Accountants from the Wells-based firm Bishop Jones were called to give evidence as their former client Richard Hillgrove's trial resumed at Bristol Crown Court this week.
Day four and five were spent with the prosecution and defence questioning witness Michele Bishop, sole practitioner and owner of Wells-based firm Bishop Jones and her former colleague Louise Dale, who worked on Hillgrove's accounts.
Hillgrove, 42, of Somerton, Somerset, is accused of cheating the public Revenue of almost £100,000 over a 12 month period.
He is alleged to have filed to pay around £52,000 in VAT, for which he purportedly billed clients but did not pass onto HMRC. In addition to this, he is accused of failing to pay HMRC £41,000 in PAYE, which he deducted from staff salaries.
Bishop Jones took on accounting, bookkeeping and payroll work for Hillgrove and his wife Lois in mid-to-late 2010 and worked for them until January 2012.
On the afternoon of day three of the trial (Thursday 6 March), Michele Bishop was questioned by prosecution QC Joss Ticehurst.
Hillgrove and his wife were both directors of RJH Management LLP, but Bishop Jones created another entity, Hillgrove Public Relations Ltd, as a more tax efficient structure as the LLP had an ‘excessive tax liability’. [Editor's note: For 'directors' read 'partners'. For further clarification regarding Bishop Jones please see below]
Bishop Jones worked out a Time to Pay arrangement with HMRC, under which the debt owed by the LLP could be paid. The court heard how the liabilities were left in the LLP, while the trade was transferred to the limited company.
Bishop said she added the liabilities to the trial balance within Sage Instant, the accounting application she used, so that one report could be pulled off showing all the figures and an overall view of the finances.
During questioning Bishop revealed that she had filed a limited intelligence report to the Serious Organised Crime Agency (SOCA).
She said she did this because she thought Hillgrove was intentionally holding off on submitting his VAT returns to disguise the true level of PAYE and VAT liabilities.
HMRC would not be aware of the true level, she said, as the VAT returns had not yet been submitted - they would only find out what the entity owed at the end of the tax year.
When Hillgrove, who is defending himself, asked Bishop why she had reported him to SOCA, she said it had been her professional obligation to do so where she had suspicions under the Money Laundering Regulations.
In his questioning, Hillgrove expressed concern that Bishop had suggested meetings with a debt restructuring firm to look at his options for his company. He saw this as “dubious” and expressed his wish to pay his tax bill. Bishop said she had suggested this because he needed to take action due to the rising level of unpaid debt and missed payments under the Time to Pay agreement.
He said he had been sceptical, but met with the firm, who was one of her clients, as well as a corporate lawyer of his own choosing to examine his options. While questioning Bishop on her evidence, Bishop confirmed that late in 2011, Hillgrove indicated he did not want to go down the winding up route.
Hillgrove had employed another accountant to take over from Bishop in January 2012, Vimal Shah of PSJ Alexander in London, who expressed plans to 'ice' the limited company and bring everything back into the LLP.
Hillgrove asked the accountant if she had known of a letter regarding a winding up threat to his company, which he alleged an employee of hers opened and filed away without informing anyone.
In giving evidence, Bishop said she did not know who had opened the letter, but that she had corresponded with him about it.
Hillgrove asked if she had known he had a previous company that had been dissolved and that winding up another company might cause him to get struck off as a director.
She said she was aware this could happen, but equally knew people with dissolved companies who were still directors.
Hillgrove also expressed concerns over what he considered Bishop Jones' lack of system in place for differentiating or dealing with business/personal expenditure.
Bishop replied that there was such a system and said that employee from her firm visited Hillgrove’s premises to carry out bookkeeping work, where he ran another version of Sage on a separate computer.
According to Bishop they had a tray for expenditure and a form for business expenses.
Hillgrove then questioned the accountant whether every expense taken out of the directors loan account was personal.
Bishop answered that if there wasn't business receipts for money taken out of cash points, the firm could not put them through as business expenses.
On a few occasions, she said her staff members came to her querying receipts for underwear purchased at Harrods or Selfridges, and for sex toys.
Hillgrove said that the sex toys were never queried as being for business or personal use, and were purchased for a client’s book launch that required models to hold sex toys as props.
The issue of whether Hillgrove's expenses were for business or personal purposes cropped up again when former Bishop Jones employee Louise Dale gave evidence on Tuesday 11 March.
Prosecuting QC Mr Ticehurst spent most of the afternoon poring over cash flow projections, company accounts and email exchanges between Dale and Hillgrove.
Going through the jury documents bundle, Ticehurst highlighted that fact that Millfield school fees and rent were included on the cashflow projections.
“The problem with cashflow at Hillgrove Public Relations was excessive drawings,” Dale said. “I rang the debt management team at HMRC on several occasions to discuss the arrangement and to negotiate a restructure.”
Questioned by Hillgrove about whether or not his expenses were for business of personal purposes, Dale replied: “After the initial set up of historic expenses data I prepared a form for all employees so they could fill in any expenses incurred privately.”
Hillgrove said he had lots of legitimate business expenses but they weren’t processed as such. As the court picked through more examples of his expenses, there were audible groans in court.
Dale replied to Hillgrove: “I am prepared to accept that Mr Hillgrove would from time to time incur business expenses from his own account which wouldn’t be put down as a business expense because I didn’t know they were.”
Dale also explained that she had access to Hillgrove’s online bank statements on a read-only basis and was responsible for preparing his VAT returns.
When she informed Hillgrove of his VAT liability for July 2011 he replied in an email response on 7 July 2011, “Please hold fire with the submission.”
“I did not have the authority from the director so I didn’t file the return,” Dale said.
The trial continues. For legal reasons, comments have been disabled on this article.
