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February 2020 Tax Investigation Round Up

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

  • Senior civil servant steals over £1.7m from Ministry of Justice via fake company
  • Edinburgh is one of the top spots for UK tax avoiders
  • Three restaurant bosses disqualified from owning a limited company for 18 years
  • False claims over staff pensions leave recruitment agency with £11k fine


Senior civil servant steals over £1.7m from Ministry of Justice via fake company

Senior civil servant Allan Williams used his knowledge of the inner workings of the Ministry of Justice to steal more than £1.7m whilst in employment. He raised suspicion among colleagues when he started to live a lavish lifestyle that they deemed beyond his means. This included buying a brand-new Audi SQ5 and splashing out on a luxurious mansion in Hampshire. Typically, a senior civil servant would earn around £50,000 - £60,000 a year, insufficient to fund the lifestyle Williams wanted.

To be able to achieve his ambitions, Williams set up a fake company called 'Sopra Business Consulting.' This business was described on paper as an "information and technology business" and was registered on Companies House as such. Williams, a manager in the Ministry of Justice's commercial and financial control sector, abused his position and his knowledge allowing him to set up an order for the consultancy services of £7 million. Over two years a monthly payment was sent to his company "Sopra Business Consulting" from where the money was transferred to his personal account.

Following increasing suspicion among colleagues, the transactions were reported and a subsequent a tax investigation resulted in Williams being found guilty at a sentencing at the Southwark Crown Court. So far, the MoJ has recovered £900,000 of the stolen funds and is currently hunting the remaining debt.

A Ministry of Justice spokesperson said, "Allan Williams abused his position as a trusted member of staff and used his knowledge of our controls to circumvent them. We had already strengthened our systems before we discovered his fraud and have since carried out a further review to ensure that it would be even harder to commit such an offence.”

Edinburgh is one of the top spots for UK tax avoiders

A new investigation has revealed that Edinburgh is one of the top areas for UK tax avoidance as 145 people from the city revealed that they had underpaid tax from offshore investments last year. This equates to 30 per 100,000 population making it the fourth worst city in the UK for such offences. Top of the list was Slough with 47 per 100,000 population closely followed by London with 39.

It is believed that with HMRC's specialist team, 'Offshore, Corporate and Wealthy', investigating more on taxpayers' offshore interests that it may have prompted more taxpayers to come forward to avoid a larger penalty from HMRC further down the line. Accountancy group UHY stated that wealthy areas that home highly paid individuals from industries such as the financial or IT sectors are paying a higher tax so therefore have an urge to move more of their income or assets offshore.

Chairman of the UHY Colin Wright said, “The growing resources at HMRC’s disposal means there is nowhere to hide for taxpayers with undeclared offshore interests. It therefore makes a lot of financial sense to make a disclosure as this can reduce penalties from up to 200 per cent of unpaid tax to less than 100 per cent.”

In addition to this he went on to say: “HMRC does not discriminate and will come down hard on all taxpayers with undeclared offshore interests – even if an error on a tax return arises from a genuine mistake. It is therefore important that taxpayers keep their affairs up to date.”

“Making a voluntary disclosure is almost always the best way to deal with an irregular tax position but it’s important to seek professional advice before doing so in order to get the best possible settlement.”

Three restaurant bosses disqualified from owning a limited company for 18 years

Jalal Ahmed of Southsea, Satokh Dhanda and Mohammad Rahman both of Southampton, were directors of the Rancho Steak House (Poole) Ltd. Following numerous enquiries, tax authorities have made a claim against the company worth over £810,000 resulting in the company entering voluntary liquidation. This action triggered a further investigation that has been undertaken by the Insolvency Service into the directors' conduct.

The £810,000 in tax failures comprised of several elements. In the first instance, the company failed to pay the tax on statutory returns submitted between 2012 and 2017. This was followed by further undeclared tax to the tune of £120,000. As a result of under-declaration, it was calculated that additional corporation tax was owed. Finally, this was all compounded by errors made by the trio in regards to PAYE and national insurance payments.

Dave Elliott, chief investigator for the Insolvency Service, said: “The directors failed to submit accurate information to HMRC resulting in an under-declaration of taxes due. These actions deprive the exchequer of monies needed to provide public services. These disqualifications mean that each of the directors will not be able to run a limited company for six years and this will help to protect HMRC from future losses.”

False claims over staff pensions leave recruitment agency with £11k fine

Linus Kadzere was the managing director of SKL Professional Recruitment Agency, specialising in providing workers in the care sector. Kadzere falsely told The Pensions Regulator that he had automatically enrolled 22 staff into a pension scheme. Accusations from staff and an investigation from TPR found that pension contributions were being deducted from staff wages, but not being paid into the scheme.

Kadzere was sentenced at Brighton Magistrates Court for willfully failing to comply with workplace pensions regulations and knowingly providing incorrect information to TPR. Three charges were put against Kadzere to which he plead guilty to them all.

Commenting on his responsibilities, district judge Teresa Szagun said Kadzere was “reckless” and went on to say that “failure to comply has a detrimental economic impact not only for the individuals concerned but for society as a whole.”

In total Kadzere was fined £1,300 plus a victim surcharge of £120 and SKL £6,000 plus a victim surcharge of £120, and was fined for the prosecution costs of £3,350.

Darren Ryder, TPR director of automatic enrollment, stated: “TPR will not stand by if an employer willfully fails to meet their responsibilities towards their staff - we will take action to make sure workers get the pensions they are due.”

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