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Taxpayers duped by rogue agent

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Two cases involving naive taxpayers who fully trusted their tax agent to complete their tax returns, show how the unwary can be conned.

24th May 2022
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Two separate cases, involving the same tax agent, show how taxpayers can be conned by rogue agents and end up in trouble with HMRC.

Shaun McCumiskey lost his job in July 2015, and was in a bad way mentally and physically, with no permanent home of his own. He undertook a small amount of work as a self-employed electrician earning around £2,500 in 2015/16, which had to be reported to HMRC.

McCumiskey met Stefan Brown in his local pub. Brown is a director of Alpha Tax Consultants Limited (“Alpha”), and McCumiskey instructed Brown (as a representative of Alpha) to submit his tax return.

The tax return submitted in McCumiskey’s name was sent to HMRC by Capital Allowance Consultants Ltd (“Capital”), which is the correspondence address of another one of Stefan Brown’s former companies: Investments for EIS Limited. Although the tribunal noted that Brown was neither a director nor employee of Capital. 

Fraudulent claim 

The purported tax return included income of £30,000, no deductions for expenses, and a fraudulent claim for relief under the Seed Enterprise Investment Scheme (SEIS) for £15,000. McCumiskey had not made an investment under SEIS and was unaware of the claim. 

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Replies (34)

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By Justin Bryant
24th May 2022 12:40

I believe HMRC have been criticized before by judges for their "process now, check later" approach to EIS claims, so this is perhaps unsurprising.

We've of course seen much the same problem with dodgy R&D claims.

Thanks (8)
By JCresswellTax
24th May 2022 14:35

Absolutely shocking conduct by the 'agent'. Hope he ends up in jail where he belongs!

Thanks (5)
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By Hometing
24th May 2022 15:24

Who wouldn't trust a man they met in the pub with their taxes?

Thanks (5)
Replying to Hometing:
paddle steamer
By DJKL
24th May 2022 16:39

Man Down Pub has been a reliable adviser to generation after generation of pub customers.

Thanks (21)
Replying to DJKL:
the sea otter
By memyself-eye
24th May 2022 17:07

I'm just off down the pub now (it's 5:00pm) to dispense golden nuggets of tax advice to willing punters, safe in the knowledge that when the 'Inland Revenue' (as I shall call them, as all my 'customers' do) check those advices, they will invoke IR35 or some such belated legislation.
I'll be long gone down the cut on my boat by then.......

Thanks (1)
Replying to DJKL:
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By AndyC555
24th May 2022 17:35

My Mate Down The Pub LLP are indeed one of the most popular tax advisory firms in the country, to judge by the number of times they are mentioned by my clients and they even have an international branch, This Bloke Sat Next To Me On The Plane LLP who dispensed some jaw droppingly inventive, if wholly inaccurate, tax planning advice to one client.

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Replying to DJKL:
By Silver Birch Accts
25th May 2022 11:26

Along with his cuz, the man down the Wholesalers.

Thanks (1)
Replying to DJKL:
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By Joe Soap
25th May 2022 11:36

although some posh people prefer MFATGC - or My Friend at the Golf Club to give him his full title

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By Hugo Fair
24th May 2022 23:35

No wonder that Stefan Brown didn't make submissions via Alpha Tax Consultants Limited:
* 17 Jul 2012 Incorporation
* 22 Jul 2014 First Gazette notice for compulsory strike-off
* 11 Nov 2014 First Gazette notice for compulsory strike-off
* 04 Aug 2015 First Gazette notice for compulsory strike-off
* 04 Jul 2017 First Gazette notice for compulsory strike-off
* 03 Jul 2018 First Gazette notice for compulsory strike-off
... and yet it's still listed - albeit with big red warning signs (literally) = "Accounts overdue" and "Confirmation statement overdue" (both since mid 2018)!

Where are the enforcers ... of Co Hse strike-offs - or of Practising Certificates (if they exist)?

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Replying to Hugo Fair:
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By Hugo Fair
24th May 2022 23:41

And HMRC are distinctly no better if they accept a submission for a 'client' of a different company - despite being unable to produce a signed 64-8 form covering that 'agent relationship'.

Also, not checking the validity of the SEIS claim before paying £7,500 into a bank account belonging to Eco Cooling Limited (unrelated to the taxpayer)! It gets worse.

