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May's round up of the latest tax investigation news and cases:
A former world darts champion has been banned from acting as a company director after withdrawing hundreds of thousands of pounds while owing over £460,000 of tax debts
Rob Cross, 34, the former world darts champion, has been disqualified from acting as a company director for five years by the Insolvency Service after his personal services company failed to pay £465,403 in tax obligations.
Cross won the PDC World Darts Championship in 2018, along with five World Series of Darts titles, operating through his company Rob Cross Darts Ltd to manage his tournament earnings. His championship victory in 2018 earned him £400,000, and throughout his career, Cross has accumulated total winnings of £2,980,850.
Cross has maintained his competitive form in recent tournaments, earning over £100,000 this year alone from various competitions, including £65,000 for finishing sixth at the Premier League in Belfast, £4,000 at the German Darts Grand Prix, £15,000 from reaching the last 64 of the PDC World Darts Championship, and £30,000 from the Dutch Darts Masters, alongside winnings from several other competitions.
Rob Cross Darts Ltd entered liquidation in November 2023 with total liabilities of £579,805, owing HMRC £512,892.24 and HSBC £66,912.70. The company's latest accounts have not been filed, and its statement of affairs shows an overdrawn director's loan account of £423,608, along with a section 455 tax reclaim of £138,716 on an outstanding loan balance from another director's loan.
By the time of liquidation, the company owed £403,896 in corporation tax, £49,071 in VAT, and £12,436 in PAYE and National Insurance contributions.
According to the Insolvency Service, Cross withdrew £300,000 from the company accounts between March 2020 and November 2023 that should have been used to pay creditors, including HMRC. Additionally, £665,419 was paid into the account of a connected party.
Despite more than £1m in earnings being deposited into the business accounts between 2020 and 2023, along with £169,500 in sponsorship payments and £261,901 from Cross's management company, only £41,936 was paid to HMRC over the same period.
Cross is now subject to an individual voluntary arrangement (IVA) and must repay all outstanding debts through monthly payments. The payment amount will depend on his future earnings from darts tournaments.
Kevin Read, chief investigator at the Insolvency Service, commented: "Rob Cross's company owed more than £400,000 in corporation tax alone when it went into liquidation. For more than three years, he withdrew funds from the company which should have gone to HMRC and other creditors.
"This case demonstrates that we will pursue action against directors who deprive the public purse of much-needed funds. The rules apply equally to everyone in business, and we expect all company directors to comply with their legal responsibilities.
"Enforcing these rules consistently is crucial in maintaining a level playing field and preventing companies from gaining an unfair competitive advantage over compliant businesses that properly fulfil their tax obligations."
The owners of Paradise Dry Cleaners in Camden, London, have lost their appeal against personal liability notices (PLNs) after failing to prove that the average price of their services was lower than HMRC calculated in a historic tax dispute dating back over 16 years.
The case originated from VAT issues spanning from August 2009 to May 2016, when Paradise Dry Cleaners was issued a VAT assessment in 2017 for £102,170 for output tax, which was subsequently reduced to £46,292.
Alongside the VAT assessment, HMRC imposed an inaccuracy penalty of £53,639, claiming the company had deliberately underdeclared its VAT obligations. This penalty was later recalculated to £24,291 to reflect the reduction in the VAT assessment.
In March 2019, as the assessments remained unpaid, HMRC issued personal liability notices to the two directors, Hamid Mojarad and David Mojarad, for £12,145.50 each when the company was being dissolved. The PLNs were issued because the company failed to pay the penalty before entering liquidation. The company was officially dissolved in July 2024.
The Mojarad brothers' appeal was submitted late, but HMRC allowed it to proceed due to miscommunication between the parties regarding the timing of creditors' meetings, which had affected the appeal submission.
Throughout 2016, HMRC officers James Ellis and Marie Evans conducted visits to Paradise Dry Cleaners, sometimes unannounced, as part of ongoing VAT and corporation tax investigations. The officers issued the first assessment in March 2017, followed by the penalty in May of the same year.
During Ellis's initial visit, he found the till was broken and cash was kept in a lockable drawer underneath the counter. The dry cleaners operated on a cash-only basis, not accepting cards, and traded from one NatWest business account.
