Theft or understated profits?

Tax inspectors of a certain vintage may remember what was for many their first step into the world of tax investigations: the accounts investigator course (AIC) which was the backbone of Inland Revenue training during the 1970s and 1980s. Among other things the course taught basic double-entry bookkeeping investigation law and practice the approach to penalties and so on. Its main emphasis was to highlight the myriad ways in which the accounts of self-employed taxpayers might be inaccurate.

Of course in those days cash businesses were much more the norm than is the case today – or perhaps it is better to say that electronic payment was less common so there was special emphasis on cash trades and the important distinction drawn between cash losses caused by individuals controlling a business and staff theft. ‘Defalcations’ would be loudly pronounced by the tutor...