One firm of accountants: 7,000 tax investigations

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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, ‚Äòtax 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 ‚Äòroutinely, 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 ‚Äòroutinely, 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.