Key Information - Tax Fraud

In this article Admiral Tax Investigations try to clear up some common misconceptions about a much used phrase, that of "Tax Fraud"

Firstly let us look at the statutory position. Specific offences in relation to fraud are present in law. There are 3 elements to this:-

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. 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 follows then that tax fraud or tax evasion can be fraudulent and then byits very definition an offence.

You may find it useful to look at the five sections of the Fraud Act 2006 by following this link

http://www.opsi.gov.uk/acts/acts2006/ukpga_20060035_en_1.htm

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).

Tax evasion involves dishonestly reporting the true nature and/or extent of ones tax affairs. This could be by either deliberately making a false declaration (of earned income or profits for example) or by failing to declare or notify something that gives rise to a charge to tax (income from letting property for example).

Disclosure

If however you disclose all relevant facts it is not usually fraud and not usually evasion and HMRC will generally deal with you using their civil powers.

The legitimate reduction of tax (sometimes referred "tax avoidance") is not tax evasion or tax fraud and we explore this area in more detail in the article titled "Tax Avoidance"

Civil and Criminal

Tax evasion can never be accidental in the eyes of the law.

Also any tax evasion which brings about a tax loss to the exchequer, 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 therefore a form of tax fraud.

Section 144 FA 2000 introduced a specific piece of legislation to define the offence of fraudulent evasion of income tax.

Section 144 states that 'a person commits an offence if he is knowingly concerned in the fraudulent evasion of tax by him or another person'.

Prior to the introduction of Section 144, any prosecution could only be pursued against the evader upon the grounds of 'common cheat'.

As mentioned earlier in this article, Tax evasion is usually dealt with as a civil, rather than a criminal matter.

However, the lines are often blurred when it comes to actually pinpointing when or why a civil case may become criminal. Remember HMRC adopt a selective criminal prosecution policy. A policy which has various determining factors.

In essence many tax offences that are dealt with by HMRC using civil powers could be prosecuted as criminal offences. After all they contain the same features of both knowledge and intent to defraud the public revenue.

However, the costs involved in conducting a criminal investigation are huge. It is for that reason, in most cases HMRC will settle the case by civil means. That is for payment of tax, late payment interest and a tax geared penalty

Admiral Tax Investigations guarantee all fees up front, so you our client can plan appropriately and worst of all avoid any unexpected billing surprises.

For a no commitment, confidential discussion about how we can resolve your tax investigation and save you money, contact Admiral Tax Investigations day or night:

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