Tax Evasion

Tax Evasion

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and is it a Criminal Offence....

Thanks for all your ocmments
Steve

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David Winch
By David Winch
25th Feb 2008 18:34

Civil and criminal

I would agree that, in the vast majority of cases, HMR&C will not prosecute a person who may have committed a criminal offence of tax evasion, but will instead agree a settlement based on the payment of tax, interest and a penalty.

Since a criminal offence involves intentional under-declaration of income (or gains, or whatever) and either intentional or accidental under-declaration can lead to the imposition of a penalty, it is sensible for HMR&C just to collect the penalty without determining whether the under-declaration was criminal or not.

Criminal prosecution is immensely expensive in terms of manpower and a civil settlement is much more cost-effective for HMR&C. So prosecution is often simply "pour encourager des autres"!

However for money laundering reporting purposes, where a criminal offence is suspected a report under MLR 2007 / PoCA 2002 is required whether or not HMR&C decide to prosecute.

David
www.MLROsupport.co.uk

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By AnonymousUser
25th Feb 2008 18:16

Evasion or avoidance?
As stated below tax evasion is a deliberate attempt to reduce the amount of tax due outside of the law.

Tax avoidance is the arrangement of a taxpayer's affairs in such a way as to pay the least amount of tax legitimately.

Unfortunately, Gordon Brown, he of the immense intellect, has a blind spot with regard to the two definitions and blithely interchanges the two and changes context so that to any lay person the two are the same and tax avoidance becomes illegal!

You simply have to look at GB's comments on paying the "right amount of tax" Almost everyone does pay the right amount of tax - just not as much as GB would like people to.

You can fool some of the people some of the time GB - but not all of them!

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By AnonymousUser
25th Feb 2008 17:55

Civil and Criminal
Section 144 FA 2000 introduced a specific piece of legislation to define the offence of fraudulent evasion of income tax stating that 'a person commits an offence if he is knowingly concerned in the fraudulent evasion of tax by him or another person'. As David says, prior to that point any prosecutions could only be conducted upon the grounds of 'common cheat'.

However, tax evasion can also be dealt with as a civil offence rather than a criminal offence and, in practical terms, it is difficult to actually point to a specific stage or level at which the offence changes from civil to criminal. In essence many offences that are dealt with by HMRC under civil processes could be prosecuted as criminal offences in that they contain the same features of both knowledge and intention to defraud the public revenue. In some respects the answer might be in the way in which HMRC chooses to treat a specific offender - i.e. that the offence is civil until HMRC decides to mount a criminal investigation and prosecution.

Interestingly in the case of Gill and Gill it was held that a penalty under Section 95 TMA 1970 (the penalty usually imposed for an incorrect Return) was a 'criminal' penalty in that, as it was tax based, it contained a punitive element.

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David Winch
By David Winch
25th Feb 2008 15:50

Fraud

If you are interested in the definition of fraud in UK law (i.e. any fraud not just tax fraud) you could do worse than look at the first five sections of the Fraud Act 2006 at http://www.opsi.gov.uk/acts/acts2006/ukpga_20060035_en_1.

David

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By User deleted
25th Feb 2008 14:06

Fraud
There are three elements in the basic definition of fraud

1. Deprivation of economic benefit. (deprivation need not be permanent, and the actor need not be the beneficiary)
2. Deception (including deliberately concealing or withholding relevant facts)
3. always, always Intentional (but an accidental or negligent deprivation of economic benefit that the actor becomes aware of but does not disclose could become criminal e.g. as "theft")

It is easy to see how tax evasion can be fraudulent. If however you disclose all relevant facts it is not usually fraud and not usually evasion. It may well be characterised as "offensive" avoidance but that is another story

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David Winch
By David Winch
20th Feb 2008 16:32

Definitions

Steve

According to Wikipedia "tax evasion is the general term for efforts by individuals, firms, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income, profits or gains than actually earned; or overstating deductions)."

There are specific tax offences in statute and also a common law (i.e. non statutory) offence of "cheat" or "cheating the public revenue".

Tax evasion can relate to direct taxes (e.g. income tax), indirect taxes (e.g. VAT), or the evasion of duty (e.g. on imports or on road fuel or tobacco or alcohol).

By definition tax evasion is a criminal offence. Legitimate reduction of tax (sometimes called "tax avoidance") is not tax evasion.

Tax evasion will involve dishonesty either by deliberately making a false declaration (e.g. of income) or by failing to declare / notify something that one realises is required to be declared / notified (e.g. the existence of income from letting property).

One cannot commit criminal tax evasion accidentally (although one may accidentally make an incorrect declaration and that can, in certain circumstances, itself be a criminal offence, e.g. in relation to a materially incorrect VAT return).

Any tax evasion which brings about a tax 'saving' (i.e. any successful tax evasion) necessarily involves a money laundering offence which may be reportable under Money Laundering Regulations 2007 and / or Proceeds of Crime Act 2002.

Tax evasion is a form of tax fraud - but there are also other types of tax fraud (such as tax credit fraud and carousel fraud).

Of course others may have different definitions!

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