We are occasionally faced with cases where either our client or their spouse is being accused of taking cash in hand payments that they are not declaring. We are frequently asked in this situation what can be done to ensure this income is being disclosed.
The first thing to remember is that when looking at finances in the context of divorce, the Court needs to be assured that absolutely everything has been disclosed. It is a requirement of the underlying Family Procedure Rules 2010 and something that the court takes extremely seriously. After all, unless full disclosure is provided, how can both spouses be confident that the agreement they are entering into is fair?
The standard comprehensive Court disclosure document is the Form E. It requires full income and capital details, to include 12 months’ worth of bank statement, the last three months’ worth of pay advice and the last year’s P60. Tax returns have to be provided with it coupled with details of any cash held over £500.
It is not always necessary to complete the Form E. If, for example, financial proceedings haven’t been issued the format of voluntary disclosure can be more bespoke. Assuming those negotiations away from Court proceedings lead to an agreement, there is still a requirement to provide a summary of income and capital positions on the D81 Statement of Information form.
What is there to compel someone to disclose their cash in their Form E or D81 however? The simple warning on the front of the Form E is often sufficient to do it:
“You have a duty to the Court to give full, frank and clear disclosure of all your financial and other relevant circumstances. A failure to give full and accurate disclosure may result in any order the court makes being set aside.
If you are found to have been deliberately untruthful, criminal proceedings may be brought against you for fraud under the Fraud Act 2006.
The Information given in this form must be confirmed by a statement of truth. Proceedings for contempt of court may be brought against a person who makes or causes to be made, a false statement in a document verified by a statement of truth.
If full disclosure is not given however, what then?
It is possible to ask questions about the disclosure given, which provides the person receiving the disclosure with the opportunity to dig a little deeper. Care should be taken with these questions. As tempting as it might be to ask “how much is kept in the safe at home”, it is often the case that if cash hasn’t been disclosed in the Form E that the answer is invariably “nothing”.
Instead, a far better idea is often to approach the problem from another other angle by focussing on the suspected source of the funds. If, for example, the spouse is in the building industry, one might seek to ask for copy of the relevant diary/job book for a defined period. If no such book exists, seek evidence in relation to the sub-contractors, copies of scaffolding contracts, insurance documents etc. All of this serves to demonstrate the actual work undertaken that has given rise to the alleged cash payments. Once the work is established it is then a case of asking the spouse to identify the payments and how they have been applied.
It can sometimes be prudent to remind the spouse and their solicitor that HMRC and the Court are two very different entities, and disclosure to the Court and one’s spouse certainly does not always result in a report made to HMRC – we know that this is something that spouses worried about disclosing their cash income seldom appreciate.
There are very often a number of difficult angles one can take to identifying cash held and it is extremely difficult for someone seeking to hide funds to do so effectively. If you are faced with issues of this nature then it is always extremely sensible to take advice from a solicitor with experience of successfully tackling similar situations.
Andrew Barton is a divorce specialist and family law partner at Stephens Scown. He was recently included in the Citywealth Leaders’ List – a list of the best advisors in private wealth in the world. To contact Andrew, please call 01392 210700, email solicitors@stephens-scown.co.uk or visit www.stephens-scown.co.uk.