I went over to her chair and sat on the arm, stroking her shoulder and speaking kindly to her for almost the first time in my life.
“Mum,” I said. “They won’t send you to prison.”
“Yes, they will,” she said.
“How do you know?” I asked.
“He says so.”
“The blackmailer?”
“Yes.”
“Well, I wouldn’t take his word for it,” I said.
“But . . .” she trailed off.
“Why don’t you allow me to give you a second opinion?” I said to her calmly.
“Because you’ll tell the police.”
“No, I won’t,” I said. But not doing so might make me an accessory as well.
“Do you promise?” she asked.
What could I say? “Of course I promise.”
I hoped so much that it was a promise I would be able to keep.
G
radually, with plenty of cajoling and the rest of the bottle of Rémy Martin, I managed to piece together most of the sorry story. And it wasn’t good. My mother might indeed go to prison if the police found out. She would almost certainly be convicted of tax evasion. And she would undoubtedly lose her reputation, her home and her business, even if she did manage to retain her liberty.
My mother’s “disastrous little scheme” had, it seemed, been the brainchild of a dodgy young accountant she had met at a party about five years previously. He had convinced her that she should register her training business offshore, in particular, in Gibraltar. Then she would enjoy the tax-free status that such a registration would bring.
Value Added Tax, or VAT as it was known, was a tax levied on goods and services in the UK that was collected by the seller of the goods or the provider of the services and then paid over to the government, similar to sales tax except that it applied to services as well as sales, services such as training racehorses. Somehow the dodgy young accountant had managed to assure my mother that even though she could go on adding the VAT amount to the owners’ accounts, she was no longer under any obligation to pass on the money to the tax man.
Now, racehorse training fees are not cheap, about the same as sending a teenage child to boarding school, and my mother had seventy-two stables that were always filled to overflowing. She was in demand, and those in demand could charge premium prices. The VAT, somewhere between fifteen and twenty percent of the training fees, must have run into several hundred thousand pounds a year.
“But didn’t you think it was a bit suspicious?” I asked her in disbelief.
“Of course not,” she said. “Roderick told me it was all above-board and legal. He even showed me documents that proved it was all right.”
Roderick, it transpired, had been the young accountant.
“Do you still have these documents?”
“No. Roderick kept them.”
I bet he did.
“And Roderick said that the owners wouldn’t be out of pocket because all racehorse owners can claim back the VAT from the government.”
So it was the government that she was stealing from. She wasn’t paying the tax as she should, yet at the same time, the owners were claiming it back. What a mess.
“But didn’t you think it was too good to be true?” I asked.
“Not really,” she said. “Roderick said that everyone would soon be doing it and I would lose out if I didn’t get started quickly.”
Roderick sounded like quite a smooth operator.
“Which firm does Roderick work for?” I asked.
“He didn’t work for a firm, he was self-employed,” my mother said. “He’d only recently qualified at university and hadn’t joined a firm. We were lucky to find someone who was so cheap.”
I could hardly believe my ears.
“What happened to John Milton?” I asked her. John Milton had been my mother’s accountant for as long as I could remember.
“He retired,” she said. “And I didn’t like the young woman who took over at his office. Far too brusque. That’s why I was so pleased to have met Roderick.”
I could imagine that any accountant who didn’t do exactly as my mother demanded would be thought of by her as brusque, at the very least.
“And what is Roderick’s surname?”
“His name was Ward,” she said.
“Was?”
“He’s dead,” my mother said with a sigh. “He was in a car accident. About six months ago.”
“Are you sure?” I asked.
“What do you mean am I sure?”
“Are you sure that he’s dead and hasn’t just run away?” I said. “Are you certain he’s not the blackmailer?”
“Thomas,” she said, “don’t be ridiculous. The car crash was reported in the local paper. Of course I’m sure he’s dead.”
I felt like asking her if she had actually seen Roderick Ward’s lifeless body. In Afghanistan there were no confirmed Taliban “kills” without the corpse, or at least a human head, to prove it.
“So how long did the little scheme of yours run? When did you stop paying the tax man?”
“Nearly four years ago,” my mother said in a whimper.
“And when did you start paying again?”
“What do you mean?” she asked.
“Are you paying the VAT to the tax man now?” I asked, dreading the answer.
“No, of course not,” she said. “How could I start paying again without them asking questions?”
How, I wondered, had she stopped paying without them asking? Surely it could be only a matter of time before she was investigated. Four years of nonpayment of VAT must add up to nearly a million pounds in unpaid tax. She should indeed be worried about going to prison.
“Who is doing your accounts now?” I asked. “Since this Roderick Ward was killed.”
“No one,” she said. “I was frightened of getting anyone.”
With good reason, I thought.
“Can’t you pay the tax now?” I said. “If you pay everything you owe and explain that you were misled by your accountant, I’m sure that it would prevent you from being sent to prison.”
My mother began to cry again.
“We haven’t got the money to pay the tax man,” Derek said gloomily.
“But what happened to all of the extra you collected?” I asked.
“It’s all gone,” he said.
“It can’t have all gone,” I said. “It must be close to a million pounds.”
“More,” he said.
“So where did it all go?”
“We spent a lot of it,” he said. “In the beginning, mostly on holidays. And Roderick had some of it, of course.”
Of course.
“And the rest?”
“Some has gone to the blackmailer.” He sounded tired and resigned. “I don’t honestly know where it went. We’ve only got about fifty thousand left in the bank.”
That was a start.
“So how much are the house and stables worth?” I asked.
My mother looked horrified.
“Mother, dear,” I said, trying to be kind but firm. “If I’m going to keep you out of prison, then we have to find a way to pay the tax.”
