Mark Jenner & Co Limited receive instructions as Forensic Tax Accountants on a regular basis, considering small and large criminal tax evasion cases. Sometimes, these cases can be very substantial owing to the complexity of tax affairs and the long period over which HMRC may conduct their investigations. Some cases can be quite “newsworthy” owing to their controversial nature, such as organized income tax fraud by Ukrainian criminal gangs, tax avoidance schemes set up for wealthy footballers and other celebrities and regional/industry clampdowns by HMRC (for example many individuals from the Dewsbury Asian community were thought to be living beyond their declared means resulting in the sweep of a large number of West Yorkshire corner shops, newsagents and the like).
Some of our forensic tax investigations are assisted by our experience dealing with offshore fraud cases, and other multi-jurisdictional matters, particularly when dealing with tax avoidance schemes or considering tax implications when money laundering. We also see substantial and varied tax issues arising when dealing with mainstream fraud matters or confiscation matters and are used to dealing with the interaction between criminal lifestyle and tax evasion, particularly with the application of the Proceeds of Crime Act 2002 and Anti Money Laundering regulations.
Examples Of Forensic Tax Investigation Cases We Have Undertaken
- Examination of the profitability of a Hawala Banking business. HMRC had examined bank statements for accounts showing some £40 million had been transferred over a period of four years. It calculated profits had been made of around £250,000 using two completely different methods and then promptly added both results together, demanding tax be paid on £500,000 income. This fundamental error, along with numerous other arithmetical blunders, resulting in a forensic report showing likely profits to be between £20,000 and £80,000 for the four years. The higher figure was ultimately accepted by HMRC.
- HMRC prosecuted individuals who had set up and run a substantial “tax avoidance scheme” that resulted in investors (including wealthy footballers etc) saving several £100 millions of tax and netted tens of millions for the promoters. The individuals had also used specialist tax barristers and at least two corporate services providers to set up and run satellite companies that allowed investor money to be recirculated, thus allowing repeated tax breaks for the same money. One of the corporate service providers was a well known multinational financial, the other was a small firm that was used for only one of the links in the tax fraud. Only the small firm was being prosecuted even though the larger corporate firm would have been in a better position to see what had been going on within the scheme. The forensic accounting work demonstrated that the small firm was likely insulated from knowledge of the fraudulent activity, and that it only earned fees that were commensurate with the professional services being provided.
- An individual ran a property development company and rental portfolio for many years. His initial losses in early years were rolled forwards to later years to set against rental profits. He attempted to ensure that each property that was sold had been his principle private residence for some of the time to avoid capital gains tax. HMRC investigated his affairs which were quite complex over a period of ten years resulting in a massive assessment of underpaid tax. The forensic work was able to establish a more balanced result, thus ensuring that a fair settlement could be reached.
Tax Expert Solicitor Or Tax Expert Accountant?
As expert forensic tax accountants, we are instructed on numerous criminal cases being brought by HMRC against individuals and companies. We use our expertise to interrogate the documents, determine income, expenditure, profits or gains and calculate any outstanding tax that may or may not be due. If appropriate this can be compared to HMRC’s own tax assessments which will often have been prepared following a number of potentially unsupported or detrimental (to the tax payer) assumptions.
Our forensic accounting work is of a highly specialist nature, which is why law firms instructed by tax payer clients will use our services. As accountants, we do not enjoy legal professional privilege with our clients, unless we are working through a solicitor. The legal expert/accounting expert team is highly effective in reaching the results hoped for by the client and given that it preserves legal privilege is the reason why we do not normally work directly with clients on contentious matters, no matter whether they are criminal investigations or not. If targeted by regulators such as HMRC we would always advise that you seek legal representation first, and are happy to suggest contact details of those qualified to assist.