Thanks (7)
Replying to Hugo Fair:
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By Hugo Fair
24th May 2022 23:46

I can understand the unrepresented taking a flyer on MDTP advice (or at least chancing it), but you might hope the decision to appoint a representative (however variable the quality as with any supply of services) would at least guarantee a degree of probity (and insurance protection).

But it seems we have to comply with AMLR etc whilst criminals can ply their trade!

Thanks (3)
Replying to Hugo Fair:
paddle steamer
By DJKL
25th May 2022 10:39

HMRC accepted submissions by any agent for any client via TaxCalc, no 64-8 required just firm tax login details. (Over the years I did a few last minute submissions where the 64-8 arrived at HMRC post 31 st January and after the submission of the return)

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Replying to Hugo Fair:
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By Paul Crowley
25th May 2022 12:54

I may be wrong but: I always considered that a registered agent can submit a return for a 'client' without being registered as their agent at HMRC.
Indeed I have had numerous former clients have their tax returns submitted by other entities whilst remaining the agent recognised by HMRC and able to access their details the agent system. A client that submits their own tax return on HMRC freeware does not displace my status with HMRC and as such I can still read the complete tax return, or print it out at will.
My status as tax agent recognised by HMRC is only replaced by a new agent sorting out their postion with HMRC, or former client removing me on their GG
For example a partnership moved to the biggest local firm. After more than a year, the 2 parners disappeared from portal (after new firm had submitted 2 tax returns for each of them, so no great urgency to register themselves as agent). The partnership itself still appears on my portal.

I see nothing particularly adverse in the example I described. Clients changed their agents (both firms properly regulated) but new firm a bit lax on telling HMRC and even when the did they forgot the partnership.
A new client to me on 29 Jan can still get the return submitted on time and sort out being HMRC recognised later on

The problem arises only when crooked agents are registered with HMRC
And crooks can usually find their way around anything

I thought signed 64-8s in paper were a thing of the past

Thanks (4)
Replying to Paul Crowley:
paddle steamer
By DJKL
25th May 2022 12:58

It is certainly possible, I did it on a few occassions. (My friendly lastminute.com service to the financially semi literate community)

Thanks (1)
Replying to DJKL:
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By Paul Crowley
25th May 2022 14:15

Same
Always only for last minuters
I do not like submitting until client shows on the portal

Most investgation cover requires the client to be on the agent list at HMRC

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Replying to Paul Crowley:
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By Hugo Fair
25th May 2022 14:44

All true (so no need for the 'I may be wrong' qualifiers) but, although you and DJKL (and no doubt others) have taken advantage of HMRC's laxity for salutary reasons, it doesn't diminish my unease at:
a) the inconsistency shown by HMRC (you've presumably encountered the refusal to help over the phone if they can't identify you as the registered agent - often expressed as "can't locate a relevant 64-8"); and
b) their ability to accept as an agent someone who remains unconfirmed in that role by the taxpayer ... AND then go on to accept instructions from this 'agent' to make repayments (fraudulent or otherwise) to a 3rd-party who is also unknown to the taxpayer.

If ever there was justification for the hyperbole of calling something a Fraudster's Charter, then this would appear to be it.

Thanks (3)
Replying to Hugo Fair:
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By Paul Crowley
25th May 2022 16:27

The only real problem is that the system is reliant upon the total honesty of all recognised tax agents
Any crook in the system can get around the expectation of honesty

There is a completely honest firm within a stone's throw that took on a new partner that stole loads of client money from clients and from fraudulent tax refunds or tax shortages. Eg client pays his tax on version 1 to the client account, then the submitted return shows a refund. The refund gets paid into client account then crook draws out both balances

No idea how the tax system could do much more. It sent paper notifications to the taxpayer of the refund HMRC made to the agent

All taxpayers in the article above will have received those notifications in the post from HMRC so they knew the totals being refunded. (Exception being the homeless guy )

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Replying to Paul Crowley:
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By Hugo Fair
25th May 2022 17:05

True ... there will always be some rotten eggs out there - but that's no reason to operate solely on the 'honesty box' principle (lovely though that sounds).

As @rememberscarborough says "Surely the way around this is to ban HMRC payments to third parties?" Or, at the very least, to require confirmation direct from the taxpayer that the account details for a re-payment are correct/valid.

The current system is as much of an invitation to fraudsters as were BBLs etc - which is not to say that all were fraudulent, just that a lack of safeguards is foolish.

Thanks (2)
Replying to Paul Crowley:
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By NotAnAccountant2
26th May 2022 08:03

I may be wrong but: I always considered that a registered agent can submit a return for a 'client' without being registered as their agent at HMRC.