“But you promised me you wouldn’t tell the police,” she whined.
“I won’t,” I replied. “But if you really think the tax man won’t find out eventually, then you’re wrong. The tax office is bound to do a check sometime. And it will be much better for you if we go and tell them before they uncover it for themselves.”
“Oh God.”
I said nothing, allowing the awful truth to sink in. She must have known, as I did, that the tax inspectors at Her Majesty’s Revenue and Customs had little compassion for those they discovered were defrauding the system. The only way to win any friends amongst them was to make a clean breast of things and pay back the money, and before they demanded it.
“Not if I retire,” she said suddenly. “The tax man won’t ever know if I simply retire.”
“But Josephine,” my stepfather said, “we’ve already discussed that. How would we pay
him
if you retired?”
I, meanwhile, wasn’t so sure that her retirement wouldn’t in fact be the best course of action. At least then she wouldn’t be perpetuating the fraud, as she was now, and selling the property might raise the necessary sum. But I certainly didn’t share my mother’s confidence that her retirement would guarantee that the tax man wouldn’t find out. It might even attract the very attention she was trying to avoid.
Overall, it was quite a mess, and I couldn’t readily see a way out of it.
M
y mother and stepfather went off to bed at nine o’clock, tired and emotional from too much brandy and with the awful realization that their secret was out, and their way of life was in for radical change—and probably for the worse.
I too went up to my bedroom, but I didn’t go to sleep.
I carefully eased my stump out of the prosthetic leg. It was not a very easy task, as I had been overdoing the walking and my leg was sore, the flesh below my knee swollen by excess fluid. If I wasn’t more careful I wouldn’t be able to get the damn thing back on again in the morning.
I raised the stump by placing it on a pillow to allow gravity to assist in bringing down the fluid buildup, and then I lay back to think.
There was little doubt that my mother and stepfather were up to their necks in real trouble, and they were sinking deeper into the mire with every day that passed.
The solution for them was simple, at least in theory: raise the money, pay it to the tax man, submit a retrospective tax return, report the blackmail to the police, and then pray for forgiveness.
The blackmailer would no longer have a hold over them, and maybe the police might even find him and recover some of their money, but I wouldn’t bet my shirt on it.
So the first thing to be done was to raise more than a million pounds to hand over to the Revenue.
It was easier said than done. Perhaps I could rob a bank.
Reluctantly, my mother and stepfather had agreed that the house and stables, even in the recent depressed property market, could fetch about two and a half million pounds, if they were lucky. But there was a catch. The house was heavily mortgaged, and the stables had been used as collateral for a bank loan to the training business.
I thought back to the brief conversation I’d had with my stepfather after my mother had gone upstairs.
“So how much free capital is there altogether?” I’d asked him.
“About five hundred thousand.”
I was surprised that it was so little. “But surely the training business has been earning good money for years.”
“It’s not as lucrative as you might think, and your mother has always used any profits to build more stables.”
“So why is there so little free capital value in the property?”
“Roderick advised us to increase our borrowing,” he’d said. “He believed that capital tied up in property wasn’t doing anything useful. He told us that as it was, our capital wasn’t working properly for us.”
“So what did Roderick want you to do with it instead?”
“Buy into an investment fund he was very keen on.”
I again hadn’t really wanted to believe my ears.
“And did you?” I’d asked him.
“Oh yes,” he’d said. “We took out another mortgage and invested it in the fund.”
“So that money is still safe?” I had asked with renewed hope.
“Unfortunately, that particular investment fund didn’t do too well in the recession.”
Why was I not surprised?
“How not too well?” I’d asked him.
“Not well at all, I’m afraid,” he said. “In fact, the fund went into bankruptcy last year.”
“But surely you were covered by some kind of government bailout protection insurance?”
“Sadly not,” he’d said. “It was some sort of offshore fund.”
“A hedge fund?”
“Yes, that’s it. I knew it sounded like something to do with gardens.”
I simply couldn’t believe it. I’d been stunned by his naïveté. And it was of no comfort to know that hedge funds had been so named because they had initially been designed to “hedge” against fluctuations in overall stock prices. The original intention of reducing risks had transformed, over time, into high-risk strategies, capable of returning huge profits when things went well but also huge losses if they didn’t. Recent unexpected declines in the world’s equity markets, coupled with banks suddenly calling in their loans, had left offshore tax shelters awash with hedge-fund managers in search of new jobs.
“But didn’t you take any advice? From an independent financial adviser or something?”
“Roderick said it wasn’t necessary.”
Roderick would. Mr. Roderick Ward had obviously spotted my complacent mother and her careless husband coming from a long way off.
“But didn’t you ever think that Roderick might have been wrong?”
“No,” he’d said, almost surprised by the question. “Roderick showed us a brochure about how well the fund had done. It was all very exciting.”
“And is there any money left?”
“I had a letter that said they were trying to recover some of the funds and they would let investors know if they succeeded.”
I took that to mean no, there was nothing left.
“How much did you invest in this hedge fund?” I’d asked him, dreading his reply.
“There was a minimum amount we had to invest to be able to join.” He had sounded almost proud of the fact that they had been allowed into the club. Like being pleased to have won tickets for the maiden voyage of the
Titanic.
I had stood silently in front of him, blocking his route away, waiting for the answer. He hadn’t wanted to tell me, but he could see that I wasn’t going to move until he did.
“It was a million U.S. dollars.”
More than six hundred thousand pounds at the prevailing rate. I suppose it could have been worse, but not much. At least there was some capital left in the real estate, although not enough.
“What about other investments?”
“I’ve got a few ISAs,” he’d said.