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Tagging fraudulent transactions

I have had around 10 transactions of money in 2 days fraudulently taking money from my account.
The bank fraud team are looking in to it.
The question is: How is best to list these transactions.

For now I wouldn’t list them as anything. I’d wait to see whether the bank will refund you or not.

You can tag them as proprietor drawings or directors loan account but it may cause a tax charge which you don’t want. So best to wait to see if the bank pays you back first, then it’s simply just money out and in.

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Hi, these are not business expenses so even if the bank don’t refund them, you can’t claim them as taxable expenses. You should tag them as proprietor’s drawings (if you’re a sole trader) or director’s loan account (if you’re a limited company) and hope that the bank refund you. Then just tag the refunds to the same place.

So your OK with someone potentially having a dividend or dla tax charge on money fraudulently taken out the business? Prob not how I’d do it.

I’d prob tag it to profit and loss if its not recovered.

If they are genuinely fraudulent transactions, then the bank is obliged to refund them by the end of the following business day. If this has happened, and the following business day happens to be in the next financial year, then by all means recognise them as a debtor at year-end.

If the bank do not refund them, it will be because in their opinion they were either authorised by the account holder, or the account holder was negligent and so bears some responsibility.

In either of these cases, the payments are not business expenses (wholly and exclusively business-related).

If a director of my limited company was negligent and thereby allowed someone to fraudulently take money from the account, then the very least I would expect would be that the director concerned would reimburse the company. So yes, I would charge it to his loan account. If the total amount owed to the company was over £10,000 and he didn’t repay it soon enough then yes, he would potentially incur income tax on the balance. I don’t see that as unfair.

This wouldn’t apply to a sole trader of course.

Similarly, if they are not business expenses, you cannot expect to reduce your tax charge by putting them through the P&L.

I would fully expect the bank to reimburse them though, so either “Other debtors” or the proprietor’s/director’s account would be entirely appropriate.

I respectfully disagree.

If it had been an employee of the company, then I’d agree with you, but there are some allowances for a director.

Were assuming that the op accidently paid someone when they shouldn’t, we don’t know the background to how it happend. Nor can we rely simply on the bank deciding whether the op is entitled to a refund or not. It’s not down to the bank to decide how the transaction is treated in your company.

Hmrc manuals make provisions for fruadulant transactions which may or may not have been created accidently by a business owner or director.

You are perfectly entitled to, in that respect, to create an expense account for fraudulent payments to non existant suppliers and debit the p and l.

The bank will have a process for deciding whether, in its opinion, the transactions were authorised by the account holder or not. If not, then they will treat it as fraud and reimburse the account holder. Problem solved.

If they view the account holder as being wholly or partially responsible, either through negligence or otherwise, they will not refund the money.

If the money is not refunded, then yes, it is up to the business to decide what has happened and who, if anyone, is at fault. It may be that the business owner inadvertently paid for personal items and forgot about them, or they may have lost their bank card and not reported it promptly enough. Or they may have been careless and let their card out of their sight. There are a whole raft of reasons why the transactions may have occurred and it not be refunded.

HMRC will allow as a deductible expense fraudulent transactions (“defalcation”) by an employee, but will not allow those same transactions where they arise due to the actions of a director or business owner. See BIM45855.

The money was taken using a Curve card. All transactions were in London & I am in Birmingham.
Thanks for all your advice

If this was cash and someone stole the cash, the how would you tag it?

Hi nick2,
It is may not as easy to answer as you may think. There are a lot of question which you should answer first - like, was it reported to the police? are you vat registered? Was it stolen from an employee, director or unknown person? … and so on.
May you can find an answer here:

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