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October 2021 Tax Investigation Round Up

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

  • Businessman’s £40m furlough claim for companies with no staff
  • Fraudulent VAT claim for £250k leads to jail sentence
  • Co-founder of Wise charged £365k fine
  • Professional referees lose £54k in IR35 case

Businessman’s £40m furlough claim for companies with no staff

Indian entrepreneur Rajanish Garibe, 44, claimed up to £40million of furlough money in a single month to a set of his British companies, all of which appear to have no staff. Each claimed between £5m and £10m in May this year.

The riddle continued when it was discovered that Garibe’s ‘European corporate headquarters’ was a virtual mailbox set up in East London.

The Coronavirus Job Retention Scheme sent money to his companies despite no proof of actual businesses or staff members. His company ‘Domain Corporation Ltd,’ which claimed to be a tech consultancy company, had a very low standard website.

His other three companies ‘Domain Foundation', 'Domain International School', and 'Domain Research Hospital' did not appear to even websites set up.

Between the four companies, enough furlough was claimed to cover the wages of 10,000 staff earning £50,000 salaries.  

There has been no comment from Garibe whilst investigations are underway, but it appears Garibe had resigned from the companies in early March before the pandemic.

HMRC is unable to comment on this case, but stated; ‘We are taking tough action to tackle fraudulent and criminal behaviour.’

Fraudulent VAT claim for £250k leads to jail sentence

Marcus Robert Kemp, 32, originally from Chippenham fraudulently claimed £251,499 in VAT repayments for windows between May and November 2015. He was sentenced on 17 September at Salisbury Crown Court after pleading guilty to fraud in the court hearings. He was sentenced to two years and two months in prison.

Kemp’s partner, Charlotte Playforth, 29, was handed a 10-month prison sentence, suspended for 18 months. This was after admitting she was using her bank account for stolen tax repayments. She was given a 40 day rehabilitation order and a 12-month curfew for money laundering. She was also sentenced on 17 September at Salisbury Crown Court.

Kemp was the director of Commercial Windows Solutions Ltd in Tetbury. He made false claims for windows that he had bought for newly built houses, however the HMRC VAT fraud investigation revealed that the VAT returns and invoices created were all false.

Kemp’s father, Robert Kemp, 53, also pleaded guilty to VAT fraud at a hearing at Swindon Magistrates Court on 3 November 2020. He however did not show up for his sentencing at Swindon Crown Court in June. He is due to be sentenced in his absence on 8 October 2021. A bench warrant is issued for his arrest.

Zoë Ellerbeck, assistant director of fraud investigation service, HMRC, stated: ‘Paying tax is important for everyone, it funds our schools, hospitals, and all our social services.

‘The majority of individuals and businesses pay the tax that is due, however, there remains a determined minority who refuse to play by the rules.’

Co-founder of Wise charged £365k fine

Kristo Kaarmann, co-founder of the listed money transfer company Wise, has been handed a £365,651 fine by HMRC for a ‘deliberate tax default’ on his taxes in the 2017-18 tax year on a £720,495 tax bill on the back of a tax investigation.

The international firm Wise was founded back in 2011, making a strong stock market debut in July 2021 with a valuation of £8.75bn. This made it the largest ever listing of a UK tech company. This record breaking debut left Kaarmann with a stake valued at almost £1.7bn and his co-founder Taavet Hinrikus with a stake close to £1bn.

The given penalty from HMRC means that he has been found to be either deliberately submitting false documents, deliberately failing to comply with an obligation to notify HMRC about his change in circumstances, or committing wrongdoing concerning VAT or excise.

In a statement a spokesman for Kaarmann declared: ‘Kristo was late submitting his personal tax returns for the 2017-18 tax year, despite sufficient reminders from HMRC. His tax returns have since been completed, and he paid substantial late filing penalties. He has since devoted more time to keeping his personal admin in order.’

An HMRC spokesman states: ‘We are able to publish the names of those penalised under civil procedures for deliberately defaulting on certain tax obligations. This is about influencing behaviour by encouraging defaulters to engage with HMRC.’

More issues could arise for Kaarmann in the future as when there is evidence that an executive has failed to comply with standards of ‘honesty, including openness with self-disclosures, integrity, and reputation’ the Financial Conduct Authority (FCA) may revoke an individual’s approval to carry out their role.

An FCA spokesman said: ‘We are unable to comment on individual firms, but we do consider information of this type in our ongoing supervision.’

The case will now be reheard at the First Tier Tribunal (FTT) as the Court of Appeal ruled that incorrectly applied decisions from the FTT and the Upper Tribunal must be reconsidered.

Professional referees lose £54k in IR35 case

The ongoing case with Professional Game Match Officials Board (PGMOL) was disputing whether 60 part-time referees were employees of PYGMOL and were engaged in contacts of service, or were self employed in relation to matters of income tax and National Insurance contributions.

In 2018, HMRC issued the company PGMOL with a tax bill of £584,00 for missing employment taxes in the years of 2014-2016.

PGMOL appealed to the First Tier Tribunal (FTT) that the referees were not employed during the time under appeal, finding that they had no mutuality of obligation outside the individuals' engagements and they were not in a contract of employment.

The court ruled in favour of HMRC finding that the lower courts had ‘erred in law in their approaches to the question of mutuality of obligation in the individual contracts.’ The case however has not been resolved and is being referred back to the FTT.

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