Tax Evasion is a criminal offence of dishonestly failing to comply with the legal requirements to provide accurate and truthful information in respect of one’s tax affairs or deliberately failing to account for taxes properly due. Tax evasion is slightly different to tax avoidance, which focuses more on the protection of the integrity of the tax system by way of anti-avoidance measures designed to recover taxes due plus penalties for non-payment.
In the UK, tax evasion is a criminal offence and may lead to Code 9 investigations and, ultimately, prosecution.
- tax evasion could be the smuggling of goods that otherwise could be sold in the UK, but solely for the purpose of avoiding import duties.
- alternatively, and a very popular fraud historically, was the misuse of EU cross border rules on import duty, which enabled it not to be imposed on EU imports to the UK.
- these EU free trade rules led to the popularity of Carousal Fraud, where goods could be imported and exported (often as a mere paper exercise), with the exporter (or one of the companies in the carousal chain) reclaiming the VAT allegedly paid on its purchase (without any VAT arising on the sale, as the goods had been exported) followed by the selling company (or importer) then failing to remit the VAT allegedly received when it sold these goods.
- the selling company would often then be placed into liquidation and the net payment of VAT to the buying company would act as a theft of taxes from Central Government, often in the millions of pounds.
Where such tax evasion is discovered, it is in the public interest for Central Government to investigate, wind-up such companies in the public interest and investigate or identify the individual(s) responsible for the fraud.
At Francis Wilks & Jones we have considerable experience of resolving tax disputes and dealing with HMRC, including accelerated payment notices, personal liability notices, VAT Security, appeals to tax tribunals, liquidator claims and director disqualification claims.