DNEG reveals tax raid

DNEG reveals tax raid

DNEG has insisted that any investors taking part in its stock market flotation next month will not be subject to any loss as a result of an ongoing HMRC investigation into an alleged VAT fraud carried out by individuals who used to work at the company.

Details of the investigation came to light in disclosures filed last week ahead of its forthcoming initial public offering. It said that DNEG and parent company Prime Focus’s London offices were searched by HMRC in October 2015, and that a number of individuals were arrested and interviewed.

DNEG said the VAT fraud was alleged to have been perpetrated by a number of individuals, including three who were employees of the company or its affiliates. It added that none of them are currently employees.

The individuals are alleged to have prepared fraudulent invoices for the supply of labour, services and the acquisition of goods, such as software and computer servers. It is alleged that these invoices were issued to companies that had no genuine trading activity or no employees, and had been established to facilitate fraudulent claims for VAT between 1 October 2009 and 21 October 2015.

The company said it could have to pay between £2.5 million and £8 million in unpaid VAT. HMRC could also impose a fine of a similar sum, doubling the potential liability.

The company said that it had received assurances from HMRC that it does not consider it a suspect in its investigation. The individuals involved no longer work for the company and DNEG said it “does not believe that any financial penalty associated with the case is likely”.

“To date, the criminal investigation by HMRC has been limited to the individuals in question and HMRC has not made any direct allegations against the Group itself or Prime Focus Limited or against their respective officers or managers.”

The company said it has conducted its own internal inquiries, as has Prime Focus, and that it has been advised by specialist counsel throughout HMRC’s investigation. It has also engaged a big four independent accountancy firm’s forensic team to conduct an independent investigation “None of these investigations has identified evidence of any inappropriate transactions.”

In a statement, DNEG said: “HMRC has been explicit in telling DNEG that it is not a suspect in its investigation. None of the Company’s board or senior management have ever been questioned in relation to the matter. The investigation appears to focus on a broad range of individuals; some of whom are former employees of a subsidiary of DNEG. Further, Prime Focus Limited has agreed to indemnify DNEG for any and all potential losses in connection with the HMRC matter, such that DNEG and its investors will not be subject to any loss should any liability arise.”

An Oscar-winning visual effects studio aiming for a £600 million stock market flotation has become entangled in an alleged scheme to defraud the taxman

The company, which has won Oscars for its work on Blade Runner, 2049 and First Man, said the money would help it reduce debt and fund further expansion. The company’s TV work includes Chernobyl and Catch-22

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