LATEST NEWS: HMRC writes to UK residents named in leaked Pandora Papers giving them chance to correct their tax affairs. Read more...
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June 2023 Tax Investigation Round Up

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

  • HMRC gives offshore customers chance to come clean
  • Lettings manager steals more than £138,000 from employer
  • Director of ATM company jailed for 12 years for £3m fraud
  • HMRC ramps up use of COP9 tax investigations

HMRC gives offshore customers chance to come clean

From the GOV.UK website on June 13th 2023:

HMRC is writing to UK residents named in the leaked Pandora Papers to give them the chance to correct their tax affairs.

UK residents who were named in the leaked Pandora Papers are being given the chance to correct their tax affairs.

HM Revenue and Customs (HMRC) is writing to UK residents named in the files of 14 offshore financial service providers. These providers specialise in companies, trusts, and foundations in low, or no tax, jurisdictions.

The letters, which started going out this month, warn recipients to report all their overseas income or gains that they owe UK tax on, or face penalties of up to 200% of any tax due or prosecution.

Kirsty Telford, Deputy Director for Offshore at HMRC’s Risk and Intelligence Service said:

Tax evasion is increasingly global – but, unfortunately for tax criminals, so is HMRC’s reach, accessing data and intelligence through international collaboration.

Our message to users of these financial services is think hard and take this opportunity to be honest and pay the tax you owe, because the reputational and financial damage if you don’t can be significant and long-lasting. We are giving people a narrow window of time to do the right thing and correct their tax records, before we take action.

During 2021 and 2022, the International Consortium of Investigative Journalists released more than 11 million records from 14 offshore service providers, this is known as the Pandora Papers.

As soon as these papers were released, HMRC began reviewing the data, which is the largest ever release of financial documents, surpassing the 2016 release of the Panama Papers, to find UK residents with untaxed offshore assets.

Recipients of these letters can make disclosures under the Disclosure Facilities made available by HMRC. It is important that individuals use the correct disclosure facility. If individuals aren’t clear about which facility to use, HMRC would recommend getting professional tax advice.

Comment from Gilbert Tax:

If you want to make a voluntary disclosure using the Contractual Disclosure Facility, the way in which you tax affairs are handled is of great importance, as if dealt with badly an individual can get a dramatic increase in penalties. Poor handling can also result in an individual having their name published on the HMRC website for tax fraud.

When HMRC accept you into the CDF process they will request a meeting to discuss the outline disclosure in more detail.

This is a very scripted meeting as HMRC have to make certain statements and get confirmation that you understand. It is important to go into this meeting fully prepared and we advise having a pre meeting with an experience advisor who can take you though the process and the sort of questions HMRC will ask so you are fully prepared.

Towards the end of the meeting HMRC will ask that you prepare a disclosure report.

Visit our Contractual Disclosure Facility page to find out more and get answers to questions like:

  • What is a disclosure report?
  • What happens after HMRC receive the report?
  • What happens if I choose not to make a disclosure?

Lettings manager steals more than £138,000 from employer

Wendy Dare from Lancashire was working as a lettings manager at a Chester - based agency. During her time here, she had access to the company’s accounts. She stole funds through various bank accounts between May 2015 and December 2020.

In total she stole more than £138,000 and was sentenced to two and a half years in prison.

Suspicion started in June 2021, where the estate agents were made aware of an issue in which a payment of £23,000 to one of their landlord clients could not be accounted for.

An internal investigation took place to locate the whereabouts of the missing finances

Evidence showed that Dare had sent money to herself, her husband and their daughter’s accounts. This soon prompted an investigation into the financial records by Chester CID.

It was revealed that four accounts had been set up in the name of Dare, and five in her husband's name. Between these accounts, large amounts of money had been distributed between them.

There were approximately 37 transactions that exceeded £47,000, that had been paid into accounts of fake landlords, created by Dare.

