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November & December 2022 Tax Investigation Round Up

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

  • Former Aston Villa striker could face prison and £45,000 fine
  • Construction and coaching bosses banned for £73k bounce back loan fraud
  • Nudge letters sent to landlords
  • HMRC settles £615m tax dispute with Uber

Former Aston Villa striker could face prison and £45,000 fine

John Carew, 43-year old  former Aston Villa footballer could be facing up to two years in prison for tax evasion crimes as well as a hefty fine of £45,353. This comes after failing to disclose assets and income abroad to the Norwegian tax authority. His case is taking place at Oslo District Court.

Carew had previously admitted to being guilty to fraud charges brought about by the Norwegian tax authority. The prosecution believed that he had plenty of opportunities to disclose information and correct it, however he chose not to.

Police attorney Ragna Flækøy Skjåkødegård commented: 'Carew has had many, many opportunities to correct the information given to the tax authorities.'

In his defence, Carew blamed his friend, lawyer and former agent Per A. Flod for his actions. He argued that he was given poor advice which led him not to disclose income and assets out of his home country.

'I trusted him blindly,' Carew stated. 'I have been convinced that he was right. He controlled me almost like a puppet.

'I understand that it is grossly negligent of me to trust him so much, but that is why I have done it.'

If the Oslo District Court favours the prosecution's requests, Carew will be charged with a large fine on top of prison time.

Construction and coaching bosses £73k Bounce Back Loan fraud

Directors of construction and coaching companies have between them fraudulently claimed £73,000 of bounce back loans. This has led to both being banned from running a business for a total of 11 years.

Lavinia-Larisa Mociar was the sole director of L&M Construction Ltd in London, operating as a construction company until going into liquidation in November 2021. Trading however ceased in October 2019, a year before Mocair had applied for the bounce back loan. The bounce back loan was provided to support businesses to get back on track over the pandemic.

Upon investigation, authorities found that not only had the company stopped trading in 2020, Mocair had falsified the company's turnover to claim the maximum amount available of £50,000. It was found that there had been less than £50 in the account when the loan was deposited in October 2020. She withdrew the money from the company account to use for her own personal benefit.

Director of Aspire Sports Coaching & Partners Ltd, Shafiqur Rahman, provided sports activities and programmes to primary schools and holiday clubs over Greater Manchester.

Rahman had applied for £25,000 of the bounce back loan in May 2020 to support his business through the lockdowns when most of the schools were shut and children were kept at home.

The Insolvency Service found that the business had collapsed in May 2021, triggering a tax investigation. When accounts were looked into, Rahman should have only been entitled to a loan of £2,000, £23,000 of which was not entitled.

Rahman had paid £20,000 out of the company and had made a fake invoice for liquidators to explain his reasoning.

Tom Phillips, assistant director of investigations and enforcement services for the Insolvency Service, stated: ‘These directors blatantly abused the government’s bounce back loan rescue scheme.

‘The lengthy disqualifications should serve as a reminder to others that the Insolvency Service will not shirk from its responsibility in taking action in order to protect the public and the taxpayer.’

Both bosses were given an 11 year ban by the secretary of state. They are not allowed to be involved with a company directly or indirectly without the permission of the court.

HMRC nudge letters sent to landlords

HMRC has sent a batch of nudge letters aimed at people who are not declaring their full rental income. This follows the advance of Jeremy Hunt’s first Autumn Statement.

George Guilherme-Fryer, a director in the tax disputes team at Kreston Reeves, stated: ‘These nudge letters are widely targeted at individuals or businesses based on information received, primarily from other governmental departments, banks or, in this case, the tenancy deposit scheme.

‘Landlords in England are limited to taking a five weeks’ deposit for new and renewed tenancies with rent under £50,000 a year or up to six weeks if the annual rent is £50,000 or more.

‘As most landlords take the maximum deposit, it is not a difficult calculation for HMRC to calculate the expected rental income which should be included in a tax return.

‘For example, if the deposit held with the tenancy deposit scheme is £1,000, five weeks of £200, then HMRC will assume an approximate rental income of £10,400 annually, or £200 per week.

‘These latest nudge letters tend to include a statement saying that HMRC has received relevant information, suggesting the landlord review their tax position, and including a suspiciously simple certificate of tax position to be completed and returned.

‘These letters will not take into account vacant periods or reductions in rent and will often mean that no action is required and there is no obligation to respond or to sign the certificate of tax position.

‘But landlords are advised to review their tax position if such a letter is received to identify if any disclosures are needed. If they are ignored and it is later found that tax is due, it may lead to an investigation and potentially a criminal prosecution.’

HMRC settles £615m tax dispute with Uber

A deal has been secured with HMRC to settle an outstanding VAT bill for £615m over Uber’s designation as a transport provider.

The dispute was resolved following the outcome of a tax case before Uber was classified as a transportation provider which meant it had to pay 20% VAT on fares.

Uber said in a statement: ‘On October 31, 2022, we resolved all outstanding HMRC VAT claims related to periods prior to our model change on March 14, 2022. We do not expect any significant impact to the income statement as we have adequate reserves recorded as of September 30

In a comment on Twitter, HMRC said: ‘HMRC has concluded a tax dispute with Uber concerning VAT due RC never compromises on its view of the law in order to secure a tax agreement. We will not settle for any amount less than we would reasonably expect to obtain from going to court.’, 2022, related to this resolution. We expect a cash outflow of approximately GBP 615 million during Q4 2022 for this resolution.'

‘This is a good result for the UK taxpayer and one that we would have reasonably expected to achieve in the court, fully in line with our Litigation and Settlement Strategy.'

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