I have a new client under a full enquiry as the Revenue has found out his previous accountant acted fraudulently in submitting his 2002/3 return - gross underdeclaration of income.
My client trades with another-who also used the aformentioned accountant with the same result- and they have spilt the income (and expenditure) randomly between their individual and one joint accounts.
It is clear that they trade "de facto" as a partnership although (at this stage) only he is being investigated-as a sole trader.
Their books are a complete mess and it is nearly impossible to extracate which slice of income belongs to who or to decide where the partnership trade begins and where the trade of the individuals does (all the invoices are made out to my client).
I plan to advise the revenue that a partnership exists for all of the income even though that will involve VAT issues (their previous advised them 'how' to avoid registering!!!) and joint liability as it is the only practical way to calculate the business's true trading figures.
Are the revenue likley to go with this approach?
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