Nigel Erd from IT was in Ian Spectre’s office and they were both looking at a print out Nigel had generated upon Spectre’s request demand. You see, Spectre likes to pluck random HMRC customers with unreasonable demands, penalties and threatening letters because… well, because he’s only happy when he’s making someone else miserable. But today something wasn’t going the way it should in Spectre’s office…
Spectre was irate, he wanted to play CAM (Cat & Mouse, read the blog here) again, but the list of random corporation tax references was wrong, each had 9 numbers instead of 10. “How am I supposed to do my job if you can’t do yours, we’re running a business here, Nigel! What are these 9 digit numbers?!” Spectre barked.
“I don’t understand it” said Nigel “I must have set something incorrectly when I generated this report for you, but I’ll fix it…” He fumbled around with a notebook and gathered his papers that had been strewn about the office by Spectre.
Then along came Polly. Polly Brown had spent many years heading the VAT office but had made the mistake of cancelling a penalty Spectre had levied on an errant customer. Spectre had had her seconded to his office because, despite her many faults, she made a damn good cup of tea. As she put Spectre’s tea on his desk she glanced at the print out that he and Nigel Erd were looking at “What are you two doing with all of those, VAT numbers?”, she said.
“Of course” said Spectre, “we haven’t got corporation tax references, we’ve got VAT numbers. Well, that should work too”. Nigel’s neck was spared, this time! Spectre looked down the list of random numbers, content that he could finally get on with his day, until he came up with a suitable customer to hector – Dougal Services Limited whose accountant was none other than Edward Peters of Warr & Co. “There’s that bloody Edward Peters again, perfect, I think we’ll arrange a VAT visit”, he said, an evil grin creeping across his face.
The next morning Spectre put a call in to Eleanor Thomas, MG (the regional Mother Goose). Eleanor had her office in a bright coloured building opposite the building that Spectre worked in. She had been appointed Regional MG 5 years ago and was in charge of training new recruits in Customer Care, a ‘mother’ of sorts to the team. “I want you in my office in 5 minutes”, Spectre bellowed.
Spectre looked at the woman standing in front of him. She was prim and proper with a knee length dress and spectacles perched at the end of her nose. All that was missing thought Spectre was an Easter bonnet.
“I want one of your trained recruits to send out on a VAT compliance visit”, Spectre said.
“I can let you have Florence Gosling” Eleanor replied “She’s been with us for three years now. You may remember I organised a collection for her 21st last month”.
“Yes, yes” replied Spectre, he had put in a few foreign currency coins that he found rattling around in the bottom drawer of the desk he inherited. “Send her over this afternoon”.
Florence Gosling had left school at 18 and answered an ad in the local newspaper placed by an organisation called Hector’s Magic Roundabout Club to train in Customer Care, which turned out to be the Customer Care team at HMRC. She never did manage to find out why the ad was for ‘Hector’s Magic Roundabout Club’ and thought it must be some inside joke. Now 3 years later she found herself standing before Ian Spectre.
“I’ve arranged for you to visit the offices of Warr & Co next Monday afternoon to look at the VAT records of Dougal Services Limited and find some errors. When you get there ask for Mr Peters.” Spectre growled without even looking up at Florence. Florence had the following week off on annual leave, but everyone knows what Spectre is like, unfortunately turning down the errand was not an option, she would have to re-arrange her time off.
The next Monday at 12.30 pm Florence arrived at Warr & Co.’s offices feeling a little nervous. A secretary put her in a small office, asked her to sit down and offered her a coffee, which she politely declined. Five minutes later Edward Peters walked in carrying some books and other records. “Miss Gosling, I presume”, Edward said offering her his hand.
“Yes”, said Florence “you must be Mr Peters”.
“Shall we drop the formalities” Edward said, “I tend to get called Ed, shall I call you Florence?”
“Flo, please” she replied.
