May 2024 Tax Investigation Round Up

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

• Accountancy shuts down owing HMRC £202k
• Nadhim Zahawi Admits Settling £5m Tax Bill
• Ex-Man City footballer settles £710k tax bill
• Cumbria construction boss jailed for £60k fraud
  ‍

Accountancy shuts down owing HMRC £202k

In October 2023, Apostle Accounting, a tax rebate firm, ceased operations and entered administration following growing customer unrest and a police investigation. The firm's closure was influenced by the involvement of a group of MPs, including Jo Churchill, MP for Bury St Edmunds, who acted on behalf of affected constituents.

Suffolk Police, assisted by the Eastern Region Special Operations Unit (ERSOU), conducted raids on residential and commercial properties associated with Apostle Accounting in Stowmarket and an office in Peterborough last week. During these operations, documents and digital devices were seized for analysis, though no arrests have yet been made.

ERSOU's tax investigation into the firm involves approximately 300 potential victims of fraud. Al Al-Bassam of ERSOU's regional organized crime unit stressed the ongoing nature of the inquiry and the collaboration with partner agencies to determine if any offenses were committed.

At the time of its collapse, Apostle Accounting was reportedly managing incorrect tax rebate claims, impacting hundreds of taxpayers. The firm had assets totaling £275,044 but faced claims from creditors amounting to £315,408, resulting in an estimated shortfall of £40,364. The largest creditor was HMRC, which is owed £202,753.84, though this amount is considered an unsecured non-preferential claim, putting full repayment in doubt.

Additional creditors included financial institutions and 28 individuals who had sought tax rebates through Apostle Accounting but were left unpaid. Among the claims handled by insolvency firm DFW Associates were several substantial amounts, with some reaching up to £10,978.

Moreover, Apostle Accounting had been penalized £40,207 for failing to comply with anti-money laundering regulations by the Institute of Certified Bookkeepers. The firm also had outstanding financial obligations to Santander and BNP Paribas Leasing, as well as an unpaid legal bill.

Zoe Goodchild, one of the firm's directors, is also involved with several other companies, including Innovative Financial Services Ltd and Apostle Property Management Ltd. Despite resigning from Innovate Accountancy Ltd in May 2024, where she was a director and person with significant control, she remains connected to the company. Recent financial statements from November 2023 reveal a balance sheet loss and a significant director's loan outstanding at Innovate Accountancy.

‍

Nadhim Zahawi admits settling £5m tax bill

Former Chancellor Nadhim Zahawi has acknowledged settling a £5 million tax bill with HMRC, which included a £1 million fine, due to what he described as a "non-deliberate" and "careless mistake."

Zahawi, who recently announced he will step down as an MP at the next election, issued a public apology for his income tax errors during an interview with Laura Kuenssberg on the BBC for not being "more explicit" about the settlement. He emphasized that HMRC deemed his actions as careless rather than intentional and confirmed that HMRC "accepted that I was not the beneficiary of an offshore structure or offshore trust."

He stated, "I’m sorry that when I had my settlement with HMRC two years ago, I should have probably been more explicit in the details, in the ministerial declaration, as to how the settlement was arrived at, and that’s my own mistake. Although it was found to be non-deliberate and careless, there’s still a penalty attached to that which I accepted fully, and I accepted it because I was Chancellor of the Exchequer. Even if I wanted to push back on this, I think it would have been a total abuse of power."

Following his decision to step down, Zahawi has been appointed executive chairman of the online retailer Very Group, owned by the Barclay family. He will assume this role after the general election, succeeding Dirk Van Den Berghe, who left the position in February after two years.

Zahawi submitted an application to the parliamentary Advisory Committee on Business Appointments regarding his new role. The committee noted that Zahawi has known the Barclay family for 20 years and found no conflicts of interest in his appointment. The committee stated, "We did not consider this appointment raises any particular propriety concerns associated with your time in office under the government’s rules. There are inherent risks associated with your access to sensitive information and contacts which the standard conditions below appropriately mitigate."

The committee emphasized that Zahawi must not exploit his government contacts or privileged information to benefit Very Group unfairly.

‍

Ex-Man City footballer settles £710k tax bill

Former Manchester City defender Benjamin Mendy has averted a bankruptcy order from HMRC by settling his £710,000 tax bill. The payment led to a High Court judge dismissing HMRC's bankruptcy demand.

Mendy, who currently plays for French club Lorient, sold his house in Cheshire to raise the necessary funds to clear the debt. His lawyer confirmed that the tax debt had been fully paid.

Judge Nicholas Briggs dismissed the bankruptcy petition, stating that there was nothing left in the petition and he would "accept the undertaking."

‍

Cumbria construction boss jailed for £60k fraud

Property developer Adam Kirkbride, 32, from Keswick, has been sentenced to four years in prison for defrauding a pensioner out of £60,000. Kirkbride siphoned off the investment intended for a proposed housing development, despite being subject to multiple director bans.

Kirkbride appeared at Newcastle Crown Court on April 19, where he pleaded guilty to tax fraud. The case revealed that he had been acting as a director for three companies, including Kirkbride Homes (NW) I Limited, despite being disqualified and under a bankruptcy order since November 2012.

The fraud involved a £60,000 investment from a pensioner in September 2013, who was led to believe his money was secure and recoverable if the housing project in Heywood, Greater Manchester, did not proceed as planned. However, Kirkbride spent the entire amount within three weeks on bills and loan repayments, violating the condition that the funds should remain untouched until the total investment reached at least £2 million.

As a result of Kirkbride's actions, the pensioner had to work four additional years and retire with a reduced income. Furthermore, Kirkbride's mismanagement led to the dissolution of three companies—Kirkbride Group (Cumbria) Ltd, Kirkbride Homes (NW) Limited, and Kirkbride Homes (NW) I Limited—between December 2014 and August 2016, resulting in a collective loss of £400,000 for other investors.

Kirkbride was initially disqualified as a director for 12 years in August 2017 after Insolvency Service investigations found he had managed companies while being an undischarged bankrupt. Despite this ban, he continued to act as a director for APK Construction Services UK Ltd from September 2018 to December 2020, and managed APK Holdings (Cumbria) Ltd and Able Skip Hire Limited without court permission.

During his illicit management, Kirkbride accrued over £500,000 in debts to individuals from whom he had purchased businesses and left invoices exceeding £100,000 unpaid.

Julie Barnes, chief investigator at the Insolvency Service, stated, "The offences committed by Adam Kirkbride involved deceit, dishonesty, and deliberate concealment of his status as someone prohibited from acting in the management of a company. Kirkbride was motivated purely by personal gain and his fraudulent behaviour involved the abuse of power, trust and responsibility. His actions caused serious financial losses and he now has the chance to reflect on his criminal behaviour from behind bars."