I started working for a small company a 6 weeks ago. I working with the financial controller and looking after the accounting. However I have been getting a bad feeling about the place for a while now which started when I looked at their aged creditors list and saw that they owe hundreds of thousands and a main part of my role soon became dealing with the chasing calls I have already been told that I am paying too much back to the suppliers after working out a small payment plan with two in order to stop them taking us to court. Now it looks like there will not be enough money to pay the staff (50K) as we struggled to pay the Directors expanses (8k). I know that we have not paid the PAYE for last money yet and I have been noticed that our corporation tax is due next month when the financial controller is on holiday.
If that wasn't bad enough I have noticed that they are moving invoices between the 4 companies they own and are in the process of buying a new one, but I have no idea how they are doing that as there is no money in the bank.
Looking at the way the company is run I think that once they buy this new company they will stop trading under the old name and try and talk away from the debts they have built up.
Someone will be along to tell you the full ins and outs, my advice would be if you think there is anything untowards then keep a diary to save yourself any implication.
whilst pheonix companies and long firms have been used in the past as a means of racking up debt and then walking away HMRC have long since been wise to such practices and directors find themselves now directly accountable for the debts of the defunct business.
The issue for any employee in a position of authority is that they are responsible for what they knew, what they ought to have known and what they ought to have done about it.
I would advise that rather than publish any facts on here you make contact with citizens advice and get professional advice as to your position as the last thing that you want is to be hit by any of the fallout from this.
I would also advise that you start looking for another job and beat the rest of the people in the company to the jobs market as I'm sure that they will not be too far behind you.
Always remember that it is always easier to find a job when you are already in one.
Good luck and sorry that this is not more detailed advice but I think from the sound of things that you should really consult with citizens advice.
kindest regards,
Shaun.
p.s. and as Steve states, document everything.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
If you think there is deliberate misappropriation going on then you should at the very least be filing a money laundering report and probably resigning as the bookkeeper (without tipping off). It may be worth ensuring you have appropriate evidence of the transactions to help with your report.
As Shaun has said Phoenixing is relatively common but if the directors are not acting in the best interest of the company i.e. by paying management fees etc. to related companies rather than genuine creditors they can find themselves in some serious trouble.
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Phil Hendy, The Accountancy Mentor
Are you thinking of setting up your own practice or have you set up and need some help?
If so a mentor may be the way forward - feel free to get in touch and see how I can assist you.
I, and several other staff, found ourselves in a similar situation many moons ago when I was younger and more naive, I did not have the support of a registered body (not that I have found them very supportive anyway), and HMRC didn't do much. The local HMRC offices are rubbish, the fraud line at that time just logged the complaint but it went nowhere. It was only when another member of staff telephoned the criminal investigations unit direct that someone took notice, and we are talking about a major, major fraud case. I don't know if HMRC have got themselves together any more or not, but just ensure that you do report in writing and keep evidence of that in case it should come back on you.
I don't want to scare you but it is imperative that you keep yourself right in this situation. My former employers tried to turn the situation around when they discovered it was the staff that blew the whistle. In their panic when their business was raided they made unfounded allegations that the staff were the ones fiddling and the poor directors knew nothing. When that was thrown out they backtracked a bit and said okay, they were fiddling a bit but the staff were fully aware and helped them, so we all had our affairs investigated as well. We were all cleared, I think HMRC knew the allegations were made in pure spite, but they had to investigate it before they could clear us all the same.
Some people in your situation get blackmailed by employers, it can be a case of 'if you don't do it, you'll lose your job'. If you are put under this type of pressure, don't do it, it isn't worth it. Employment law is absolutely no help, in the case where you want to take a tribunal case the law states that you need to leave your job quickly after uncovering the fraud, otherwise you will be seen to have agreed to working illegally and have no case. A very unfair point of law, not everyone can afford just to walk away from a job, they have to work on until they secure another post, not realising they are scuppering their chances of tribunal. A member of staff who did walk found the DSS cut her money for some weeks as she 'voluntarily' resigned. They didn't care she was forced into the position, a clear case of 'computer says no'.
Don't be surprised if very little is done to your employers either. It is usually the people with money that defraud and get away with it because they can throw money at a legal team. Those that co-operate are usually allowed to settle for an agreed sum without prosecution. The agreed sum is normally a fraction of what people actually have defrauded due to and smart ar*e barristers and tax specialists whittling the bill down.
That's not to say you shouldn't report, like I said, keep yourself right in all circumstances but don't hold out much hope of your employers getting punished, we live in a corrupt society where the rich get off with murder and HMRC hammers the small businessman because they are a much easier target.
Edited because of bad grammar
-- Edited by mushroom on Saturday 23rd of March 2013 01:50:11 PM
The only thing I would say there though mushroom is that as the appointed professional you have a legal duty to report. Even if you are not registered to a professional body you need to register with HMRC.
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Phil Hendy, The Accountancy Mentor
Are you thinking of setting up your own practice or have you set up and need some help?
If so a mentor may be the way forward - feel free to get in touch and see how I can assist you.
I have reported it to http://www.actionfraud.police.uk/ but the women I reported it do didn't understand what I was reporting and spend most of her time telling me to report it to someone else, really I had to use my manager voice on her.
As it was she didn't record any information of any use, just the company names address, phone, fax, website, and email. As there are 4 companies involved have to read out the same information again and again and she only record it as suspected fraud.
I have to say I really am horrified at how difficult it is to report fraud and now I sure that the directors will get away with it and the only ones who will be out of pocket are the suppliers and the staff.
You would need to go direct to HMRC with this one, get the contact details for Criminal Investigations and go direct. If you phone, follow in writing as well in case you have to prove at a later date that you complied with your legal obligations.
I have to say I really am horrified at how difficult it is to report fraud and now I sure that the directors will get away with it and the only ones who will be out of pocket are the suppliers and the staff.
Just thought I would add, that can happen, and does a lot. As I said in my last post even if businesses are raided by HMRC, they are maybe not taken to courts and are allowed to settle with an agreed payment. If a Ltd company is involved that has a lot of debt, the company closes, usually penniless on paper and the suppliers usually find it impossible to pierce the coporate veil. It is a case of 'innocent until proven guilty' and unless you can prove the company was trading illegally and money was being taken elsewhere, you can't hit their personal assets, but how does a supplier prove the company is guilty if HMRC does not pursue a criminal investigation? Debt collectors worth their salt will not touch a collection like this so more often than not innocent people get shafted.
Contact your professional body if you have one, they should log calls like this and that can help. I'm afraid your own personal diary doesn't help as it pretty much says you knew something was wrong but didn't do anything about it (turned a blind eye).
You should report financial crimes to SOCA, they are very good at working with all the other various government departments and may already have a flag on this company, you never know.
Even if you are employed the AMLR still applies to you, you just don't need to register. So if you are a professional who did not report something you can still be in trouble as professionals should know better. Not only that but the company could turn around and say they have a professional looking after all financials and they didn't say anything.
If something does go wrong you want to make sure you have all your boxes ticked, as clients and company bosses (if they are guilty) tend to pass the blame quickly
