Having invested in the company, you then discover tax fraud

provide HMRC with documents

Share this content

Unfortunately, this nightmare scenario is not uncommon.  No matter how much due diligence is undertaken, a fraud can be very sophisticated and may only surface after certain people have left.  Often the fraud includes the Managing Director and other key employees, all of whom have now left.

The cost

The costs will only increase.  Exactly what has gone on and for how long will be the key question to be answered.  Followed by how was it done, what steps can we take to prevent it happening again.  All this at a further cost.  And no benefit.

So what do you do with the results?

Do you go to your solicitor to claim under Warranties and Indemnities?  Good luck – more cost and no guarantee of success.

The stress

Suspecting let alone discovering a fraud can be sickening.  Its often the last thing on your mind when you try and get just a few hours sleep and back again as soon as you wake up.  All adding to the stress levels.

What about HMRC?

What about HMRC?

This is invariably a tax fraud as well.  But one you did not commit.  You are the victim or rather the company is.  How do you deal with that without HMRC accusing you of all sorts.

Subject to the facts, the best advice is likely to be to make a Disclosure under the Contractual Disclosure Facility.

What will happen next?

HMRC is likely want to check the facts supporting the Disclosure.  Armed with the facts, HMRC may choose to mount their own separate investigation against the fraudster(s) either on a criminal or civil basis.

What about your claim against the seller?

Having paid the purchase price you will struggle to recover any funds.  It is therefore vital to structure the purchase price over a period of time.  In that way, you can adjust or stop any further funds to be paid over.

What should you do?

Seek specialist advice.   Few claims succeed under Warranties and Indemnities.  Protect yourself and the company from being seen as complicit by HMRC.  Undertake a damage limitation exercise.

Anyone seeking help can call me on 07979 313 010 or…

Share this content