Edward handed over the records and talked through them briefly. “Ed, can you let me know what the customer is called” she queried as she thumbed through a few pages. “Well Flo, we tend to call our customers clients. You see, we have a professional duty of care, and so client is a more appropriate term to use. But you know already that the company is Dougal Services Limited, I think you meant to ask the name of the director. He’s called Jack Phillipson and he uses the company to provide management consultancy services to third party clients”.
“Thanks Ed, that’s exactly what I meant, do you want to leave me with these records and come back to me at, say, 3.30 pm?”
With that Edward returned to his office to answer his emails.
“What a nice gentleman”, Florence thought to herself, “Nothing like the monster Mr Spectre described”. Florence worked through the records, struggling a little to understand the accounting entries and then made notes as she went through them.
At 3.30 pm Edward knocked on the office door and entered. “Hi Flo how you getting on? Are you going to have Jack Phillipson arrested?”
Florence grinned, “No, I don’t think that will be necessary”
“Me then?” said Edward.
“No, no one’s going to get arrested! I do have some queries though. I’ve got a £30,000 banking last October with no invoice and these four bankings of £2,400 each in August where VAT doesn’t appear to have been paid over.”
“I can explain the £30,000”, said Edward. “Jack took a loan from his company 12 months earlier and repaid it in October. But I’ll have to get my working papers file to check these four bankings.” Edward left to get his file and returned a few minutes later. He sat down and studied the file and the records and then said, “Look here they are, the bankings represent these four invoices raised in July”.
“But I’ve tied those up to these bankings in July Ed”, she replied.
Edward knew the correct VAT had been paid over because the accounts he had prepared balanced to the penny. He sensed that perhaps Florence lacked experience, so over the next hour he went over four years of records showing Florence how all of the bankings could be tied up to invoices, except for the £30,000 that Jack had paid in to clear his loan. He began to get conscious that the time he was putting in meant that a higher than expected invoice would need to be raised to Jack and attempted to wrap up the meeting.
“You’re quite right Ed”, Florence said, “I do apologise, I should have worked it out for myself. I’ll write a report for Mr Spectre and I should be able to come back to you in a week to 10 days to confirm that no adjustments are needed”.
“No apology necessary, Flo” Edward said. “Now, its 5.00 pm and the traffic is awful at this time. There’s a nice pub across the road, can I buy you a drink?”
“That would be really nice Ed, I’m on the bus, but I’ll only have one because I want to be home for 6.30 pm”.
They chatted as they enjoyed a drink together and discovered they were both fans of the radio show ‘Just a Minute’. They said their goodbyes at 6.00 pm.
Back in the office Florence prepared her report and emailed it to Ian Spectre. Spectre printed the report and started to read it. As he did so his face reddened and he started to shout expletives. He picked up the phone, dialled a number and yelled, “MISS GOSLING, MY OFFICE NOW!”
Florence gingerly made her way to Spectres office. He stood up and told her to sit down. He stood towering above her, holding the report and glared.
“YOUR REPORT STARTS met with Ed Peters at his office…… YOU MUST NEVER REFER TO A CUSTOMER REPRESENTATIVE BY HIS FIRST NAME.” He went on,“YOU STATE IN THE REPORT THAT YOU LET HIM TAKE YOU TO A PUB! LET ME TELL YOU, THAT MR PETER’S IS A DEVIOUS MAN. HE TRIES TO DISRUPT THE GOOD WORK WE DO. HE IS THE ENEMY, DO NOT SOCIALISE WITH HIM! WORST OF ALL YOU FOUND NOTHING WRONG WITH THE CUSTOMERS VAT PAYMENTS!! SURELY THERE WAS SOMETHING UNEXPLAINED!?!?”
Tears welled in Florence’s eyes, more from the shock of how angry Spectre was – she’d heard this was possible, but this was the first time she’d witnessed his full fury. When she composed herself she replied “well, there was the £30,000, but Ed, I mean Mr Peters explained that Mr Phillipson had taken a loan from Dougal Service Limited and he then repaid it”.
