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Fraud and asset tracing against HMRC

04 May 2021 / Joseph England
Issue: 4790 / Categories: Comment & Analysis
Follow the (tax) money

Key points

  • The defendants misappropriated funds on trust for XL – the second defendant wrongly declared those funds as income and paid tax on it.
  • HMRC sought to retain those funds even though tax was not due.
  • Judgment is important with regard to the approach HMRC should take to stolen funds.
  • HMRC was unable to use the defence of bona fide purchaser for value.

In XL Insurance Company SE v IPORS Underwriting LTD and others [2021] EWHC 474 (COMM) the defendants allegedly misappropriated approximately £10m of premium funds due to be held on trust for the claimant insurers (XL).

XL contended based on bank statements and forensic accountancy analysis that the second defendant had then wrongly declared XL’s trust funds as ‘income’ on his tax returns to HMRC and paid the resulting ‘tax’ using XL’s funds. XL then sought to add HMRC to the proceedings on the...

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