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September 2022 Tax Investigation Round Up

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

  • Biffa under investigation for £20m landfill tax dispute
  • £1m fine for tax avoidance promoter
  • 329 professional footballers under investigation
  • London grocer is banned for squandering £50k Bounce Back Loan

Biffa under investigation for £20m landfill tax dispute

Biffa is currently under review as part of a HMRC investigation in relation to aspects of its landfill tax compliance.

Provisionally £20m in tax has been recognised to be owed to HMRC, however there are a range of possible outcomes due from the enquiry which is believed to continue for a while.

Michael Topham, chief executive officer of Biffa comments, 'The enquiry is ongoing and a provision of £20m has been recognised but there are a range of possible outcomes and it is therefore difficult to accurately ascertain the quantum of any potential liability with any certainty or precision.'

The company itself believes that it owes around £170,000 to settle the claim however HMRC disputes this figure, believing that the overdue landfill tax bill could equate to £153m.

Biffa was refused leave to appeal to the Supreme Court on the EVP dispute in regards to historical landfill tax. When releasing its 2022 annual report, Biffa said that 'the impacts on the financial accounts have been included in adjusting items.'

£1m fine for tax avoidance promoter

Hyrax Resourcing Ltd, a tax avoidance promoter was handed a huge fine of £1,074,600 after being legally challenged by HMRC. This fine was near the maximum amount allowed by the First Tier Tribunal (FTT) for not disclosing the scheme as legally required.

Hyrax worked by by promoting a hidden remuneration scheme that paid individuals National Minimum Wage, the rest of their earnings were transferred to an offshore trust in Jersey. This money was not declared as earnings, meaning that users did not pay tax on it and the loans were never expected to be paid back.

The tribunal commented; 'Hyrax retained 18.5% which was effectively them splitting the tax saving with the scheme user. HMRC have calculated that the gross receipts in the period were £37,608,000 which is approximately 18.26% which is broadly consistent with that finding. That means that the tax saving was a very significant figure.'

In the hearing the tribunal stated that failure to disclose the scheme was 'a very serious matter' and that the 'statutory maximum penalty is appropriate.'

They continued, 'We accept HMRC's argument that the penalty imposed should act as a deterrent. it should certainly do so to deter others from deliberately setting up a company with a sole director who can at best be described as displaying Nelsonian acuity in regard to the company's affairs. It should also act to deter those who rely only on the advice of the promoter of the tax avoidance scheme and promoter who makes large sums of money from it.'

Hyrax was fined as a result the maximum £600 a day for the time period between 9 April 2014 to 5 March 2019, totaling a fine of £1,074,600.

HMRC's director of counter-avoidance Mary Aiston said, 'This £1m fine should serve as a star warning to tax avoidance promoters. those who ignore their legal duty will face serious consequences.’

'We actively tackle promoters of tax avoidance schemes and are determined to drive them out of business. we continue to use the full force of the law to challenge tax avoidance scheme promoters.'

329 professional footballers under investigation

A staggering 329 professional footballers are under investigation by HMRC for suspected tax avoidance. HMRC is reported to be 'very concerned about the significant amounts of unpaid tax in the sport.'

The crackdown on this continues as HMRC has started to actively look into serious tax fraud in the sport of football according to Hacker Young (accountancy group.)

They are looking into tax avoidance, particularly in the form of 'agent fees.' This refers to money that is paid to an agent by a player to manage a transfer, sometimes totaling in millions of pounds. Usually these fees have been paid by the club instead of the player.

Another area in football is the players 'image rights.' This is when the player's image is sold for sponsorship reasons. In dealing through a company, they will only pay 19% tax, the UK's rate, rather than the 45% rate of additional income tax.

Elliott Buss, partner at UHY Hacker Young, comments: “The football compliance project linking up with HMRC’s elite fraud unit means the tax authority is very concerned about the significant amounts of unpaid tax in the sport.

“HMRC sees football as an industry where millions of pounds in tax can very easily go unpaid. It is determined not to let that happen.”

HMRC can request documents within the football industry such as agent letters, texts, emails and messages to help with its investigations.

Buss continues: “HMRC believes that a lot of players use agent fees and supposed image rights ‘loopholes’ to lower their tax bills.

“HMRC has been clear that these methods don’t work and that failure to pay tax in full will be pursued with investigations.”

London grocer is banned for squandering £50k Bounce Back Loan

Abbas Abo Kifayah of London was the sole director of Al-Amir Ltd. his company traded as a grocer and butcher in London, Wembley.

An investigation took place by the Insolvency Service when it was flagged that the company went into voluntary liquidation in July 2021.

Investigators uncovered that Kifayah exaggerated his company’s turnover to secure a £50,000 Bounce Back Loan in August 2020 during the Covid-19 pandemic.

Once receiving the loan, Kifayah transferred £43,200 into his personal account, over £3,000 was transferred to a third party and £2,250 was taken out in cash.

When questioned about the transactions, he claimed that £12,000 was used to pay his own wages that he had backdated, and the further was for personal use. Investigators could not find any evidence that the money was used to benefit the company and keep it afloat.

As from 21 July 2022, Kifayah was banned for ten years from directly becoming involved in the promotion, formation or management of a company without the permission from the court. Al-Amir Ltd’s liquidator is looking into the recovery of funds from the bounce back loans.

Lawrence Zussman, deputy head of insolvent investigations at the Insolvency Service, states: ‘Bounce back loans were available to support viable businesses through the pandemic. Abbas Kifayah, however, abused the government’s support when he inflated his company’s turnover in order to receive the maximum loan before squandering the money rather than using it to benefit his business.

‘10 years is a significant amount of time to be removed from the corporate arena and Abbas Kifayah’s disqualification should serve as a clear warning that we will take decisive action to protect the public and the taxpayer.’

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