A Forensic Accountant For All Tax Matters?
Do you want to pay more tax? Should you pay the right amount of tax? Could you pay less tax than you should? These questions broadly reflect the three groups of taxpayers that HMRC targets each year to fund the public purse. Two of these groups might also ask why you would use a forensic accountant for tax!
Paying Too Much Tax
Of course, nobody wants to pay too much tax. However, there are those who do not monitor their financial affairs and accept their tax assessments without question. Very often these are individuals with substantial assets and income who, being rich, simply don’t care much about money.
As a forensic accountant focusing on fraud and crime, I do not generally see overpayments of tax. These are the remit of general accounting practitioners. They can provide advice to their clients regarding a more suitable taxation framework. They can administer the recovery of overpaid tax and help with assessing future tax burdens.
Paying The Right Amount Of Tax
Successive UK Governments have ensured a very complicated tax system. The Institute of Chartered Accountants in England and Wales is a leading fiscal advisor. It lobbies the authorities, promoting the simplification of the taxation system. However, for the foreseeable future we will continue to have a minefield of different tax rates. Add to these the multitude of allowances and reliefs, it is no wonder the tax system is difficult to navigate.
It is this complicated tax structure that can lead to unwitting underpayments. We were recently instructed to calculate the VAT that a US company owed the Revenue for its UK trading activities. The tax bill ran into tens of £millions. It was eventually negotiated with HMRC and reached a favourable settlement with minimal penalties and interest.
In another case, the Revenue got their teeth into a client alleging some £10 million additional business revenue had not been declared. It took some work, but a detailed examination showed that HMRC had effectively added a zero somehow and the under declared turnover should be nearer to £1 million. Of course this had a massive impact on the amount of tax that was eventually settled and paid,
Not Enough Tax – Forensic Accounting For Tax Evasion
Now we are at the heart of the matter. Forensic Accounting For Criminal Tax Evasion forms a large part of our work. A job might involve income tax, corporation tax, VAT and other forms of tax, frequently a combination of several.
In a recent case I was asked to comment on HMRC’s assessment of tax evaded by a driveway contractor. Have you ever been confronted by a scruffy chap offering to renew your tarmac drive? I remember a team turning up at a business I worked for when I was younger. They drove a lorry of hot steaming tarmac left over from the highway job they had been subcontracted to. We managed to get a car covered quite cheaply. The work was settled using cash and I don’t know if this was subsequently declared.
An Example Of The Black Economy
This recent case is an example of work that takes place within the UK’s black economy. Cash businesses that don’t pay any tax. My journey as a forensic accountant has revealed that the practice is widespread. Also, I hadn’t realised that surfacing driveways was so profitable. In my case, HMRC had calculated unpaid income tax of about £1 million and VAT of about half this amount. The only records that the defendant kept were his bank statements – and these revealed how much work had been done compared to the zero tax that had been paid over a number of years. This was a sad case of the defendant being guilty, but my work showed that his overall tax bill should be roughly half of that calculated by HMRC.
Mark Jenner and Co Limited regularly works for specialist tax investigation lawyers on behalf of their clients. The benefits of forensic accounting for tax include the unpicking of complex finances and presenting results in a simple and understandable way. Normally it is profitability or the taxable value of a transaction estimated by HMRC that needs to be investigated – the calculations of tax owed are usually very straight forward once the underlying figures are investigated and understood.