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TaxRobin, Tax Consultant
Category: Tax
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Experience:  International tax
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A partner in a farming business received a hoax phone call

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A partner in a farming business received a hoax phone call which he believed was from his bank. He was advised that the partnership business account had been compromised and that he should transfer the funds immediately to another account. Believing what he was being told he transferred £40,000 only to later establish it was a complete fraud. The matter has been reported to ActionFraud (Police) but it has not proved possible to recover any of the money transferred to the bogus account.
Can the amount of £40,000 be treated as an allowable Sch D Case 1 trading expense for the purposes of obtaining tax relief?
Hello and thank you for allowing me to assist you.
Your situation is unfortunate. Generally, Thefts and defalcations are
allowed as a trading deduction provided such thefts etc are by employees (i.e. not proprietors or directors). These expenses are seen as an every day risk of running a business (see Curtis v J & G Oldfield Ltd 1925).
Losses arising as a result of staff thefts or negligence are generally allowable. Losses arising as a result of withdrawals by the business principals (the trader, partners or directors as the case may be) are not allowable.
As the theft was reported to the appropriate authorities and a valid attempt has been made to secure a recovery, in whole or in part that is important proof for the claim. HMRC would carefully examine any claim to deduction where a trader alleges theft or other wrongdoing but has made no serious attempt at recovery.
I would not venture that HMRC will not question the claim but can advise if warranted it is allowed.
TaxRobin and other Tax Specialists are ready to help you
Hi David
I hope that information is just what you needed. It’s pretty complicated I know.
Please let me know how all works out and I thank you in advance for a positive rating.