The problem arises only when crooked agents are registered with HMRC
And crooks can usually find their way around anything

Hmmm. Not this year where things are going to be pretty flat, but HMRC aren't much cop at getting my tax code right and it's not uncommon for me to be owed large refunds but waiting for my p11d before I can submit my tax return.

Are you saying that any crooked agent who became aware of that could go and submit my tax return on April 6th, put in a large pension contribution and pocket a refund to a third party bank account - and I'd have absolutely no idea until August/September time when I usually do my return? (I'm not sure if I would get an email letting me know my tax return had been submitted which would alert me to this)

That sounds fundamentally broken.

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Replying to NotAnAccountant2:
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By Paul Crowley
26th May 2022 16:32

Usually the agent and client get a letter in the post confirming from HMRC the refund being made
So yes that could happen to you provided that the rogue agent had enough detail on you to submit a return
But short lived as when you did your tax return, or looked at your GG account it all comes to light. That assumes that the agent changed the residential address so you did not get the letter in the post.

HMRC know the agent involved and the bank account that the money went to
If HMRC did their job, they knew the agent entity and its directors
You the tax payer know it has happened and report it
You the tax payer get a new UTR

How long could such an agent survive without complicity of the taxpayer?

And of course my experience of tax refunds is that an out of ordinary refund gets stuck in the system for up to three months even on small subcontractors, where HMRC already have the details of tax deducted sent to them each month by the contractor. Validation check.
Last year HMRC started a specific new system of confirmations requiring ID to be sent to HMRC prior to issuing some refunds, sent in paper to the address known to them. One of my clients had one last year for a comparatively small refund of tax (she had not had a refund before).
So that system could well stop your rogue agent getting anything at all unless agent able to create fictional ID for you at the new address

Having said all that perhaps agents need to be stratified
Regulated by a professional body and being in existence for over 10 years are more trustworthy than new agents without independant regulation?
But that really is a can of worms best left sealed

The example I gave prior
Every default was repaid by the firm, but then thay were regulated and been an agent for 20 years
Guilty party went to prison

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By rememberscarborough
25th May 2022 10:57

Surely the way around this is to ban HMRC payments to third parties?

That way the tax payer receives the money directly and can't claim ignorance. Also, the third parties can't commit this type of fraud without complicit help so probably will look elsewhere for their "easy" money.

Thanks (1)
Replying to rememberscarborough:
By cfield
25th May 2022 12:32

Absolutely right. I've never understood why this is allowed. Nearly everyone has a bank account these days. There's just no need for tax rebates to go to third parties.

The other thing they should do is greatly widen the scope of the misconduct in a public office rules to include the most egregious acts of incompetence, and also allow the courts to surcharge senior HMRC officials who allow this sort of thing to happen on their watch. There is a culture of complacency at HMRC. Perhaps a few swingeing fines for the most culpable individuals would shake them up a bit, and make them do their jobs properly. At the very least, it should be written into law as automatic grounds for summary dismissal.

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Replying to cfield:
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By JacquiMBurns
25th May 2022 14:15

Not to mention when HMRC are the incompentent party!

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By norstar
25th May 2022 11:17

Unfortunately, I come across situations like this more frequently than should be the case. The entire system is broken.

On the one side, if you don't enforce regulation on an industry, you'll encourage rogues to operate without rules.

But on the other hand, the professional bodies seem to be using all their resources harassing compliant firms like me for CPD and AML matters whilst not actually checking the worst offenders nor indeed the actual files in the firm in question. I have had three monitoring visits in four years - all satisfactory. The guy two doors down from me last saw the ACCA in 2002 and finds the whole thing hilarious.

I really don't understand the controversy of forcing all Accountants to be monitored and regulated but with professional bodies actually you know, monitoring. That way the chances of there being a rogue are less. We are in a position of trust and yet can be left to do whatever we please should we choose not to be regulated...

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By Ammie
25th May 2022 11:49

...............and yet how often do we struggle to speak to anyone at HMRC because they haven't received, (more likely lost or not logged), a 64-8, when you know you have sent in at least one.

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Replying to Ammie:
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By G Webber CTA
25th May 2022 12:47

And don't even start me on Comp 1's!

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Replying to Ammie:
By Nick Graves
25th May 2022 12:53

Ammie wrote:

...............and yet how often do we struggle to speak to anyone at HMRC because they haven't received, (more likely lost or not logged), a 64-8, when you know you have sent in at least one.

