The Account

Money trailers

A major new study to identify kleptocracy’s “red flags” is being launched in the hope that it will lead to better rules and regulations in the fight against worldwide corruption. One of the areas to be examined will be the role that professional services play in moving ill-gotten gains around the world.

The research will be carried out by John Heathershaw and Tom Mayne from the University of Exeter, Ricardo Soares de Oliveira (University of Oxford), Alexandra Gillies and colleagues (Organized Crime and Corruption Reporting Project (OCCRP)) and Tena Prelec (University of Rijeka, Croatia). Their work has previously informed the UK’s 2022 Economic Crime Act.

“Lawyers, accountants, company service providers and other professionals often play essential roles in the movement of illicit wealth,” said Heathershaw. The OCCRP is a global network of journalists specialising in crime and corruption and this is the first large-scale effort to marshal its capacities for academic research, including that of its Aleph database, an investigative data platform that helps journalists “follow the money”. Aleph contains more than four billion entries, including detailed information on corporate ownership and financial transactions.

“Armies of professionals around the world are helping corrupt individuals conduct their dirty business,” said Gillies, Director of the Global Anti-Corruption Consortium and the project’s lead at OCCRP. “Given the massive scale and secrecy of their work, we need silo-busting partnerships like this one to understand how these global networks function, and to chip away at the harm they cause.”

From beer to eternity

According to global industry research firm, IBISWorld, the UK product expected to enjoy the greatest growth this year is non-alcoholic beer, with an impressive projected 40.5% rise in sales revenue. Second is corporate travel services at 31.5%, followed by language-learning software developers (22.4%).

IBISWorld credits the rise in sales to the pandemic, when many consumers cut out the booze while under lockdown, moving to non-alcoholic beer instead.

But, just as for every action there is an equal or opposite reaction (as Newton’s third law has it), the sales of non-alcoholic beer are coming at the expense of the alcoholic variety. Mazars reported earlier this year that the number of UK breweries going into insolvency jumped by 82%, from 38 in 2022 to 69 in 2023.

Craft beer appears to be bearing the brunt of this decline. A sharp rise in the cost of hops and yeast, caused by Russia’s invasion of Ukraine, and the extra administrative cost of exporting to the EU have conspired to hit brewers in the pocket. Some supposedly “local” London companies have been bought out of administration by a private equity firm and had their production relocated to Yorkshire.

However, Andy Slee, the Chief Executive of industry group Siba, recently told the Guardian: “Rumours of our demise are greatly exaggerated. There’s still good demand for indie beer. Our challenge is making profit out of it.”

CAs in the news

Victoria Ivinson CA

Scottish accountancy firm EQ recently announced its merger with Douglas Home & Co. The pivotal move marks EQ’s first phase in a strategic expansion plan to triple its turnover in the next five years. The merger, which creates a firm with a combined workforce of 210, will see Victoria Ivinson CA take a seat on the EQ executive board driving future strategy. Ivinson joined Douglas Home in 2007 and also sits on the Scottish Land & Estates Tax Committee.

Donald Begg CA

The famous fashion retail publication Drapers has shortlisted Begg Shoes in the Independent Retailer category for its Footwear Awards. The shoe seller, which has been in operation since 1866, is currently led by Managing Director, Donald Begg CA, from the sixth generation of Beggs to run the family firm. We’ll find out if he and Begg Shoes have triumphed when the winners are announced in June.

Ted Franks CA

Impact investment firm WHEB Asset Management has hit back at the recent increase in negativity surrounding sustainable investing. Ted Franks CA, a partner at the firm, wrote in a recent article on the company website: “We know that a large proportion of end investors want to invest in a way that generates a financial return while also supporting positive change in the world.”

The AI train

A £6.4m government fund supporting SMEs by match-funding AI skills training for their employees is now open to applications.

The scheme is funded through the £37.5m Labour Market Evaluations and Pilots Fund, announced by the Chancellor in the 2023 spring Budget to “continue to build the evidence base on the effectiveness of policies to improve labour market outcomes”.

Eligible businesses can apply for funding for up to 50% of the cost of training to help employees develop their AI skillset and understanding with a view to using the technology in their role. The deadline to apply is 31 May.

The funding competition is open to UK-based SMEs which have been operating for at least one year and operate in the professional and business services sector. Learn more here.

Why the clock isn’t ticking on TikTok tax avoidance

Some readers may be familiar with the story of Christopher Lunn, aka “the accountant to the stars”. At the time he was arrested in 2012, Lunn had around 7,000 clients on his books and had become the go-to accountant for self-employed creatives. Four years later, the qualified accountant, who was never affiliated with a professional body, was sentenced to five years in prison for evading more than £6m in tax through a combination of fraudulent claims, inflated accountancy fees and fraudulent deployment of trading losses.

Then HMRC went after his clients, who collectively owed millions in tax due to Lunn’s misdirection. The money was systematically retrieved, the system worked and justice was served. As one can imagine, the story garnered a huge amount of publicity for Lunn’s clients, who included celebrities such as Fiona Bruce, Sean Pertwee and Sadie Frost.

Fast-forward to the present day and another tax avoidance story has generated a lot of column inches. This time, however, the chances of finding the perpetrators and retrieving all the lost money are non-existent. The Australian Tax Office (ATO) is still chasing around A$1bn (£520m) that it paid out in refunds because of a scheme promoted on social media (mostly through TikTok).

This scheme exploited a weakness in Australia’s new self-assessment process that involved setting up a fake business and sending in a false set of accounts in return for a government refund of up to A$50,000. The ATO has blamed “influencers”, but if you create a weakness in a system where money is involved, somebody will find a way to exploit it, whether influenced or not.

Whereas Lunn insisted he was simply taking advantage of a loophole, and everyone involved was easy to find, many of the people who promoted and engaged in the ATO scam are untraceable – although it has been reported that up to 150 tax office workers were under investigation for submitting some of the 60,000 false claims.

Social media is not subject to the same regulations as other forms of communication and the sites are simply too big to police effectively. So it’s a safe bet that people will continue to be lured into such bogus schemes, revolving around areas such as inheritance tax. This is where the profession has a role to play. For instance, RSM recently published an article headlined “Beware the TikTok tax avoidance schemes”.

It is sound advice. It is also the kind of public-information message all firms could usefully echo to help potential clients avoid falling prey to the likes of Lunn.

RYAN HERMAN

THE ACCOUNT