If you are being investigated for tax evasion it is highly likely that HMRC has discovered irregularities which it believes are suspicious or has found inconsistencies in your tax return or company accounts.
Using a database called ‘Connect’, which analyses large amounts of data and which produces patterns and reports, provides HMRC with leads. HMRC may use this information, along with other sources of information to launch an investigation.
The penalties for tax evasion can be financial, criminal and in some instances both.
The majority of cases of tax fraud and evasion are usually dealt with via HMRC’s civil procedures.
HMRC will only prosecute you for tax evasion if the evidence shows that there has been a criminal offence committed and it is in the public interest. This is called the 2-stage test for prosecutors. The evidential test and the public interest test.
One of HMRC’s objectives, when proceeding with prosecutions, is to act as a deterrent that sends a clear message of their zero tolerance of tax evasion, either individual or corporate.
If you’re found guilty of tax evasion, there is a risk of a prison sentence, dependent on the severity of the tax evasion.
HMRC will investigate reasoning for the under payment of tax and the amount due.
This will result in your tax underpayment case being placed in one of four categories.
Mistake or misinterpretation
Failure to take reasonable care
Punishment for not declaring income
Summary conviction for evaded income tax carries a six-month prison sentence and a fine up to £5,000.
More serious cases of income tax evasion can result in a sentence of up to seven years imprisonment.
Sentences can be increased, and an unlimited fine imposed, if the taxpayer fails to repay the evaded tax.
In the magistrate’s court, the maximum prison sentence for the evasion of VAT is six months. Fines of up £20,000 can also be levied.
More substantial cases of VAT evasion that are sent to the Crown court can carry prison sentences up to seven years and unlimited fines.
If you provide false documentation to HMRC, it can result in a maximum penalty of a £20,000 fine or a six-month prison sentence.
This is the criminal charge most often levied by HMRC in cases of serious tax evasion. The maximum sentence for this offence in the UK is life in prison and / or an unlimited fine.
If an employee or an associated person facilitates tax evasion while working on behalf of a company, the company itself can be held criminally liable.
The Criminal Finances Act 2017 builds on the Bribery Act 2010 which had already deemed it a criminal offence for businesses to evade tax.
However, the 2010 Act made it hard for the authorities to prove that a business had been complicit in tax evasion.
As well as running the risk of serious reputational damage, failure to comply with this legislation could result in a substantial financial penalty being imposed.
If one of your employees or an associated person facilitated tax evasion, the company must prove that it had adequate procedures pursuant to s.7 of The Bribery Act 2010.
Being found guilty of an offence under the Criminal Finance Act 2017 can result in penalties up to 200 per cent of the tax due and a possible prison sentence.
Our experienced legal team at Richardson Lissack which comprises of accomplished corporate crime solicitors, ex-HMRC officers and commercial tax litigators, can help you try to reduce HMRC penalties as a result of a tax evasion investigation or avoid criminal proceedings. They understand the process, approach and procedures most regularly taken by the HMRC and in some circumstances can negotiate a favourable settlement for our clients.
If you are currently being investigated for tax evasion, contact Richardson Lissack today to learn more about how we can help you.