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12 Dec 2022

It’s time to be honest. When you are a sole trader, self-employed, or you run your own company, when it comes to tax season, it is never fun.

And while you may be able to afford an accountant who can complete your tax returns for you, smaller organizations may not have this to hand, prompting you to do the taxes yourself.

Of course, this then increases the chance of errors, which can lead to a tax audit being conducted, which may then lead to you being accused of tax evasion.

If you are currently under investigation by HMRC or have been accused of tax evasion, it is important that you contact our fraud solicitor as soon as possible. We will work tirelessly to have any accusations and investigations by HMRC dropped if possible. If this is not an option, we will work to represent you in the legal proceedings that may occur.

But what is tax evasion and what penalties does it carry in the UK? Read on to find out more from our fraud solicitor.

What is considered tax evasion?

In the UK, you can be accused of tax evasion if it is thought that you have been deliberately withholding the payment of tax to HMRC.

If you do your own tax returns, you may have inadvertently stated the incorrect amount of taxable income, thus leading to an accusation of tax evasion.

However, our fraud solicitor can help and will work to prove that any accusation was accidental and will work to put in steps to prevent it from happening again.

Tax evasion examples

As mentioned before, incorrectly declaring the amount of taxable income that your company made can lead to such an accusation. But what are some of the other ways that companies and people perform tax evasion?

Carousel fraud- This is when a group may import goods VAT-free, sell them with the VAT added and then not report the added VAT in the tax return.

Expenditure fraud- There are many expenditures for sole traders and those who are running their own businesses, such as gifts to clients, car allowances and advertising. However, if you state that more was spent on these activities than was actually spent, this is an example of tax-allowable expenditure fraud.

False invoices- This is pretty self-explanatory and involves companies drawing up false invoices with the aim of claiming money back from HMRC when it comes to tax returns.

Cash and cryptocurrency- If you pay your workers in cash or cryptocurrency, then it is seen as avoiding a traceable record of transactions, which could be used to ensure the correct amount is paid in taxes.

Penalties for tax evasion

Tax evasion is deemed very serious and results in heavy fines, as well as jail time in some cases.

Carousel fraud can result in a maximum sentence of 6 months imprisonment and a fine of up to £5,000.

Expenditure fraud and false invoice-related fraud can lead to a sentence of 6 months imprisonment and an unlimited fine. Cash and cryptocurrency fraud will vary in the fine based on the money that was not taxed and can cause a sentence of between 18 months and 8 years in prison.