The Professional Contractors Group has reported the following:
HMRC have initiated an investigation targeted at thousands of TV freelancers working through media accountancy firm Christopher Lunn & Company. The department has written to the clients of Christopher Lunn & Company of Crowborough, East Sussex, stating that, from information obtained so far, ‘tax returns submitted to HMRC may not be correct for a number of reasons’.
The areas of concern listed by the Revenue in their letter to clients dated 17 September fall into two broad categories. The first was a list of areas in which excessive claims for expenditure may have been made in areas such as travel and subsistence, and use of home as office. The Revenue’s letter also listed accountancy fees as an area of concern.
But as an article on www.taxation.co.uk suggests it is unlikely that the apparent criminal investigation that has commenced was triggered by over-claims such matters. That article does instead suggest that the investigation is based on:
HMRC’s belief that clients were ‘routinely, and apparently falsely, claiming self-employment status by directors’, which was part of the second set of areas listed in the taxman’s letter". This included allegations of retrospective creation or apportionment of income and expenses into a limited company.
Now these are allegations right now, not facts. But one has to presume that such a coordinated action has some substance behind it — whether a case is proven or not.
And that suggests whether criminal actions have occurred or not there are significant grounds for suspicion — and if that’s true for one firm I regret to say that the abuse will be widespread. Most important of those concerns is the risk that:
clients were ‘routinely, and apparently falsely, claiming self-employment status by directors’, which was part of the second set of areas listed in the taxman’s letter. This included allegations of retrospective creation or apportionment of income and expenses into a limited company.
Fabricating evidence is serious if true — and that’s pretty much what is being alleged. I have a horrible fear it is much more common than is realised — and contributes significantly to the tax gap.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I looked at that article. If the various comments are accurate, it looks as though this is the kind of firm that cuts corners and undercuts more traditional accountants on fees. As well as being quite “sportif” on the tax planning. Running a sole trade alongside a company is something I have only seen once in my career, in a client that my then employer had acquired from another firm. We put a stop to this PDQ. In other words this is the sort of firm that many accountants would like to see the boot put into!
“And that suggests whether criminal actions have occurred or not there are significant grounds for suspicion — and if that’s true for one firm I regret to say that the abuse will be widespread.”
So one rogue tarnished an entire profession? Nonsense.
@JayPee
Ah – always a rotten apple
Nonsense!
This firm may be the one picked on – may even be more blatant than most – but I suspect not alone
Sorry – just not possible
Of course not all are tainted
But all have to take action and stand out against tax avoidance and evasion before the profession can say “rotten apples”
And it does not do that
Richared
This is one of the laziest blog pieces I have seen written.
You have done no research.
You have not demonstrated any understanding of what Christopher Lunn stands accused of.
You should apply to write for the Daily Mail if this level of laziness refects the research you intend to put into your efforts.
Richard, you appear to have confused tax avoidance and evasion as the same thing. Tax avoidance is where you structure your affairs in a way to avoid paying tax legally within the tax rules. We are all entitled to pay as little tax as the law allows. Putting your money in an ISA rather than in a bank account for instance. Evasion is trying to reduce tax illegally and any tax adviser assisting a tax payer in evasion is, and should be, stamped upon by the Revenue. I agree that the dividing line may be fine, and as Dennis Healy put it “the difference between evasion and avoidance is the thickness of a prison wall”, but they are distinct none the less.
@mel
I think I’m guilty of quoting Taxation magazine
And maybe quoting those from PKF they quoted
And I think I fully understand the accusation they are making: they are suggesting that those who undertook these supposed transactions may not have undertaken them in the form in which they were recorded
That is, of course, as I note just an allegation: I am not saying it is proven. But it is a serious allegation. Did I err in reporting it?
@Mark
You clearly do not understand what tax avoidance is. It is not, never has been and never will be an act which fully complies with the intention of the law, such as paying cash into a nicer. Please do not misrepresent the truth in such ludicrous fashion. That is tax compliant behaviour according with the will of Parliament.
Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
Tax avoidance on the other hand is the deliberate act of seeking to get around the intention of Parliament by arbitraging the rule of law within the UK, or between the UK and another state or between the laws of tax and company disclosure, and other regulation.
The two are fundamentally different. Tax compliance has an entirely different motivation from tax avoidance. The two cannot be confused. On the other hand tax avoidance is, as Denis Healey rightly said, just a step away from tax evasion at any point of time, and often indiscernible from it until such time as two barristers stand up in court.
If the divide between the two is so hard to discern any wise accountant, lawyer or banker, let alone any wise taxpayer, stays as far away as possible as they can from tax avoidance and those who promote it.
