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HMRC internal manual

Compliance Handbook

From
HM Revenue & Customs
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Agent operational guidance: dishonest tax agents: establishing dishonest conduct: who is responsible for dishonest conduct

You can only give a conduct notice to an individual who has engaged in dishonest conduct as a tax agent. You cannot give a conduct notice to an organisation in which dishonest conduct has taken place. For an explanation of who is a tax agent, see CH180180.

Where you have established dishonest conduct by a sole trader, without staff, it will be clear who is the tax agent responsible for the dishonest conduct.

Where you have established dishonest conduct within an organisation you will need to contact the organisation to find out who was responsible. Usually, this will be the individual who directs what is to be done in respect of their clients’ affairs and directs the work done by others.

As soon as you make contact you must tell anyone you speak to within the organisation that they must not conceal documents we may require, see CH182180. If you have not told them in writing, then you must create and retain a written record of how and when you told the person and provide them with a copy of it.

The individual responsible for the dishonest conduct within an organisation may be anyone from a senior partner to a junior employee. However, where a junior member of staff is implicated in the dishonesty you will need to show that they were personally responsible for the dishonest conduct before taking action against them. For example, a secretary who types the letters which refer to the dishonest conduct will not be responsible for the dishonest conduct.

There may be more than one individual responsible. If more than one individual is responsible, each can be given a conduct notice. For example, a tax senior who is instructed by a partner to do something they know is wrong, suspect is wrong, or ought to suspect is wrong, can be given a conduct notice. The partner can also be given a conduct notice.

Once you have established who is responsible for the dishonesty you must not discuss the action you intend to take with anyone in the organisation who is not involved in the dishonesty.

If evidence of further dishonesty, above and beyond what has been gathered, comes to light, the case must be referred back to the Evasion Referral Team, see CH880400.

For example

Following on from example 2 in CH880210.

Mr Berrick was a qualified tax agent operating through a limited company (Stoke & Church Ltd) which had three other employees.

Stoke & Church Ltd routinely submitted self assessment returns for its 560 construction industry clients that showed travel and subsistence claims that generated tax repayments.

We received amended returns for over 100 of Stoke & Church Ltd’s clients showing increased claims for expenses generating further tax repayments.

Specialist officers interviewed Mr Berrick about these claims. He said that the initial return was correct and was filed with HMRC by Stoke & Church Ltd on the client’s behalf. The company took a percentage of the tax repayment as its fee.

Mr Berrick admitted that the amended returns were false and submitted without the client’s knowledge. The repayment was not passed to the client, but was retained by Stoke & Church Ltd.

The specialist officers asked further questions to find out who was the individual responsible within Stoke & Church Ltd. Mr Berrick argued that it was one of his employees that prepared the tax returns and handled the repayments received from HMRC.

Careful questioning revealed that Mr Berrick gave the employee clear instructions about the false tax returns and handled the tax repayments himself. The employee did not know that the tax returns were false, nor could he have suspected they were false.

We have established that it is the principal, Mr Berrick, within the organisation who was responsible for the dishonest conduct. He will be given the conduct notice, see CH881500.

The meeting must go on to give Mr Berrick the Human Rights message, an opportunity to make further disclosures and for us to find out the extent of the dishonest conduct. We will follow this example further later in this guidance.