Tax evasion in the UK is illegal and is seen as an attempt to give a late underpayment or a non-payment to HMRC. Income tax evasion could result in being sentenced to four years of imprisonment for breaking the law and committing the crime, making the act of tax avoidance a criminal offence.
Deliberate tax avoidance typically occurs when businesses don’t report money-making activities to the government. Filing reports and ensuring the government is aware of your taxable income is crucial under the rules of the law.
Declaring taxable income is important to avoid issues occurring with HMRC; staying in compliance with both the government and HMRC is vital; otherwise, you could face a tax evasion investigation. To find out more information about the penalties for tax evasion in the UK, continue reading.
What is Tax Evasion?
Deliberate tax evasion is when someone avoids paying their tax liability. Many tax evasion cases involve corporate businesses that sit at the top of the list regarding wealth within a variety of different industries. Regardless of the field of work that you’re in, paying your taxes is vital.
Typically, tax evasion occurs when someone conceals the true state of their financial affairs, keeping it from tax authorities. There are many cases of tax evasion because so many people get caught, resulting in a tax investigation.
Similar to other money-making schemes such as fraud, tax evasion is illegal and mustn’t be committed. Paying taxes is important for the economy, and without taxpayers, the government is deprived of funding vital public services such as schools and community-based projects.
We all must pay taxes, especially if we want to see improvements across the UK, including better road conditions, hospitals and the levels of poverty in certain areas. If you avoid paying tax, you’ll likely encounter negative consequences and could face fines.
Examples of Tax Evasion
Hiding money, assets, or shares in offshore bank accounts, keeping business off the books by regularly dealing cash, failing to report income to the tax authorities, and misreporting personal expenses are all key examples of tax evasion in the UK.
Essentially, tax evasion is when someone deliberately attempts to avoid paying the tax owed. Both tax evasion and tax fraud are similar but have some differences. However, tax evasion and serious tax fraud can both land you in a great deal of trouble.
It’s hard to investigate tax evasion when there’s no traceable record of any transactions in your name. This is why so many individuals use cryptocurrency for tax evasion. With an array of tax avoidance schemes out there, the stamp duty avoidance scheme is used by many.
Stamp duty avoidance involves a set of transactions that save you money on tax. HMRC easily pinpoints those who are taking part in stamp duty avoidance schemes, finding them guilty in court.
Tax Evasion Penalties
There are numerous consequences you could face related to tax evasion. With a range of penalties in place, it’s important to ensure you pay your taxes accurately and on time. HMRC penalties vary, and they won’t be shy to out companies involved in tax evasion.
You or your company will be held liable if you’ve evaded tax. Over a decade ago, the government set a range of measures to tackle both tax evasion and general tax avoidance. Errors in a tax return don’t go unnoticed, although many organisations and people in business believe that they do.
The tax evasion penalty is up to 200% of the tax that is due. In worst-case scenarios, jail time could be on the cards for those who have been found to repeatedly go against the law with tax evasion.
The maximum penalty for income tax evasion in the UK is about seven years, whereas the maximum sentence for evasion of VAT is six months imprisonment or a tax evasion fine of up to £20,000.
There’s no reasonable answer to tax evasion, and although many disputes occur in court with individuals stating it was an honest mistake, tax evasion sentencing is common. There’s no reasonable answer to tax evasion, and although many disputes occur in court, tax evasion sentencing is common.
Does HMRC Investigate Tax Evasion?
Yes, HMRC does investigate tax evasion. If HMRC thinks tax evasion is occurring, you’ll be approached by them via letter, phone, or email, telling you that you’re under investigation.
Typically, an investigation carried out by HMRC will begin around 12 months after the due date of your tax return, or the date on which it was filed. It’s vital to respond to HMRC promptly to avoid further complications.
You’ll likely be investigated by HMRC if you’re suspected of incorrectly filing returns relative to national insurance, corporation tax, VAT, and income tax, to name a few. If you’re subject to an HMRC investigation, it’s advisable to make contact with a professional and trusted solicitor.
Navigating HMRC Investigations
If you’re under investigation by HMRC, rest assured that LJS Accounting Services can help. We’re a trusted firm that has been operating in the industry for well over a decade. If you’ve found yourself in a position where HMRC is investigating you, it’s vital to seek support from our reliable and dedicated team.
Our team of award-winning tax advisers will provide you with everything you need to know while offering support, guidance, and advice. Our top-quality services are favoured by many, and we’ve helped a wide range of clients with their tax payments.
With many businesses and entrepreneurs just beginning to navigate the world of taxes properly, it can be hard to get a grip on how taxes work and why you need to pay them. This is why we also offer professional start-up advice. If you’d like to find out more about our services, please don’t hesitate to get in touch today. We look forward to hearing from you soon.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.