...or for a client for whom you've acted for decades, only to find that you've suddenly been un64-8ed, for no apparent reason.

Cancel culture...

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Replying to Nick Graves:
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By Paul Crowley
25th May 2022 13:12

Very rare, but I have had a few in the last five years that adamantly advised me that the had neither cancelled me nor seen any other agent

I had always taken their denials with a pinch of salt and just started the agent process again
I had never blamed HMRC

Do others get unknown drops out from the agent portal?

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Replying to Paul Crowley:
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By LucyCharles
27th May 2022 09:05

I recently had a similar problem and my client was adamant that they had not moved to another agent. However.......upon further investigation I found that they had responded to an online Marriage Allowance Check via a company going by the name of Ensign Advisory & Total Tax Claims. They completed the questionnaire (giving authority as new agent) and did actually receive their £250 from HMRC but I have yet to see if they were then charged as per the small print below, which although similar, is a later version than the wording at the time. Total Tax Claims appear to have ceased these claims at present but there are other companies now doing this.

By signing the Declaration to Act and our Letter of Assignment, in favour of Total Tax Claims Limited or Ensign Advisory LTD or Touchstone Consulting Group LTD or any agent of our choice, you unconditionally and irrevocably instruct HMRC to release, assign and repay any rebate arising to Total Tax Claims Limited or Ensign Advisory LTD or Touchstone Consulting Group LTD or any agent of our choice.

Where any tax rebate is sent directly to you by HMRC without the explicit approval or authority of Total Tax Claims Limited, you agree to pay to us our agreed fee within 7 days. We reserve the right to undertake all legal means for recovery of our fee where you fail to make payment to us within 7 days of receipt of the rebate.

We never charge an upfront fee and will only be entitled to a fee if a income tax payment is released.

You will receive 100% of the increase to your household net income going forwards once the marriage allowance tax break is in place. This is approximately £250 per year. This is done at no cost.

Our fee of 42% inclusive of all charges plus £100 admin fee of the total HMRC repayment is payable if a payment released. Where no payment is released you do not have to pay us anything.

You agree and acknowledge that our fee will be retained from the rebate that we receive from HMRC and the difference will be repaid to you by cheque. The cheque will be made payable to the person who has generated the rebate and posted to the address entered when completing the application process.

If after 6 months the cheque remains uncashed or your Anti money laundering check is still outstanding we will cancel the cheque and be entitled to retain all of the monies received from HMRC and dispose of as we see fit.

Should you require a further cheque to be issued we will be entitled to charge a fee of £15.

If any of the tax rebate obtained is used by HMRC to meet any other tax liability that you may have, our fee will be based on the amount of the tax rebate generated not the amount actually repaid and received by us.

If you have applied for the Marriage Allowance transfer (either directly or via another business) and HMRC issue a rebate to us as a result of the claim we have made on your behalf, we will still be entitled to charge a fee for the work that we have undertaken. The fee will be the same as mentioned above.

For whatever reason a refund is created by HMRC whilst our Deed of Assignment is in place for both customers (transferor and recipient) the full fee of 42% inclusive of all charges and £100 admin fee will be payable per refund.

Once we have received payment from HMRC we will send a cheque out to you for the remaining balance after our fee has been deducted within 35 days.

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Replying to LucyCharles:
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By Paul Crowley
27th May 2022 14:22

Much appreciated

A couple of drop outs have happened on landlords, when the letting agent gets appointed tax agent for an overseas resident landlord

Not seen one of these in quite a few years

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By nazman
25th May 2022 17:37

I recently notified HMRC that a fraudlent R&D claim has been made by a rogue agent on behalf of one our clients by submitting revised tax returns in the sum of £50k. The agent poceted 1/3+vat as his commission. To the best of knowledge no action has so far been taken.
Who says money doesn't grow on trees planted by HMRC?

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By Robbiec147
25th May 2022 21:52

https://www.chroniclelive.co.uk/news/north-east-news/gallery/newcastle-d...

It would appear that the “Victim”, Mr McCumiskey is a bit dodgy to say the least.

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Replying to Robbiec147:
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By Hugo Fair
25th May 2022 22:52

Ah, 'collusion' enters the realm of possibilities - which in turn might explain the ease of obtaining fraudulent repayments from HMRC.
But even if that turns out to be the case, it doesn't diminish the above gripes about rogue Agents - and the lack of hurdles placed in their way by HMRC.

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By Joe Soap
26th May 2022 16:51

.

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