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HMRC Throw Book at Miscreant Company Directors

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

HM Revenue and Customs (HMRC) have a variety of methods, both sophisticated and less so, for uncovering tax evasion and find sectors with substantial cash income, such as takeaway restaurants, a source of easy pickings.

As well as having industry comparisons (and algorithms which automatically pick out ‘suspect’ VAT returns for investigation), they undertake test purchases to check gross profit margin claims, keep watch on premises to count the number of customers and so on. By the time the owner of a takeaway becomes aware of the enquiry, there is often a very impressive body of evidence in the possession of HMRC.

And so it was that the owners of a kebab shop in London came to be assessed for £71,000 in VAT based on HMRC’s calculation that they had under-declared the takings of their shop, which was run as a company. By the time the calculation had been made of the additional Corporation Tax due and the penalties were added, the total debt of the company, now in liquidation, was nearly £300,000.

Having a limited company normally operates to protect the directors from personal liability for the company’s debts, but not in cases such as this. The two owners were given ‘personal liability orders’ for the company’s liability to HMRC.

They have also both been banned from acting as directors of a limited company or participating in the management of a company for seven years.

As soon as you receive a notice that HMRC is enquiring into your tax affairs, you should take professional advice. There can be serious legal and financial ramifications and skilled advocacy is important.

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