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January 2024 Tax Investigation Round Up

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

  • Suspended jail term for insurance broker tax evasion
  • £400k cash seized at company property
  • Courier company director faces disqualification over VAT bill

Suspended jail term for insurance broker tax evasion

James Alexander, director of Ebstree Solutions Limited in Wolverhampton, a joinery business, has been banned for 10 years after fraudulently claiming a covid bounce back loan following a HMRC tax investigation.

When applying for this loan, Alexander falsely overstated his business turnover to be eligible for the bounce back loan of £50,000. This scheme was launched by the government in May 2020 during the pandemic to help businesses get back on their feet.

The company ‘Ebstree Solutions Limited’ was established in February 2016 and had last filed accounts for a dormant business in March 2019. Recently after the scheme was launched however, Alexander falsely submitted a loan application, claiming his business turnover was £212,000. This enabled him to borrow £50,000.

When looking at Alexander’s accounts, during the period of March 2018 to March “019 it showed the company turnover to be £7,490 and for the year ending March 2020 it was £33,187.

Therefore as a result of the overstatement of his business turnover, Alexander borrowed £41,703 more than what he should have been entitled to.

In July 2023, the company was dissolved and administrators were appointed from Fortis Insolvency. The bank lender claimed £50,113 for the outstanding fraudulent loan, £5,134 was also owed to HMRC in corporation tax and national insurance.

Alexander has now been banned for a total of 10 years as acting as a company director.

£400k cash seized at company property

In a significant operation, £400,000 in cash, including £350,000 in banknotes and £50,000 in foreign currencies, was found at a property owned by Kingdom Corporate. The discovery was made during a search of director Alaeddin Kamar in January 2023.

The High Court heard Kamar's contention that the cash's seizure by HMRC was illegitimate. The search was conducted under the authority of section 289 of the Proceeds of Crime Act 2002 (POCA).

Kamar initially tried to conceal a safe from HMRC officer Imogen Johnson. He claimed the safe, unopened since 2006, contained no money, and its keys had been lost years prior. However, after a locksmith opened the safe, Kamar produced the key, revealing substantial cash amounts inside, which were immediately confiscated.

Due to procedural errors, the initial 48-hour detention period post-seizure, commencing at 17:38 on January 16, 2023, lapsed. However, the cash was legally re-seized on January 23, following the approval of a re-seize order by a district judge.

The judge sanctioned HMRC's retention of the cash for an additional six months, citing section 295 of POCA. The central issue in the case was the legality of the re-seizure. The claimant argued that re-seizing the funds under the same act bypassed the strict 48-hour limit.

Tom Rainsbury, representing HMRC, referenced several typical magistrates' court incidents, including a closed court building due to heating issues, a lost courtroom key, and a judge trapped in an elevator, contributing to the delay.

Lord Justice Bean ruled that the re-seizure was legally sound, dismissing the idea that the cash needed to be returned to Kingdom Corporate's premises for procedural reasons. He rejected the judicial review claim presented by Kingdom Corporate and Alaeddin Kamar, upholding the legality of the re-seizure.

Courier company director faces disqualification over VAT bill

Andreia de Souza, the director of UK Brazil Courier Limited based in Byfleet, Surrey, has been disqualified from serving as a company director due to the failure to maintain proper accounting records and a substantial unpaid VAT bill of £383,830.

UK Brazil Courier Limited, incorporated in July 2013, faced liquidation in November 2018 following a winding-up petition. The company had been struggling with accounting issues since August 2017. The Insolvency Service has imposed director disqualifications on several individuals associated with the business. De Souza received a seven-year ban, while Sabrina Tolani Cordeiro and Kaique Silva Xavier were banned for four years each.

The company's lack of proper accounting records hindered liquidators from determining its turnover and tracing various expenditures, including office rent, van hire, driver salaries, and transactions with affiliated companies. The VAT non-compliance was a significant issue, leading to a debt of £383,830 to HMRC.

This VAT debt accumulated from August 1, 2016, until the company's liquidation. Initially, when UK Brazil Courier Limited registered for VAT on April 29, 2014, it projected an annual turnover of £100,000. However, from June 2014 to March 2018, the company failed to submit VAT returns, leading HMRC to issue assessments.

Subsequent VAT returns up to December 2017 showed no liabilities, but the return for the period ending March 31, 2018, resulted in a £383,830 liability. This return covered the period from August 1, 2016, to March 31, 2018, rather than just a single quarter. Company bank records indicated no VAT payments to HMRC between September 1, 2016, and November 28, 2018, except for a single payment of £308 on June 16, 2017.

Despite the VAT issues, the company showed substantial activity, with £1,842,592 deposited into its account from its sole client between April 2017 and November 2018. Payments for vehicle hire, rent, and leases amounted to £401,406, with additional payments to a connected company.

Personal expenditures from the company account included £34,387 paid to or for De Souza and £76,823 in other personal spending between April 2017 and November 2018.

By 2018, HMRC's winding-up petition led to the company's closure, with HMRC being the largest creditor owed at least £383,830, alongside other debts totaling £133,610. The director disqualifications became effective on January 4, 2024.

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