See http://www.taxresearch.org.uk/Documents/TaxLanguage.pdf for more information.
But please get your facts right before you comment and understand the indication of what you say, and the social consequence of what you promote before you decide to make further representation here.
@Richard Murphy
Richard
My comment about lack of research and lazy blogging is confirmed by your response rather than rebutted by it.
You do not understand at all well what HMRC is (effectively) accusing Lunn of, based on your follow up.
Have you even seen (or read) the HMRC letter?
This is really lazy third hand stuff.
(for the avoidance of doubt, having spoken with Lunn clients and seen the HMRC letter, this is a potentially very serious situation for thousands of people. Unresearched third hand comments do not make a positive contribution. Taxation attempted some research. You did not, but just bashed out a barely informed piece very much along the Daily mail mode. Not very fine from Tax Research UK )
@mel
And with the greatest of respect you have not so far pointed out a single error in what I say, nor have you offered to share your letter. Why not do so?
I have I think fairly reported and commented upon other people’s articles. I never claimed to do more.
If you wish to take the debate forward here then please feel free to do so by adding your knowledge, not by simply sniping, as you are
I am not sure about this particular case but what I would term “agressive” avoidance is very widespread. Let’s say it’s conducted by a significant minority rather than bad apples. And it is not too hard to identify those firms. Trouble is HM Revenue & Customs don’t have the will or resources to do anything about it.
Richard
You call your site tax research UK.
When you post commentary or blogs based on research, they are very welcome.
Unfortunately you also post comments or blogs based on no research whatever, and which comprise, when bottomed, to mere snipes.
This blog of yours falls squarely into the latter category.
Therefore to level the charge of sniping against my comments are hypocrisy, I’m afraid.
I cannot share the HMRC letter because I do not have a copy (the unfortunate CL clients who came my way were given the best support I could give them, but none are -for various reasons on both sides – clients of ours. But the letter’s contents are available if you research.
(and you should do so rather than be so thunderingly lazy. You style yourself Tax research. Please do some research before you post something worthy of the Daily mail)
And for the avoidance of doubt, from the limited info I have access to, I have not one scintilla of sympathy for Christopher Lunn and company.
Why do you not research a bit, and comment on a more informed basis?
Am I going to do the research for you? No. Not because of any antipathy to the substance of the CL situation, nor antipathy to you or Tax research UK. But because of total antipathy to the lazy nature of the blog you wrote. It does descend to the levelof the Daily Mail. It is very disappointing. That is what I wish to highlight, not cover.
@mel
With the very greatest of respect I think you should stop trying to make yourself look stupid.
Compared to most of the press, remarkably little of what is on this website is second-hand, or the mere reproduction of a press release. In this case I fully admitted, and made it clear, that I drew on other sources and had not done original work. I simply sought to highlight a particular aspect of the matter in the context of discussion was taking place longitudinally within this blog.
That was honest, and appropriate.
I then the last three days I have published two reports, appeared in many newspapers, been on live radio, featured in a Channel 4 documentary programme, and done other work. If you honestly think that one man can do much more than that then I really do presume that you are deluded. Or you are simply making mischief for the sake of it. Either way, you discredit your own cause.
Even the first bit is missleading >targeted at thousands of TV freelancers<. ‘Retrospective creation of a Freelancer’ anyone? My company isnt a TV Freelancer and my partner isnt a TV Freelancer but both have had letters from HMRC alleging everything yet saying nothing specific. Pure scare tactics and UTTERLY out of order. I do personally supply my services via my company but havent received a letter. Go figure.
Lunn and Co are good – they arent passive shrinking doormats like many accountants I’ve had in the past; individuals that do little more than what I could do myself for my mini company.
Lunn rattled the HMRC as they challenge them on unfair rules like runners being unable to be freelance etc etc and its clear they dont like it up ’em…
I’ll wait for some facts please.
J De Evans
@De Evans
Tax compliance is not being a doormat
Tax compliance is defined as seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
That’s the choice of the responsible citizen, and their accountant
Nothing world shattering there Richard – its what I’ve done all my life; I dont need the worry. However I have found some accountants are more pro-active and lateral thinking than others. Its sometimes more about the client’s best interests than than their own passive comfort and safety zone? I’m sure you appreciate this difference in approach – some would rather be down the Rotary than down the dock fighting for utterly freelance Gallery PA’s to continue to be schedule D…
Do you think it all clear cut and zero ambiguity out there on tax issues? I dont, and I dont think HMRC REMOTELY understand our industry. Also I prefer a thinker to a follower – especially if I’m paying! Maybe I’ll ultimately pay more…fancy offseting 30% of £520pa for my home edit suite that turned over £27k taxable last year… I have the scary letter.
J De Evans