Resulting in the fraudulent transactions, there was a £138,741.10 loss. Dare paid back £32,681.85 to the agent.

Dare was convicted at Chester Crown Court. She was charged with three counts of fraud, and ordered to repay £122,922.68 to the lettings agency. Dare also received a sentence of 28 months imprisonment.

Jane Carruthers, accredited financial investigator of the economic crime unit, commented: ‘Wendy Dare’s confiscation order sends a strong message that Cheshire Police takes the recovery of the proceeds of crime and loss to victims very seriously.

‘It highlights the importance of asset recovery considerations running throughout an investigation, to maximise the opportunities to recover significant sums derived from criminality in an effort to compensate victims of crime.

‘This sentencing and the subsequent confiscation order that has followed is a testament to the hard work of DC Andy Mason and DC Georgia Hughes, who led the investigation. Their tenacious and diligent approach to the investigation left no stone unturned in the pursuit of recovering this substantial amount of stolen funds.’

Director of ATM company jailed for 12 years for £3m fraud

Duncan Grant, a director of an ATM reconditioning company, was handed a 12 year sentence after stealing more that £3m from his clients to personally fund his lavish lifestyle.

In order to do this, over six years Grant set up a complex, large scale fraud operation. He told his clients to invest in his cash-spoiling device company which was known as Patronus.

Grant however only invested £549,000 to the company and did not purchase any ATMs to recondition as part of the business.

In total he had stolen around £3,800,000 and used this to buy expensive cars, holidays, jewellery and luxurious rented homes.

Grant got close to his clients by manipulating them. He would befriend them to build close bonds and at times would even use his parents’ illnesses to steal money. He would claim he needed financial help to care for them and then use the money for himself.

A tax investigation took place in December 2019, launched by Surrey Police and Sussex Police’s economic crime unit. It reported that Grant had previously been bankrupt and changed his name twice before he was made bankrupt again. This was all while acting as a director for a total of 16 companies.

Detective constable Fleur Jones of the Surrey and Sussex ECU, stated: ‘This was a complex investigation where Grant had moved monies between many bank accounts to try to obfuscate where over £3m of victims’ money disappeared to.

‘One of the things I felt was important was to be able to tell those victims exactly what their money was spent on by Grant. Between us, my team were able to trace the journey of each person’s money through numerous accounts and transactions until we found that it had been spent, among other things, on rentals for luxury homes, fast cars, jewellery, Rolex watches, holidays, and expensive meals in top restaurants.

‘Grant lived a life that many could only dream of, using other people’s money that they had invested in him in good faith, thinking he was either using it to develop a business or that he was helping his elderly parents. In convicting Grant, we worked tirelessly to obtain justice for these victims, many of whom thought were his friend.’

HMRC ramps up use of COP9 tax investigations

HMRC has plans to expand the use of Code of Practice 9 (COP9) and has clarified the rules on how to report fraud where taxpayers have failed to pay the correct tax.

HMRC clarified: ‘The refreshed Code of Practice is part of a wider push to re-establish COP9 as HMRC’s primary civil investigation tool in tackling tax fraud. It has been developed in consultation with agents and other professionals.’

The new Code of Practice:

  • restates the Code of Practice, so that the COP9 recipient fully understands that the Contractual Disclosure Facility (CDF) is an opportunity offered to them as an alternative to a criminal investigation; and
  • resets the terms of the CDF contract to make sure the recipient is clear on exactly what they are signing up to, HMRC’s expectations throughout the investigation, and the serious consequences of their non-compliance.

In addition a number of new sections have been added to the Code of Practice. These include:

  • reinforcing the criminal underpin in COP9 by emphasising the different circumstances when a COP9 case can escalate to a criminal investigation and ultimately to prosecution;
  • clarify when COP9 can cover fraud in respect of HMRC functions not involving tax; and
  • sets out what HMRC can do, if the COP9 recipient rescinds their admission of deliberate behaviour, after they have accepted the CDF offer.
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