Last updateTue, 11 Feb 2020 3pm

Expert Witness Blog

Are increased prosecutions a deterrent to fraud?

In December the National Audit Office (NAO) published the estimate by HMRC of how much was being lost to the exchequer due to tax fraud. The figure was £16 billion – almost half of the ‘tax gap’. HMRC placed a good deal of the responsibility for that fraud jointly at the doors of organised crime and small business.

HMRC has become more proactive in its tackling of such fraud, although the NAO was less than convinced of its claims regarding the deterrent effect of its increased prosecutions. According to the NAO, HMRC must make better use of the data at its disposal. Uncovering and tackling fraud is just one of the roles of the forensic accountant. They are at the forefront of the fight against financial crime – as well as uncovering the financial indicators of other major crimes. And it is an unexpectedly glamourous world, involving high-level sleuthing and the dogged pursuit of the truth.

Occasionally, such as in the case of a major drugs trial or a multimillion-pound divorce case, the forensic accountant steps into the public gaze. Most of the time, however, they operate behind the scenes. On a more routine level, forensic accountants are engaged to calculate the amount of compensation a personal injury claimant could be awarded. In such cases there will also be a need to arrive at a conclusion as to the cause of the accident and who is responsible.

That is where the engineering expert comes in. Where there is a failure or mishap regarding a vehicle or any kind of machinery, an engineering expert can often pinpoint where the problem arose and/or who was responsible for the event. They can also determine liability in cases of disputes over product or plant failure. Another area where a solicitor becomes involved in financial affairs – and one which can occasionally give rise to controversy – is in the determining of legacies in a will. Often that will include the leaving of an amount to charity, a course of action that is encouraged by government and which an increasing number of solicitors are committing themselves to introducing to their clients. In fact the number signing up to do just that passed the 1,000 mark in September.

In 2012 the rules changed to allow a reduced rate of inheritance tax for liable estates in which 10% or more was gifted to charity. That makes leaving a legacy more efficient, a fact that spurred PR luminary Roland Rudd to found an organisation, Legacy10, to encourage such giving. They also offer an annual award for individuals who make a difference.

On the other side of the coin, research shows that too many people are unaware of the implications of charitable giving for inheritance tax. Let us hope the campaign is successful. Many bequests involve offering aid and succour to refugees in war-torn parts of the world. However, unfortunately when the refugee is a lone child our asylum system does not always work in their best interests. That was the finding of a report by the Law Centres Network. They found that life chances for lone child asylum seekers may be affected by the workings of the system.

Often the child’s cultural background is greatly different from the domestic one and it is essential that an expert on cultural differences is on hand.