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HMRC internal manual

Compliance Handbook

Agent operational guidance: dishonest tax agents: example of advising or assisting a client to do something that the tax agent knows to be dishonest

A compliance check into Mrs Chisbridge’s business revealed that a dozen new computers had been purchased during its first year. Capital allowances of 100% of the cost of the computers had been claimed that reduced her profits to nil. VAT had also been claimed on the purchase of the computers.

Documents located during the check indicated that the computers had been returned to the supplier a couple of days after their purchase. However, the year end accounts showed the computers as still owned by the business and no adjustments had been made to the capital allowances claimed or the VAT claimed.

Mrs Chisbridge said that she had discussed ways of reducing her taxable profit with her tax agent, Mr Hindhay, and he had suggested purchasing and returning these computers. She said that she was unaware of how the transaction would be treated in her accounts but assumed it was all legitimate.

Mr Hindhay admitted that he was under pressure from Mrs Chisbridge to reduce her tax liability and so had suggested this transaction. He said that he was later going to ‘sell’ the computers in the accounts and effectively reverse the capital allowances and VAT that his client had benefited from.

Mr Hindhay’s conduct is dishonest as he assisted Mrs Chisbridge to do something that he knew to be wrong.

See CH880400 for guidance on the action a caseworker must take to report dishonest conduct by a tax agent during a compliance check.