UK tax officials who are investigating allegations of tax evasion by four senior Belfast partners of KPMG have requested documents from the law firm that represents JEAP, the property finance vehicle controlled by the men.
C&H Jefferson, the Belfast firm listed as JEAP’s solicitors in the company’s annual accounts, confirmed that HM Revenue and Customs has requested “access to client files”.
It is believed the law firm is engaged in a process with HMRC to ascertain which elements of the information the tax agency is seeking may be subject to client confidentiality.
C&H also would not comment on JEAP but added it was “complying” with the request.
The four KPMG partners – Jon D’Arcy, head of audit and transactions for KPMG in the north, Eamonn Donaghy, who heads the Belfast tax practice, Paul Hollway, head of corporate finance and Arthur O’Brien, an audit and advisory partner – were arrested and questioned on Wednesday.
Focus of investigation
It is understood the tax investigation has zeroed in on issues including the treatment of £4.3 million in losses accrued by JEAP, and how they were allegedly used against tax.
Neither C&H Jefferson nor HMRC would make any comment on what the client confidentiality assessment process entails, in relation to the files sought on JEAP.
However, a staff handbook for HMRC outlines some of the procedures for UK tax investigators who want access to legal documents.
It says not all of a client’s files contain legally privileged information. It says the legally privileged information can be viewed with the permission of the client.
If a document contains privileged and non- privileged information, tax inspectors can demand to see the original document, although the legally privileged information can remain “covered”.
Law firms can also produce copies of the parts of the documents that are not privileged. If a tax investigator wants to dispute whether information he or she seeks is privileged, it is resolved by a tribunal.
JEAP loaned money to property developers on both sides of the Border, apparently using cash it had borrowed from Ulster Bank, but it ended up writing off most of its investments.
It appears to have no income and has been rolling up interests payments in recent years.
KPMG says it has no indication that the investigation involves the activities of the firm or its clients.
