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Original poster

Tax Fraud

25 replies

Marinerscove · 09/06/2022 22:18

I'm looking for some help for a friend...and yes it is a friend

They are a director of a company for 15 years give or take a few. The company as far as they were aware, was just a shelf company and made no money.

The partner is a friend of almost 17 years and a mentor.

3 weeks ago the partner telephoned my friend and explained that over the last 4 years they have been defrauding the vat man and they are about to perform an investigation and the bill is about £250k/£500k.

He is pretty sure they will find it out and he will be going to prison, and as my friend is a director, even though not aware of this happening, will effectively be held liable for the bill. The issue is, that my friend has no money and has only just paid off the mortgage of his house which was in effect the start of what he thought was a pension.

My friend thinks he will end up losing his house to pay for his business partner's fraud. Because he trusted his friend to operate the shelf company he will be done by the director's neglect and lose his house even though he did nothing.

Is this right?
If so what can he do?
He really did nothing; this will destroy his life and he did nothing illegal.

OP posts:
Original poster
Marinerscove · 09/06/2022 22:21

I should add-this is UK based .

OP posts:
CiderJolly · 09/06/2022 22:24

If he is as innocent as he says (doubt it) then he won’t be guilty of fraud as he would need to act dishonestly.

SunnyShiner · 09/06/2022 22:25

How has he not noticed this?

Discovereads · 09/06/2022 22:33

Your friend should seek legal advice from a solicitor.
If they genuinely thought it was a shelf company and made no money, it’s a bit odd to have been a director for 15yrs as shelf companies are usually sold on sooner than that. But not unheard of. He should have all the paperwork he signed off on…annual accounts and so on to prove that he was defrauded by the partner as well. If he’s ever been paid dividends, he will be in a sticky situation as shelf companies by definition are not trading and so no revenues are generated.

RoseslnTheHospital · 09/06/2022 22:41

Unless he's acted wilfully to defraud HMRC then I don't think he can be made personally liable. But he should most definitely seek legal advice asap so as to make the best decisions going forward.

whereamu · 09/06/2022 22:43

Did he get dividend or a salary?
They will most likely follow the money.

Original poster
Marinerscove · 09/06/2022 22:44

He is innocent! His partner of 17 years has done this! He has not signed anything or has been paid anything! The main thing is him being a director of this company. He found out 3 weeks ago that this is happening.

OP posts:
Original poster
Marinerscove · 09/06/2022 22:45

whereamu · 09/06/2022 22:43

Did he get dividend or a salary?
They will most likely follow the money.

no, nothing from it! But as his name is on the company registrar as the director he is implicated!

OP posts:
Original poster
Marinerscove · 09/06/2022 22:46

He is 100% sure he will not get done for fraud, what he is worried about is the director's negligence.

OP posts:
FearlessFreddie · 09/06/2022 22:49

Is the company currently trading?

Original poster
Marinerscove · 09/06/2022 22:49

Never made any money from it or dividends. If someone could point me in the right direction of a good UK solicitor that deals with this, I would be most helpful. As you can guess he does not have mumsnet.

OP posts:
Original poster
Marinerscove · 09/06/2022 22:50

FearlessFreddie · 09/06/2022 22:49

Is the company currently trading?

The company is not dissolved. The only thing that has gone through the books in the last 3 years has been the partner's fraudulent VAT invoices.

OP posts:
FearlessFreddie · 09/06/2022 22:52

www.irwinmitchell.com/our-people/andrew-walker

CanaryWharf2 · 09/06/2022 22:53

Marinerscove · 09/06/2022 22:18

I'm looking for some help for a friend...and yes it is a friend

They are a director of a company for 15 years give or take a few. The company as far as they were aware, was just a shelf company and made no money.

The partner is a friend of almost 17 years and a mentor.

3 weeks ago the partner telephoned my friend and explained that over the last 4 years they have been defrauding the vat man and they are about to perform an investigation and the bill is about £250k/£500k.

He is pretty sure they will find it out and he will be going to prison, and as my friend is a director, even though not aware of this happening, will effectively be held liable for the bill. The issue is, that my friend has no money and has only just paid off the mortgage of his house which was in effect the start of what he thought was a pension.

My friend thinks he will end up losing his house to pay for his business partner's fraud. Because he trusted his friend to operate the shelf company he will be done by the director's neglect and lose his house even though he did nothing.

Is this right?
If so what can he do?
He really did nothing; this will destroy his life and he did nothing illegal.

