While the majority of people abide by the law and pay their taxes, there are those who deliberately and dishonestly set out to defraud HMRC by evading tax, stealing public funds or cheating the system in other ways. Tax fraud undermines our economy, creates unfair competition for legitimate businesses and robs our vital public services of much-needed funds. It also supports other crimes that harm our communities.
2020 saw a record fall in the volume of recorded tax fraud, including tax refunds, evasion of duty, evasion and VAT fraud. It fell by 93% from 2019 to 2020, from £721 million to just £54 million. There was a 51% drop in the volume of cases in 2020 as opposed to 369 in 2019.
• £4.6 billion of the UK “tax gap” is due to tax evasion
• Around £70 billion of revenue has been lost to tax evasion overall in the UK
• 73,000 people reported to the UK tax evasion hotline in 2019-2020
• Income tax accounts for as much as 23% of the government’s total revenue
Criminal activities people commit to evade tax include:
• Deliberately underreporting or omitting income – Concealing any income is fraudulent. Examples include a business owner’s failure to report a portion of the day’s receipts or a landlord failing to report tenant payments.
• Keeping two sets of books and making false entries in books and records – Engaging in accounting irregularities, such as a business’s failure to keep adequate records, or a discrepancy between amounts reported on a corporation’s return and amounts reported on its financial statements, generally demonstrates fraudulent intent as it usually occurs due a manipulation in the data.
• Claiming false or overstated deductions on a return – HMRC is always vigilant when it comes to inflated deductions. Common examples range from claiming unsubstantiated charitable deductions to overstating travel expenses.
• Claiming personal expenses as business expenses – Assets, such as cars and computers, will have both business and personal use. Concise record keeping is required to display the business usage. Business usage is often overstated, leading to fraud.
• Hiding or transferring assets or income – This type of fraud can take a variety of forms, from simple concealment of funds in a bank account to improper allocations between taxpayers. For example, improperly allocating income to a related taxpayer who is in a lower tax bracket, such as where a corporation makes distributions to the controlling shareholder’s children, is likely to be considered tax fraud.
• Engaging in sham transactions – You can’t reduce or avoid income tax liability simply by labelling a transaction as something it is not. For example, if payments by a corporation to its stockholders are in fact dividends, calling them “interest” or otherwise attempting to disguise the payments as interest will not entitle the corporation to an interest deduction. As discussed below, it is the substance, not the form, of the transaction that determines its taxability.
To Prevent Tax Evasion, HMRC took numerous approaches to increase the difficulty of committing fraudulent activities such as building checks and legislation, implementing controls within the HMRC system, and even working with businesses, notifying them if they are at risk of tax Fraud. If there is any indication an individual or business is committing tax evasion, a specialised criminal and investigation team will be dispatched to investigate the issue and if fraudulent behaviour is found, harsh repercussions are given.
Although tax evasion is not allowed, there are numerous methods for individuals and businesses to save money on their tax payments. Companies such as Wim Accountants, which specialise in Tax, can save money for businesses by ensuring they are dealing with their tax the right way. The Tax accountants will ensure all reliefs and tax-saving programs you are eligible for are claimed, being able to claim benefits you missed from up to four years prior, for example, if your balance sheet showed losses the past few years you can claim it against your profits for the year you made a profit. All of this is done whilst following all HMRC guidelines to guarantee legal compliance.
If you need assistance with your tax affairs, then please contact us at 02082271700 or firstname.lastname@example.org
Originally posted 2022-06-15 14:52:47.