HomeHMRCHMRC Case Updates from Accountants to Restaurants

HMRC Case Updates from Accountants to Restaurants

Here’s an update on recent HMRC successful investigations and prosecutions

HMRC loses £300k chocolate brownie VAT case

A health food brownie containing dates and brown rice bran has been deemed a cake – and so free from VAT charges – after a judge taste-tested the product alongside Mr Kipling’s French fancies and Tunnock’s teacakes.

Pulsin, makers of the brownies, could reclaim up to £300,000 from HMRC after Judge Amanda Brown ruled in the Gloucestershire-based manufacturer’s favour, saying the company’s Raw Choc Brownies would “absolutely not look out of place” at “a cricket or sporting tea”.

Brown dismissed Pulsin’s claims that the brownies were “not sweet enough” to be considered confectionery, on which VAT is charged, but said this did not exclude them from being cakes.

Unlike sweets, cakes are considered to be a staple food and therefore zero-rated for VAT. Biscuits are also zero-rated unless they are a luxury item, which usually means they have chocolate on top.

Brown said the ingredients used in making the brownies, the manufacturing method, their taste and texture were all “consistent with those of a cake”.

The dispute began in 2016 when Pulsin said it had wrongly been paying VAT on the products for four years.

An HMRC spokesman said: “We are carefully considering the decision in this case.”

The judge’s ruling referred to the 1991 Jaffa Cakes case when McVitie’s successfully argued that the product was a cake and not a biscuit and so not liable for VAT.

£5.9m tax fraud lands engineering boss in jail

A North East engineering company boss has been jailed for more than eight years for a £5.9 million tax fraud.

Stanley Miller, of Ryton, stole millions of pounds by pocketing his staff’s tax deductions and using phoney invoices to claim VAT repayments, an investigation by HMRC revealed.

The 57-year-old pocketed £5,952,339.57 in VAT, income tax and National Insurance between May 2008 and May 2016. He stole the money through his three companies; MGM Precision Limited, T-Tec (Precision Engineers) Limited and SLM Engineering Ltd; in Newburn, Newcastle.

Daniel McDonald, 33, of Dukes Meadow, Newcastle upon Tyne, worked for all three companies and helped Miller steal the money.

Cheryl Burr, Assistant Director, Fraud Investigation Service, HMRC said: “This was a shocking and sustained attack on the tax system. Miller abused his position to steal money from the public purse and his employees. He was wrong to think he could get away with it and now he is paying the price behind bars.

“We will continue to pursue criminals like Miller and the people who help them.”

The fraud was uncovered following a routine VAT visit to SLM in April 2016 when officers were shown various invoices; but later checks revealed they were fake.

Investigators found Miller had forged invoices and submitted false VAT returns to fraudulently reclaim £1,055,294.51 for all three of his companies.

It was also discovered Miller pocketed £4,897,045.06 income tax and National Insurance Contributions from MGM employees instead of passing it to HMRC.

Miller was convicted of cheating the public revenue and VAT fraud at Newcastle Crown Court on 30 October 2018. He was sentenced to eight years and three months in prison, and was disqualified from being a company director for nine years, at the same court on 1 February 2019.

McDonald provided Miller with invoice templates which were subsequently altered and used to support false VAT repayment claims. He was also convicted of cheating the public revenue and VAT fraud and was sentenced to three years in prison.

Proceedings are under way to recover the stolen money.

Harry Potter actor loses £1m refund appeal

Harry Potter actor Rupert Grint has lost his appeal in a tax refund case against HMRC. The actor, who played Ron Weasley in the Harry Potter movies, failed in his latest attempt to get a £1m tax refund he believes is owed from the Revenue.

In 2016, Grint tried to claim the tax back by using a change in accounting dates to avoid paying a higher tax rate on his earnings.

At the time Judge Barbara Mosadele found Grint had changed his accounting date so 20 months of income would be taxed in 2009/10, one year before the top tax rate rose from 40%to 50%.

Because HMRC prevented him from doing so, Grint had to make an additional tax payment of £1m.

The judge ruled at the time that he was not entitled to the refund as he had failed to give a valid reason for such change, but he took his case to the Upper Tribunal.

Last week, Justice Rose and Judge Richards dismissed his latest appeal, ruling that the actor had failed to meet the conditions on which the law would recognise a valid change in accounting dates.

An HMRC spokesperson said: “HMRC welcomes the Upper Tribunal’s decision in this case which agreed with our interpretation of the facts and law.”

Restaurant owner jailed for £1m tax fraud

A Chinese restaurant owner, who evaded more than £1m in tax by claiming his business made pottery and had a tiny turnover, has been jailed for three years.

