the undertaking. He also told the tribunal that he had no choice but to accept the undertaking because he could not afford the risks that litigation brought.

However, the tribunal found Munn’s change of heart about giving the undertaking “an expression of regret”, rather than a defence.

Furthermore, the ICAEW tribunal accepted that the undertaking was conclusive evidence of Munn’s misconduct. Secondly, the tribunal noted that it had no power to “go behind this conclusive evidence” and revisit the circumstances.

With the undertaking still in full force, the tribunal noted that “there is no evidence that the defendant has ever taken steps to revoke his undertaking”.

Munn was disqualified as a director for seven years. The ICAEW tribunal took this into account when considering an appropriate sanction. It also took account of an absence of insight or of any remorse.

In addition to the length of the disqualification period, the tribunal could not overlook the size of the companies’ financial liabilities to HMRC or the impression Munn gave that his circumstances were the fault of others.

The tribunal excluded Munn and ordered that he pay costs of £5,000.

Chris Cope, director and solicitor of Accountants National Complaint Services Limited, said:

I am astonished that this case did not result in fraud charges against Mr Munn. The Revenue has lost nearly £1.5m. That’s money which could have been spent on public services. It’s money that should have been paid. Is there any argument which would rebut the suggestion of fraudulent activity?It’s all very well blaming the lawyers. Isn’t it always the case that it’s someone else’s fault? Of course, I accept that fighting the establishment can be fearfully expensive and few can afford it. But if the director is entirely innocent (as Mr Munn suggests), could he not, as a chartered accountant, assemble his evidence to convince the authorities that they’ve simply got it wrong?

I am also bewildered that the disqualification was for seven years. The maximum is 15.

Lack of practising certificate

Darren Hutchinson had never held a practising certificate but as detailed in a February 2019 ACCA disciplinary tribunal decision, that didn’t stop him from describing his firm as chartered accountants and preparing company accounts.

The ACCA Disciplinary Committee excluded Hutchinson after considering evidence of meetings with clients and emails showing him communicating with clients regarding their company accounts which confirmed that he had engaged in public practice for a number of years with two different firms.

The committee heard how Hutchinson had ignored the global practising regulations that prohibit members from carrying out public practice without a practising certificate.

Throughout the investigation, Hutchinson never suggested he had a practising certificate. The ACCA provided the committee with evidence that showed Hutchinson had:

  • prepared a client’s limited company accounts for the year ended 28 Feb 2016
  • attached an invoice to a client’s email in April 2017 relating to the client’s company accounts he had prepared  for the year-ended Feb 2017
  • sent an email in June 2017 where he held himself available to prepare dormant accounts
  • had a meeting with a client in November 2017 when he discussed the client’s accounts for the year ended 28 February 2017
  • when filing the subsequent documents with Companies House, described himself as a certified accountant

But the case against Hutchinson was further evidenced by reference to his firm’s website, where between May 2016 and July 2016 Hutchinson Moss described itself as “accountants and business consultants”, alongside providing tax services.

Hutchinson also described himself as an “accountant” when he accepted the appointment as a director of Hutchinson Moss in August 2013 and on the firm’s tax return in October 2014, and again when he was appointed director of Hutchinson Moss Accountants in 2016.

The ACCA argued that by holding 49% of Hutchinson Moss’ shareholding between August 2013 and November 2016, Hutchinson was effectively put in the position of principal. The committee did not accept that being a minority shareholder in a limited company made him a principal. What, though, made Hutchinson a principal was his directorship.

Engaging in public practice without a practising certificate would have been enough to justify a severe reprimand from the committee, but this was not an isolated complaint. The committee also considered an allegation that Hutchinson failed to respond to a client’s email and telephone requests for a copy of their latest annual returns.

Hutchinson’s “perfunctory” response to the ACCA’s investigation reinforced the committee’s decision to exclude him and order that he pay costs of £8,000.

Chris Cope, director/solicitor of Accountants’ Defence & Advisory Services Ltd, said:

Mr Hutchinson did not attend the hearing and was not represented. In view of the seriousness of the allegations, this was clearly a mistake. Can an accountant seriously be surprised if a committee imposes the ultimate sanction when he cannot be bothered to attend?
  • Obtaining a practising certificate is a fairly straightforward process. Some would say it’s a bit too easy. The cost is reasonable. So why not apply for a certificate? Not doing so makes no sense.
  • You do wonder why someone should go to all the trouble, time and expense of obtaining a qualification (as recently as 2012) only to let it go for reasons entirely avoidable.
  • Mr Hutchinson largely failed to engage with the ACCA in this investigation. However, in July 2018, he did explain that he had had health issues but did not elaborate or produce medical evidence.
  • Despite having no disciplinary record and being a member for less than seven years, the tribunal was clearly troubled by the lack of insight, failure to communicate and absence of corrective action.
  • The ACCA will pursue Mr Hutchinson in the courts for the costs of £8,000.

For more information about Chris Cope and the Accountants Defence & Advisory Services or to take out a membership, you can visit their website and/or phone Chris Cope 01769 580041 today.

Replies (5)

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By Justin Bryant
05th Mar 2019 10:10

The £1.5m tax payment failure case is interesting. It seems there was no recourse by the liquidator against the director(s) under IA 1986 for the unpaid CT, PAYE, NIC etc., yet HMRC threaten that very route against directors of insolvent companies for doing perfectly legitimate EBT profit extraction planning under professional advice (where the APN or whatever re the EBT planning goes unpaid due to lack of funds and causes the winding up petition)!

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By lucapacioli
05th Mar 2019 10:28

I wouldn't say obtaining a practising certificate from the ACCA is easy at all, in fact unless you work for an ACCA approved employer it's a real pain!

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By AndrewV12
06th Mar 2019 08:10

Extract above
'Munn was disqualified as a director for seven years'

You could disqualify him for 10,000 years, you are not going to stop him..... doing whatever he likes.

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Replying to AndrewV12:
By djn24
06th Mar 2019 11:45

AndrewV12 wrote:

Extract above
'Munn was disqualified as a director for seven years'

You could disqualify him for 10,000 years, you are not going to stop him..... doing whatever he likes.

Do you mean that he could just trade as a sole trader/partnership in future?
I'm pretty sure that I know who this chap is. He was running a very successful number of firms. Must have made an absolute fortune and if it is the chap I'm thinking of, at 60, can probably retire and keep all that money.

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By Arcadia
08th Mar 2019 15:10

Chris has put forward a view which is very commonly argued by politicians that tax lost to the exchequer through fraud,evasion, or even avoidance, could have been spent on public services, in order to somehow make the deed more dastardly. Whilst it is true that the money 'could' have been spent on public services, it is unlikely that it would have been. The government sets the level of public services which it believes are appropriate and raises the funds through taxation, charges and borrowing. If more money needs to be spent on public services, and one has to assume the current government does not think so, then they only have to raise more funds. There is no reason to think that spending on public services is last in line, and only gets what's left. If the additional £1.5m had come in, it 'could' have been spent on reducing taxes, or borrowing, or on extra perks for MPs.

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