Yes, if it’s as you described it then it’s possible, but far from inevitable.

Did your friend understand their legal obligations and carry them out fully and diligently?

CanaryWharf2 · 09/06/2022 22:54

Marinerscove · 09/06/2022 22:44

He is innocent! His partner of 17 years has done this! He has not signed anything or has been paid anything! The main thing is him being a director of this company. He found out 3 weeks ago that this is happening.

Innocent how, though? How did he fulfill his obligations as a director? Did he attest that the accounts were accurate when they were not?

Original poster
Marinerscove · 09/06/2022 22:58

CanaryWharf2 · 09/06/2022 22:53

Yes, if it’s as you described it then it’s possible, but far from inevitable.

Did your friend understand their legal obligations and carry them out fully and diligently?

Show quote history

I believe the issue being it was a personal buddy of 17 years and when the yearly paperwork came to sign, it was just, sign here and he did but over x number of years the other partner was defrauding the VAT man and he recently confessed.
he has been paid no dividends, no profits nothing.

Yes you hit the nail on the head he is concerned about directors neglect.

OP posts:
CandyLeBonBon · 09/06/2022 23:04

Being the director of a limited company has responsibilities. How on earth has he chosen to continue to be a director without actively participating in his directorship?

CandyLeBonBon · 09/06/2022 23:06

I believe the issue being it was a personal buddy of 17 years and when the yearly paperwork came to sign, it was just, sign here and he did but over x number of years the other partner was defrauding the VAT man

That's absolutely no excuse. I'm really sorry for your friend but he has not a leg to stand on. Ignorance is no defence!

Original poster
Marinerscove · 09/06/2022 23:10

CandyLeBonBon · 09/06/2022 23:06

I believe the issue being it was a personal buddy of 17 years and when the yearly paperwork came to sign, it was just, sign here and he did but over x number of years the other partner was defrauding the VAT man

That's absolutely no excuse. I'm really sorry for your friend but he has not a leg to stand on. Ignorance is no defence!

I believe he is now fully aware of this, but the question was basically, what can he do now?

OP posts:
lovingtheheat · 09/06/2022 23:18

There are 2 issues here (1) fraud aspect; and (2) financial liability.

In relation to financial liability, on uncovering the fraud HMRC will want payment and in the absence of payment will likely apply to put the company into liquidation. Thereafter your friend may well lose his home, or remortgage. If his equity isn't sufficient he may well face bankruptcy proceedings.

There may well be further claims that could be brought against him personally re approval of payment of dividends to the buddy if he blindly signed on the dotted line when asked.

His lack of knowledge is irrelevant here as a director cannot abrogate his duties. I'm afraid saying he didn't know won't cut it. He has been very foolish.

The best thing he can do now is obtain good legal advice.

CanaryWharf2 · 09/06/2022 23:20

Marinerscove · 09/06/2022 23:10

I believe he is now fully aware of this, but the question was basically, what can he do now?

Show quote history

Comply fully and honestly with the investigation while taking advice from a suitably experienced and expert lawyer.

HollowTalk · 09/06/2022 23:23

Do HMRC really tell you that they coming to investigate? Did they give any grounds?

What was in it for your friend? Why would he want to be a director of a company in that situation?

Villagewaspbyke · 10/06/2022 00:02

The company from what you have said has been used as a vehicle for fraud (carousel fraud?). A criminal enterprise in effect. In cases such as that the shareholders can be held responsible for the company debts but it’s rare (you haven’t indicated if he is a shareholder). There are also various statutory way he may be held responsible for the debt. From what you say, he certainly hasn’t complied with his director’s duties and possibly could be held liable by creditors on that basis. However that’s all speculative as we don’t know the details. He needs to get specialist legal advice.

Discovereads · 10/06/2022 00:56

Marinerscove · 09/06/2022 22:50

The company is not dissolved. The only thing that has gone through the books in the last 3 years has been the partner's fraudulent VAT invoices.

Show quote history

Then the company was trading and was not a shelf company.

scotsguy1314 · 11/06/2022 14:23

Unfortunately ignorance isn't a viable reason for not carrying out your duties as a company director. The likelihood is they'll find nothing to proceed with a fraud case but they will be struck off I'm sure as a Director.

Surely the friend doesn't expect the partner to foot the bill for the money owed to HMRC, to generate a tax liability, the friend will have earned from it. If the partner has too then they're bang to rights.

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