Chin Lam, 60, from Barnet, north London, owned outlets in North Greenwich and at Gun Wharf Quays shopping centre in Portsmouth, Hampshire. He failed to declare cash payments, resulting in his failure to pay £1,018,508 due in tax.

Both businesses used a similar scam when they opened. In North Greenwich, the Water Margin restaurant registered for VAT in April 2013 and was described as ‘manufacturing pottery with an estimated yearly turnover of £10,000’. The actual annual turnover was £5.1m.

In Portsmouth, the Water Margin registered as an art illustration company with a turnover each year of £10,000. The reality was between February 2013 and March 2016 the figure was £5.3m, HMRC found. The restaurant went into liquidation in September 2016.

Lam declared just £2,100 in self assessment income between December 2014 and November 2016 despite being a director of both restaurants.

HMRC officers swooped on the North Greenwich outlet a month after a new company took it over in February 2017, and the owners had mirrored the behaviour of the other companies – being listed at Companies House as being an ‘artistic creation’ company. Tax official said Lam was pulling the strings of the new company from the sidelines, but it never traded.

He was arrested on 10 March 2017 and the North Greenwich outlet and his home were both searched that day. Lam admitted VAT fraud and money laundering and was subsequently sentenced to three years in jail at Harrow Crown Court.

Confiscation proceedings to recover assets will now begin.

Jail for accountants who stole £710k redundancy money

Three accountants who tried to steal £710,000 from a government redundancy fund for workers whose employer had gone bust have been jailed for a total of 15-and-a-half years.

Lennox McLeod, 46, of West Wickham, London, recruited accountants Francine Francis, 43, from Streatham and Mohammed Nadeem, 41, from Croydon, to work for him and help commit the fraud, an HMRC investigation revealed.

Together they arranged for 105 false claims totalling £710,000 to be submitted to the Redundancy Payment Service (RPS) over a six-year period, for employees of insolvent companies.

The accountants were acting for various companies as they made claims for unpaid wages, redundancy and holiday pay. In some cases, the group used false National Insurance numbers and identities to make the fraudulent claims and pocketed the cash. More than £450,000 was paid out by the RPS before the fraud was detected.

Richard Wilkinson, Assistant Director, Fraud Investigation Service, HMRC, said: “McLeod was the driving force in this despicable fraud, stealing money from a redundancy fund that’s in place to help those in real need of financial help. These three abused their position of trust and should have known better. The money could have paid the starting salary of the equivalent of 25 new London nurses.

“HMRC worked closely with other law enforcement agencies to gather the strong evidence that helped convict McLeod and the others engaged in making these fictitious claims.”

Nathan Marsh, Senior Manager for the Redundancy Payment Service, said: “McLeod and his cronies made bogus claims against a system that was specifically put in place to help those who need urgent financial support when they lose their jobs.

“Their actions were particularly unscrupulous and we will continue to work with HMRC and other government agencies to bring fraudsters to justice.”

In a separate case, McLeod also admitted a £111,332.82 VAT repayment fraud between June 2014 and June 2017, where he pocketed VAT refunds paid to The Luxe Agency Limited after ‘taking over’ the business when the company’s director died.

He updated its trading address and business bank account but did not forward the VAT refunds to The Luxe Agency or the estate of the deceased director.

McLeod was jailed him for a total of nine years. Francis was jailed for four years and Nadeem for two years and six months.

Confiscation proceedings to recover assets from the gang have been started by HMRC.

Truck crook stole £337k VAT while claiming benefits

A truck dealer from Liverpool who stole £337,000 in VAT while claiming benefits has been jailed. John Doyle, 37, of Albion Street, Everton, traded more than £3 million of vehicles and pocketed the VAT he charged on every sale, a HM Revenue and Customs (HMRC) investigation found.

Doyle bought trucks and specialist plant machinery in the UK and Ireland through his business, Albion Trucks & Plant, before selling them on.

His business bank account showed he had more than £3.2 million paid into it between February 2016 and May 2017, but paid no VAT on the sales, and during this time he collected hundreds of pounds in unemployment benefits.

HMRC investigators found Doyle, who refused to answer any questions in interview, spent lavishly on trips to expensive hotels and restaurants, as well as shopping sprees.

Tim Atkins, Assistant Director, Fraud Investigation Service, HMRC, said: “Doyle lived the high life with the stolen cash, but the wheels have now come off and he is deservedly behind bars. He had the audacity to claim unemployment benefits while stealing taxpayers’ money.”

Albion Trucks & Plant was registered to a residential address in Blenheim Street, Vauxhall, with Doyle conducting sales through a business website. His activities were uncovered when a customer was unable to register their imported vehicle with the DVLA because no duty had been paid.

Doyle admitted VAT fraud and was sentenced to three years and two months at Liverpool Crown Court on Wednesday 13 February. Doyle was also disqualified from being a company director for 10 years.

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