SOCA investigation

by **AvocadoK** on Mon May 24, 2010 8:34 pm

We have recently started acting for a couple of individuals. Today, they were issued with notices from SOCA, indicating that SOCA had reason to believe the indivs had committed tax frauds, asking for statements of assets and various other documents that you might expect from a letter from an HMRC investigation. Has anyone had any experience of dealing with SOCA? Why would SOCA not refer it to HMRC to deal with?
Thanks in advance
AK

by **wamstax** on Tue May 25, 2010 9:48 am

Hi there
SOCA do not just deal with HMRC but have to determine the appropriate agency that would undertake any fraud investigation. Without knowing the exact details of what they have been up to it is possible that matters could be referred to not only HMRC but other prosecuting authorities

I hope that this helps

by **scottie2** on Tue May 25, 2010 10:03 am

Hi AvocadoK. The matter has been referred to SOCA as they must have the belief/suspicion that criminality has produced the untaxed income. In this scenario the criminality is not common or garden tax evasion, but something more serious. How well do you know your clients and what trade are they in? SOCA also get involved in these cases if they think they can recover tax or confiscate assets which will contribute to a reduction in whatever crime they think has taken place. They can utilise the powers available in POCA 2002 to pursue tax which has been generated on criminal activity and these powers are avilable where there are reasonable grounds that this has taken place. Generally HMRC would not be involved in these cases because of the suspicion that criminality has yielded the profits generated. My advice would be to have a frank and serious conversation with your clients and secure expert professional assistance if you have not dealt with this before. I hope this helps and please get in touch if you need more help. manoj.anand@wlhtax.co.uk

by **AvocadoK** on Wed May 26, 2010 6:48 pm

Thank you both for your comments. Fortunately for us, it is quite a new client - we have not prepared any accounts etc for them so far. But we will certainly have a serious discussion!

AK

by **AvocadoK** on Wed Jul 14, 2010 7:25 pm

I met the guys from SOCA today. It turns out that, although they believe the suspect has received proceeds of crime, they are not interested in trying to prosecute for that, and instead just want to tax the money in question (plus the interest and penalties of course). This makes life much easier for them - as a civil matter, they only have to demonstrate tax loss on a balance of probabilities. They also say (tho I have not checked) that the Proceeds of Crime Act allows them to charge tax on unexplained receipts without the need to establish a source of income, which HMRC would be required to do.
AK

by **AvocadoK** on Wed Jul 14, 2010 7:42 pm

...I have now checked and s319 Proceeds of Crime Act is where it says they do not have to identify a source.
AK

by **Brian Clarke** on Fri Sep 03, 2010 3:56 pm

I have only just spotted this thread.

"I met the guys from SOCA today. It turns out that, although they believe the suspect has received proceeds of crime, they are not interested in trying to prosecute for that, and instead just want to tax the money in question (plus the interest and penalties of course)."

It's the same as with HMRC - they really only want the money, and they'll only prosecute if the taxpayer seriously starts taking the p*ss. I've been dealing with SOCA lately, and they allege drug dealing, and they issued estimated assessments based just on bank receipts.

I'm not sure what purpose is served by s319 POCA 2002.

by **Generix** on Fri Sep 03, 2010 4:33 pm

Brian Clarke wrote:I have only just spotted this thread.

"I met the guys from SOCA today. It turns out that, although they believe the suspect has received proceeds of crime, they are not interested in trying to prosecute for that, and instead just want to tax the money in question (plus the interest and penalties of course)."

It's the same as with HMRC - they really only want the money, and they'll only prosecute if the taxpayer seriously starts taking the p*ss. I've been dealing with SOCA lately, and they allege drug dealing, and they issued estimated assessments based just on bank receipts.

I'm not sure what purpose is served by s319 POCA 2002.

Am I reading this right that rather than taking the full amount of unexplained, likely illicit, money, they want to tax it instead?

So effectively taxing illegal trade instead of jailing the people/taking the entire funds from them!?

:roll:

No wonder the government won't ever legalise drugs, the price would drop and then the tax collected would also drop by the sounds of it!

by **Brian Clarke** on Fri Sep 03, 2010 6:23 pm

Generix,

"Am I reading this right that rather than taking the full amount of unexplained, likely illicit, money, they want to tax it instead?

So effectively taxing illegal trade instead of jailing the people/taking the entire funds from them!?"

The way I read the legislation (and I'm an accountant, not a lawyer), it's broad brush and a little vague. Using tax legislation is a relatively easy way to get some money out of the (alleged) criminal - you're working effectively on the balance of probabilities. I would imagine that to get ALL the money, you have to convict the perpetrator, and that takes a lot of time and money to achieve. By using tax legislation, they get a quicker bang for their tax compliance buck.

by **AvocadoK** on Fri Sep 03, 2010 6:39 pm

Brian Clarke wrote:
I'm not sure what purpose is served by s319 POCA 2002.

When HMRC raise a tax assessment, they must identify a source of income. They cannot assess bank deposits without at least having a theory as to where they come from. With SOCA, they don't need to identify the source. So it is up to the taxpayer to explain away the bank deposits or face a tax assessment.

AK