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December 2020 Tax Investigation Round Up

December's round up of the latest tax investigation news and cases:

  • Restaurant boss disqualified for seven years
  • 4,000 Eat Out to Help Out verification requests issued
  • Trio jailed for £29.5m tax scam
  • Latest figures reveal extent of global tax evasion

Restaurant boss disqualified for seven years

Sunderland restaurant boss Abdul Amin was the sole director of the company Church View Restaurant Ltd trading as Ministers Restaurant in Sedgefield. The company was incorporated in July 2014 and was required to register 'Church View Restaurant' for tax purposes.

Amin failed to do so putting his company at risk of enquiries by the authorities for unpaid taxes. The tax investigation found that there were tax liabilities totaling over £133,000. This resulted in the company being put into liquidation by the HMRC and an Insolvency Service investigation resulted in Amin Being disqualified for director misconduct.

Chief investigator for the Insolvency Service, Rob Clarke stated:

"Directors have statutory requirements to ensure their companies pay taxes. But our investigations uncovered that Abdul Amin’s behaviour was deliberate, putting Church View Restaurant at an unfair advantage over their competitors by not paying taxes.

"Seven years is a substantial amount of time to be removed from the corporate arena and Abdul Amin’s ban should serve as a warning to other rogue directors that if you neglect your obligations you could lose the privilege of limited liability trading."

4,000 Eat Out to Help Out verification requests issued

HMRC have been busy writing to around 4,000 businesses where their records have flagged that they may have made an incorrect claim, prompting them to check their claims are correct. These post payment compliance checks are aimed to recover money which has been paid out incorrectly as part of the Eat Out to Help Out scheme.

The letter sent by the HMRC gives recipients 60 days to respond or a formal compliance check will take place.

The letter is based on information the HMRC holds about the business, amounts claimed and the payments received by credit and debit cards. Some businesses may be asked to provide evidence of eligibility for their EOTHO payments.

Any business that repays voluntarily will not be charged a penalty for their mistake. All that have made incorrect claims will be required to complete and online disclosure form and the HMRC will calculate what is owed. Businesses that believe that they have not made a mistake are still required to contact the HMRC or it will result in formal compliance checks.

The letter from the HMRC concludes: "We are supporting our customers while tackling serious fraud and criminal attacks. We understand mistakes happen, particularly in these challenging times. This means we will not look for innocent errors and small mistakes for compliance action."

Trio jailed for £29.5m tax scam

Birmingham Crown Court sees Mohammed Zeb Zaheer and Mohammed Iqbal Khan, both from Coventry, and Matthew Sutherland, from Leamington, jailed for a total of 21 years.

The court was told that Sunderland was the 'architect' of a crime that used his company, Convergica (Clinical Information Systems) Ltd to claim a staggering £29.5m against a purported £137m spend on a fake project.

The fake IT project claimed to be developing an IT healthcare system for two countries in the Middle East.

Zaheer and Khan were the front-men of the companies carrying out the tax fraud. HMRC requested documents to support their claims for SME R&D relief and they provided false bank statements submitted in January 2016.

SME R&D relief allows companies to deduct an extra amount of 130% of their qualifying costs from their yearly profit, on top of the normal 100% deduction. This prompted an investigation for fraud and saw all three men charged in March 2018.

All three men pleaded not guilty to conspiracy to cheat the public revenue. However an eleven week trial found them all guilty. Sutherland faced a jail sentence for nine years, Khan for seven years and Zaheer was jailed for five years. Sutherland was jailed in his absence as he is in Dubai and due to health issues was too ill to travel.

To conclude, Kath Doyle, deputy director of the Fraud Investigation Service at HMRC, exclaimed: "These men tried to extract an astronomical sum of money by claiming tax relief from a scheme designed to help legitimate companies do work that seeks to make advances in science and technology.

"This wasn’t research and development, it was out and out fraud. HMRC will continue to create a level playing field for law abiding businesses by rooting out the minority who seek to abuse these schemes, as this result clearly shows."

Latest figures reveal extent of global tax evasion

According to reports from the Tax Justice Network, countries are losing a total of over $427bn (£319bn) in tax each year to international corporate tax abuse and private tax evasion.

Latest figures from the annual report on global tax abuse calculates that $245bn is directly lost from profit shifting by multinational corporations. $182bn to private tax evasion is lost through holding financial assets offshore.

The statistics show that higher income countries lose over $382bn every year compared to lower income countries with a total loss of $45bn.

However, it is argued that the impact is greater on lower income countries because of their smaller tax take, showing that lower income countries lose the equivalent of 5.8% of the total tax revenue they collect each year due to global abuse. Higher income countries statistically lose on average 2.5%

Alex Cobham, chief executive of the Tax Justice Network, states: "Now more than ever we must re-programme our global tax system to prioritise people’s health and livelihoods over the desires of those bent on not paying tax.

"We’re calling on governments to introduce an excess profit tax on large multinational corporations that have been short-changing countries for years, targeting those whose profits have soared during the pandemic while local businesses have been forced into lockdown.

"For the digital tech giants who claim to have our best interests at heart while having abused their way out of billions in tax, this can be their redemption tax. A wealth tax alongside this would ensure that those with the broadest shoulders contribute as they should at this critical time."

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