February 2022 Tax Investigation Round Up

February's round up of the latest tax investigation news and cases:

• Family commits £62,000 worth of benefit fraud
• Only 25% of £5.8bn loss to be repaid from Covid fraud
• Barrister convicted for £100k VAT fraud

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Family commits £62,000 worth of benefit fraud

David Aston and Eugina Wallis have both been found guilty and convicted of claiming more than £60,000 in benefits. Investigations on the pair were launched in 2014 by Mid Sussex District Council and the Department for Work and Pensions. Evidence was gathered over three years.

The pair both claimed they were single not living with a partner, receiving income related employment support allowance. It was however revealed that they were married living together in a property in Hurstpierpoint.

David Aston, 59, claimed housing benefit and council tax benefit by wrongly claiming he was living in Bognor with his carer. Investigations found that his daughter Kelly Aston was living in this property rent free. He also claimed disability living allowance payments, reporting that he had mobility and care needs.

Eugina Wallis, 61, also fraudulently claimed housing benefits and council tax benefits.

Following all the evidence, Aston and Wallis were arrested and the properties were searched. Aston’s daughter Kelly was also interviewed under caution.

Judge Janet Waddicor stated: “There is overwhelming evidence of dishonesty over a number of years. The amount of work by the investigators on this case is truly impressive.

“The amount of work that has gone into this investigation is astonishing. The degree of careful investigation was truly exceptional.”

The case took place at Lewes Crown Court and David Aston pleaded guilty and was sentenced to 22 months in prison. Eugina Wallis received a 36 week sentence and Kelly Aston was given 12 months community service.

A Department for Work and Pensions spokeswoman continued: “We constantly review how we tackle benefit theft. We are committed to deterring those considering fraud; to detecting fraud when it does occur and to making sure those who commit benefit theft are brought to justice.”

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Only 25% of £5.8bn loss to be repaid from Covid fraud

With HMRC’s ongoing investigations into fraudulent claims and payouts of the Covid-19 support schemes, they expect to recover just 25% of the total £5.8bn loan fraud.

This latest figure was published in a document on 12 January 2021 entitled HMRC’s responses to inaccurate claims, revealing that £4.3bn of £5.8bn looks as though it will never be recovered.

HMRC states that it has already managed to recover £500m worth of overpayments in the years 2020-21 and the Taxpayer Protection Taskforce is hoping to recover £800m to £1.5bn between 2021-23. This figure represents only 22% to 26% of the total amount lost to error or fraud.

Reports show in the publication that 8.7% or £5.3bn was of the Coronavirus Job Retention Scheme, 8.5% or £71m to the Eat out to Help Out scheme and 2.5% or £493m of the self employment income support payments were all paid out by error or by fraud.

HMRC had spent a total of £81.2bn on all the coronavirus schemes and had prevented over 100,000 "ineligible or mistaken claims" during the pandemic. A further 29,000 claims were blocked by carrying out pre payment checks.

Think tank Taxwatch comments: ‘The admission from HMRC that they only expect to recover one-quarter of the amount lost to error and fraud in the Covid relief schemes means that billions of pounds will be left in the hands of criminals. That simply cannot be acceptable by any standard.’

Taxwatch also analysed the government's actions on tackling the Covid 19 fraud, critically finding that the taskforce was given £100m to cover 2021-22 financial year, and then awarded £55m for the 2022-23 financial year in the Autumn budget with no further planning for April 2023 onwards.

Taxwatch criticises: "This demonstrates that when an issue is deemed to be important enough, the Treasury finds the money. It is time for the Treasury to start taking tax fraud more seriously and properly funding the enforcement of tax crime".

Jim Harra, head of HMRC, told the Financial Times  that they will struggle to recover over half of the money lost.

Harra claims: "We will not be able to recover it all. You will reach a point of diminishing returns in terms of good use of resources.

"These are time-limited schemes. We do need to put them to bed at some stage and move on from them. And 2022-23 is the year to which our plans go up to. Whether there’s anything that goes on beyond that will depend, I think, on what we find and the rate of return that we’re getting."

A Government spokesperson communicated : "Throughout this crisis, the Government’s number one priority has been to protect jobs and livelihoods while also supporting businesses and public services across the UK.

"Robust measures were put in place to control error and fraud in the key Covid support schemes. The controls put in place delivered results.  It was right to put the schemes in place despite knowing there would be some error and fraud.

"The government has invested over £100m in a Taxpayer Protection Taskforce of 1,265 HMRC staff to combat fraud on the HMRC Covid-19 schemes, one of the largest and quickest responses to a fraud risk by HMRC."

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Barrister convicted for £100k VAT fraud

Christopher Wilkins was sentenced to 21 months in prison by Taunton Crown Court on 12 January 2022 . He was found guilty of tax fraud by inflating his expenses and reporting a lower income to avoid £93,732 in VAT.

Wilkins worked as a solicitor and was called to the bar in 1993, practising until 2005. He then returned in 2011 working as self-employed, specialising in insolvency and financial services.

Wilkins began to undeclare his income and submitted false VAT returns in May 2012 for the purpose of paying his children's private school fees which account to a sum of £5,000 a month. He was already suffering from debt due to a failed investment in a property overseas that crashed in 2008.

In 2013 Wilkins agreed to an individual voluntary agreement (IVA) to settle the amount owed and avoid bankruptcy. However he continued to submit false claims until June 2017.  His financial records were seized by HMRC from his home address after he failed to submit his VAT returns for a long period up to June 2017.

On his arrest in May 2017, an investigation was launched and found that Wilkins had understated his income to reduce his tax liability. This information was provided by his Chambers. The total VAT liability was £98,732.

Wilkins denied the guilty charge and stated he had not done anything with bad intentions to avoid or evade VAT. However he changed his plea two weeks before the trial date.

In Wilkins defense at the trial, Charles Bott QC exclaimed to the court that Wilkins had ‘lost his professional reputation as a result of the case’ as he can no longer practise at the bar.

He also said that "even though he brought it on himself" that Wilkins "cuts a sad figure and the degree of physical, emotional, and mental damage this has caused and he is a walking parable of what can happen to a good man when he gets into debt".

Judge Paul Cook declared it was "clear the defendant had suffered psychological and physical distress trying to cope with his financial issues" and that Wilkins' motivation "was not financial gain but emotional pressure and you did not want to let those around you down".

Cook did not see Wilkins as a risk and agreed that he was not going to reoffend again but decided that it had "to be an immediate term bearing in mind the substantial amount and long period".

Zoe Ellerbeck, assistant director, Fraud Investigation Service, HMRC, commented: "As a trusted barrister, Christopher Wilkins should have known better than to try and cheat the system.

"Nobody is above the law and tax fraud is not a victimless crime. People who defraud HMRC are stealing from their community by taking money away from hospitals, schools, and other vital public services."