When Ellis checked the cash in the till drawer, it did not match the number of tickets processed that day. Hamid Mojarad explained that his brother had removed the rest of the cash earlier, as they preferred not to keep large amounts of money on site.
Hamid Mojarad provided Ellis with purchase invoices, bank statements, and a copy of the ticket book used to record customer purchases. However, one ticket book was unavailable, and the appellants stated that old ticket books were not kept on site.
The central issue in the appeal was the average ticket price used by HMRC in their calculations. HMRC representative Paul Marks maintained that 375 tickets equated to £7,370.95 worth of sales, establishing an average of £19.65 per ticket.
Dhiren Doshi, the accountant representing the dry cleaners, argued that this average price was excessive and "fails to take into consideration that it is unlikely that prices would have been static for seven years."
David Mojarad created an average price list from memory, claiming the most expensive service would have cost £12.50 in 2016, £10.50 in 2009, and £7.50 in 2005. Based on these figures, Doshi calculated that the average ticket price should have been closer to £13.97 for 2016.
Doshi argued that HMRC's higher average price resulted from data being collected around the May bank holiday, which brought an influx of customers with larger items to be cleaned. He described the period around the May bank holiday as "Christmas for dry cleaners," leading to inflated invoices.
David Mojarad also claimed that over 10 working days in 2018, the business issued 89 tickets worth £1,243, supporting an average ticket price of £13.97. However, no evidence was provided to substantiate this claim.
Tribunal Judge Rosa Pettifer rejected the appellants' pricing arguments, stating: "We note that the price list involves a gap of four and then seven years between changing prices, ie, even on the appellants' case seven years may elapse before prices are changed.
"Therefore, we do not accept that the price list is a credible or reliable basis on which to calculate the average ticket price and do not accept Mr Doshi's submission that the prices must have changed in the preceding seven years."
While acknowledging some sympathy for the argument that May-June might involve higher-than-average ticket prices due to bank holidays, Judge Pettifer emphasized: "However, in order to form part of our decision as to average ticket price we are required to consider the evidence before us. The appellants' position is that we should simply discount the larger priced items and create a new average ticket price."
The tribunal sided with HMRC, maintaining the average price per ticket at £19.65, and the personal liability notices were upheld. The appeal was dismissed.
Over just three years HMRC collected over half a billion pounds in late payment interest after hikes in interest rates saw the figure rise by almost £100m in a single year
HMRC's collection of late payment interest has reached historically high levels, with the department gathering £252m in 2022-23 alone. The current late payment interest rate stands at 8.25% following HMRC's recent reduction after the Bank of England's 0.25% base rate cut in May, but this remains at levels not seen since the 2007 financial crash.
From 6 April 2025, HMRC will impose an even higher premium on its repayment interest rates, increasing the current 2.5% rate surcharge to 4% over the base rate. The Treasury announced this change at October's Budget as part of a broader clampdown on tax avoidance and non-payment. This measure is expected to generate £255m annually from 2025-26, as taxpayers who delay or avoid payments face increased penalties.
Late payment interest collected by HMRC has grown dramatically over recent years, according to a freedom of information request by NFU Mutual. Between 2018 and 2023, HMRC collected £834m in late payment interest, with £513m gathered between 2020-23 alone, despite a significant drop during the pandemic.
The yearly breakdown shows the scale of this growth:
Interest begins accruing immediately once a payment deadline is missed, and penalties compound the problem for taxpayers who delay settlement. HMRC's penalty structure operates on an escalating timeline:
This structure demonstrates how quickly costs can escalate for taxpayers who ignore their obligations.
Sean McCann, chartered financial planner at NFU Mutual, commented on the current situation: "The change in April saw the interest on late tax payments rise to 8.5% to its highest level since August 2007 – even with the recent reduction in the base rate, an interest rate of 8.25% is a heavy charge on taxpayers who pay late."
Despite the high interest rates, HMRC does offer support for taxpayers experiencing difficulties. Payment arrangements are available through the "time to pay" scheme for eligible taxpayers.
McCann explained the available options: "For those struggling to pay a tax bill, HMRC will in many cases allow you to set up a payment plan to pay by instalments provided you owe £30,000 or less, have filed your latest tax return and are within 60 days of the payment deadline."
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