“AND YOU BELIEVED THAT EXPLANATION? IT COULD HAVE BEEN A FEE OF £25,000 PLUS VAT, AND IF IT IS, WHAT ELSE MIGHT THERE BE?”
“But I saw a £30,000 payment going from the company to Mr Phillipson 12 months earlier”, said Florence.
“Well”, said Spectre, “we’ll get Phillipson’s personal bank statements for the last 4 years and see if we can find anything. At the very least we should build up a profile of his lifestyle which could be useful in a future enquiry into his personal tax affairs. Send a letter to Peters demanding to see 4 year’s personal bank statements and find out everything you can about this Mr. Phillipson”.
Two weeks later Edward Peters was going through his post and spotted a letter from Flo. ‘She’s unable to complete her review of the VAT records of Dougal Services Limited until she sees the last four year’s of personal bank statements for Jack Phillipson??’, he said to himself. Feeling somewhat flabbergasted he picked up the phone and rang her number.
“Good morning, Florence Gosling here, how may I help you?”
“Hi Flo, its Ed Peters here”
“How can I help you Mr Peters?”
“I’ve just got your letter and am somewhat surprised that you are asking from Mr Phillipson’s personal bank statements. Why do you want them?”
“Well Mr Peters, £30,000 is rather a lot of money and I can’t take your explanation at face-value”.
“But your review was in respect of Dougal Services Limited not Mr Phillipson, he is a third party. It’s like asking for my personal bank statements. Furthermore, are you aware of the case Betts v HMRC? In that case the Tribunal said that HMRC were going on a fishing expedition which they wouldn’t allow. You seem to be doing the same. At best you are speculating that something may be wrong. You certainly don’t have any grounds for suspicion”.
“I am aware of that case and I think the circumstances are different here. Of course I wouldn’t ask you for your bank statements. However, Mr Phillipson is the sole shareholder and director of Dougal Services Limited and I think I am entitled to see his bank statements to satisfy myself that all is in order. Of course, if you prefer we can go down the formal route. I can issue a decision which you can appeal and take to the Tribunal”.
“I’ll give it some thought, Flo, and come back to you soon if that’s ok?”
“Very well Mr Peters but do make sure you come back to me within 30 days. Good day.”
Edward Peters was shocked. It took some time for him to gather his thoughts. He telephoned Jack Phillipson and explained the position.
“What do you recommend we do”, asked Jack.
“Well, I’m 100% sure that a Tribunal will back you if you refuse to hand over your personal bank statements. But that is going to be very costly for you. I don’t think we have any option but to comply with the request”.
“Ok, I agree, I’ll drop my statements off next week”, said Jack.
Edward received the statements and had them posted to Miss Gosling.
On receiving the package, Florence sat down with Spectre. They quickly tied up the transactions between Mr Phillipson and the company and Spectre asked Florence to return the statements and close the enquiry with no adjustments. Spectre had had the statements copied and intended to spend the next couple of days going through them in detail and making notes, he couldn’t pass up an opportunity to try and catch a customer out.
That evening Spectre reflected on the episode. “I was perhaps a little harsh on Miss Gosling”, he thought. “With a bit more practical training she’ll make an excellent Customer Care Representative, I wonder if I should demand she works for me exclusively. With more experience I could train her to be the type of Customer Representative that the HMRC needs if we’re going to meet our financial targets.”
As he dozed Spectre delighted in the fact that he had at last got the better of Edward Peters. As he drifted off to sleep his final thought was to come up with ideas to Hector More Random Customers.
Warr & Co offer their clients a Fee Protection Policy. Dougal Services Limited had not taken this up. If they had then Edward Peters could have taken the matter to the Tribunal and stopped HMRC from seeing Jack Phillipson’s personal statements.
NB: The story presented in this blog is based on a real case involving a client of Warr & Co.