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PLN: taxpayer lied to accountants and HMRC | accountingweb
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Tribunal orders £54,030 tax bill for diner owner

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The sole director of a diner found himself served with a personal liability notice totalling £54,030.09 after lying to his accountants and HMRC.

2nd Mar 2023
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Colm Brendan Malone was the sole director and shareholder of Maloney’s Diner Limited (MDL) from its incorporation in December 2013.

He had previously been a sole trader and a member of two partnerships, with these partnerships having accrued unpaid VAT before they ceased.

Compliance check

In June 2018, three HMRC officers visited MDL for a compliance check. They noted two tills in operation and a machine for card payments. Further visits were carried out in October and November 2018.

During these visits, HMRC acquired the backup from one of the tills, but the other had apparently not been set to store data and so no figures could be extracted. The officer reset both tills and made adjustments to make them HMRC compliant, including setting the second till to start storing data.

A till report was shown to be produced twice daily – once early afternoon and then again either close to closing or first thing the next day. However Malone stated that only one report was produced each day.

At some point prior to November 2018, Malone opened and closed a bistro next door to MDL. The sales from this new business were put through a third till and the business was stated to have been run by Malone’s daughter.

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Replies (30)

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By Hugo Fair
02nd Mar 2023 13:32

Most people when they realise they're stood in a shallow hole in the ground just clamber out (or call for assistance if necessary) ... but it takes a special kind of person to call for more spades & shovels, in the hope of finding an exit below them!

Thanks (16)
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By kestrepo
02nd Mar 2023 14:27

The bit about the HMRC officer repairing the tills made me chuckle - very kind of them to make the case even stronger!

Thanks (5)
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By JustAnotherUser
02nd Mar 2023 15:47

A win?
Would love to know, and im sure its published somewhere what the return on these investigations are once costs are deducted.
3 investigators , site visits, transport, tribunals, appeals..

A Bundle consisting of 620 pages and an Authorities Bundle extending to 577 pages

A story of issues going back to 2005 them....
VAT returns for the tax periods 09/15 to 06/19
the Corporation Tax Returns for the periods ended 31 December 2015, 2016 and 2017
Penalties issued on 6 November 2019
In relation to 17 January 2020
A review on 7 January 2021.
Heard on 21/22 sept 2022
Judgement on 02 Feb 2023

Thanks (3)
Replying to JustAnotherUser:
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By AndrewV12
06th Mar 2023 09:52

I agree sounds to me that all they achieved was to get their money back spent on the enquiry.

Thanks (1)
Replying to AndrewV12:
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By waldron
06th Mar 2023 10:26

Possibly so, but it probably keeps a lot of other potential tax evaders honest.

Thanks (10)
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By fellowcraft
02nd Mar 2023 21:04

Well the Statement of Affairs says HMRC assessed in excess of £400k tax + pens, so it seems he got away fairly lightly

Thanks (1)
boxfile
By spilly
02nd Mar 2023 22:18

I thought that the ‘two tills trick’ had been consigned to the annals of dodgy accounting history since their recording methods became computerised.
Clearly not, and I am now doubting the veracity of the restaurant I recently went to who said their till had malfunctioned so they were unable to print receipts.

Thanks (5)
Replying to spilly:
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By johnjenkins
06th Mar 2023 09:47

What about the Sunday only cash ploy?

Thanks (3)
Replying to johnjenkins:
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By AndrewV12
06th Mar 2023 09:54

Oh no they never opened on Sunday, it says here :)

Thanks (1)
Replying to AndrewV12:
VAT
By Jason Croke
06th Mar 2023 10:10

Not in this case, but I am never surprised to go to any town centre on a Sunday and apart from the big chains, absolutely amazing how many independent cafes only take cash on a Sunday.

I'd have thought taking cash on a Sunday was a big risk, banks aren't open and cash held on premises overnight or taken home is risky.

The number of times the "card machine is broken", would suggest that card payment machines are the most unreliable bit of tech since the photocopier was invented.

Or may be I'm just a cynic?

Thanks (4)
Replying to Jason Croke:
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By fmuk
06th Mar 2023 10:37

I have a Chinese takeaway near me that only takes cash, no cards are allowed on any day.

Thanks (2)
Replying to fmuk:
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By johnjenkins
06th Mar 2023 11:14

Surprisingly in lockdown the guidelines said pay by card but loads of shops would only take cash.

Thanks (2)
Replying to johnjenkins:
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By bendybod
06th Mar 2023 12:53

Or magically were able to take cards during lockdown but now can only take cash again.

Thanks (1)
Replying to bendybod:
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By johnjenkins
06th Mar 2023 13:53

I blame the banks for most of this. Many years ago they would charge extortionate charges for taking cash. Now they charge extortionate charges for card transactions.
Why charge for a transaction that's electronic?

