The Revenue had banned the firm from acting as an agent while it investigated allegations of malpractice. Mr Justice Parker heard the case, which lasted two days, and concluded that HMRC should not have withdrawn the agent status of the firm. Instead, the company should have been told about the evidence against it and given the opportunity to make representations before any action was taken.
The case has now been referred back to the commissioners and HMRC will have to treat Christopher Lunn as an agent.
This case first started in April 2009 when an HMRC inspector discovered evidence that record-keeping at the firm did not meet statutory requirements. For example, expense claims were not exclusively incurred for the purposes of business and revenues were often estimated.
The Revenue launched a criminal investigation into the firm and raided its offices in June last year. Files on all the 7,000 clients were removed, as were computers. HMRC also contacted the accountant's clients requesting them to disclose any irregularities. Based on the evidence received, the Revenue terminated CLAC's agent status last November.
The lawyer representing Christopher Lunn argued that HMRC had given no indication that the firm's status as an agent was to be terminated, nor had it been given the chance to make representations.
The system as is doesn't appear to be very efficient. We don't want rogue agents and draft legislation on working with agents has been omitted from the Finance Bill 2011. But this case shows that there needs to be more communication between HMRC commissioners and the firms they deal with.
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