Thanks (2)
Replying to johnjenkins:
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By fmuk
06th Mar 2023 17:04

Call me a cynic, but I don't think their wanting cash only has anything to do with charges for card transactions.

Thanks (1)
Replying to fmuk:
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By johnjenkins
07th Mar 2023 10:56

Although I kinda agree with you, in some places cash is still king and can avoid mega bank charges.

Thanks (1)
Replying to johnjenkins:
paddle steamer
By DJKL
07th Mar 2023 18:28

We used to have a client who paid their bar/restaurant takings each day into a building society account (which needed to be in a personal name back then, late 80s/early 90s) and then the following day got a building society cheque for the exact figure that they had paid in on the previous day and then paid this into their company's bank account- saved an absolute fortune in bank charges as even back then their turnover was ahead of £1m gross. I had an interesting time explaining all this to HMRC during an enquiry but even they eventually accepted the logic of what the client was doing. (The predecessor section to s455 (cannot now remember its number but it started with a 2 was never even mentioned)

Thanks (1)
Replying to DJKL:
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By johnjenkins
08th Mar 2023 11:15

Many of my cash clients used to pay their bills in cash so as to avoid bank charges. Not so much now.

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By ireallyshouldknowthisbut
03rd Mar 2023 09:01

Given they doth protest so much.

What about ongoing? Presumably they are still at it the past 4+ years.

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Jennifer Adams
By Jennifer Adams
03rd Mar 2023 09:16

The article doesnt say how or why there was a 'compliance check' - ie what brought this company to HMRC's attention.

The answer is in point 18 of the judgement - the director was a serial non VAT payer. Previous companies he was involved in went into liquidation owing VAT
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2023/98

>> so not really surprising he came to HMRC's notice.

But this judgement does confirm that the 'veil of incorporation' cannot be relied upon.

Thanks (3)
the sea otter
By memyself-eye
03rd Mar 2023 16:49

I bet he files for bankruptcy !

..HMRC will probably do the honours for him.

Thanks (1)
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By scubajoe
06th Mar 2023 09:46

Why were there no criminal proceedings? Seems like a clear breach of Section 72
https://www.legislation.gov.uk/ukpga/1994/23/section/72

Thanks (4)
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By AndrewV12
06th Mar 2023 09:47

HMRC therefore believed sales had been understated and assessments were issued in November 2019, including penalties of £139,902.72 for VAT and £41,701.76 for corporation tax.

My gosh who would have thought there would be so much money serving up such muck, mind you wheres there's muck .....

Thanks (1)
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By Mr J Andrews
06th Mar 2023 10:48

Three visits by HMRC compliance officers. Clearly they weren't paying attention to Tripadvisor comments.

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By ds
06th Mar 2023 11:30

Probably an easy target for HMRC as he has history with them. There are many other similar small businesses up and down the land up to all sorts of trickery and dodgy dealings where the politically correct feet of the tax inspector fear to tread for fear of offence being taken and accusations of racism being flung.

Thanks (1)
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By Ian McTernan CTA
06th Mar 2023 12:55

You would have thought by now HMRC would employ local specialists whose job is to visit small cash taking businesses and see how many take cash only, then start enquiries on them once visitor patterns have been established. you could even review the shop's own CCTV coverage and count customers!

Would Have two effects: deterrence, knowing that someone is dedicated to finding out who's cheating and secondly produce decent yield for the Tresaury.

Thanks (1)
Replying to Ian McTernan CTA:
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By ds
07th Mar 2023 14:08

I expect they don't have the resources to do this. In the town where I live the government built the Inland Revenue a shiny new building in the town centre in the 1990s which had an enquiry office and people working on site. Now that office has been sold on to other non government users and you now have to deal with a call centre who knows where. They have cut costs but in the process reduced their reach and effectiveness. No wonder, money laundering is rife and almost in the open.

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By FD-HBC
07th Mar 2023 09:51

I find it astounding that the amounts assessed were reduced from over £181k to just over £54k as a result of HMRC "revisiting their workings" - a 70% difference ?????? Wow !

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Replying to FD-HBC:
paddle steamer
By DJKL
07th Mar 2023 18:33

I am not surprised. HMRC staff in my experience are, in the main, poor accountants, they possibly ought to spend time seconded into practices actually preparing accounts, imho this would make them far more effective investigators.

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Replying to DJKL:
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By johnjenkins
09th Mar 2023 10:08

I have said this so many times that HMRC training should include time in an Accountants office and all Accountancy qualifications should include spending time in HMRC's offices. There has never been such a wide gap between HMRC and Accountants which only does harm to both sides. Time someone with a bit of gumption brought back "agent strategy" and expanded co-operation. You listening Jimbob?

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