Tax Evasion Penalties in the UK

If the HMRC investigates you or your businesses, they will likely find some irregularities that they believe are suspicious. The HMRC is likely to find inconsistencies in filing your company accounts or tax returns.

The HMRC gets the required leads by using the Connect database that analyses large data and produces patterns and reports. They can use the leads or information from the database alongside another source of information to launch an investigation.

Tax evasion possibilities in the UK

The penalties for tax evasion by the HMRC can be criminal, financial, or both. Most tax fraud cases are dealt with through the HMRC civil procedure. Hence, you should always take the help of HMRC civil tax investigation solicitors.

In most cases, the HMRC is most likely to prosecute you for tax evasion if there is enough evidence that shows a criminal offense has been committed, which is in the public interest. This two-stage test includes a public interest test and an evidential test.

When proceeding with the prosecutions, one of the HMRC’s objectives is to act as a deterrent which sends a clear message to the public as an institution that doesn’t tolerate tax evasion by individuals or corporations.

If the HMRC finds you guilty of tax evasion, there is the likelihood that you can serve a prison sentence. However, this will depend on the severity of the tax evasion case.

How the HMRC determines penalties for tax evasion 

The HMRC will normally investigate the underpayment of tax and the amount due. This will normally result in a tax underpayment case placed in one of the four categories.

1 – Failure for not take reasonable care 

The HMRC regards it as a failure to take reasonable care if a taxpayer does not take due cares when filing a tax return or fails to file a supplementary form. The HMRC regards this as a moderate offense, and it could often result in a penalty of 30 percent of the tax owed by the business or individual.

2 – Misinterpretation 

The HMRC will treat it as an honest mistake when you make a genuine mistake that results in an underpayment of tax. There will be no penalty imposed on you if you pay the underpaid tax.

3 – Deliberate understatement 

HMRC would regard it as a serious tax fraud if the tax liability was deliberately understated. Deliberate understatement will often result if the taxpayer overstates the level of their expenses or allowances. This is normally regarded as tax fraud and could result in a tax evasion penalty of up to 70 of the tax owed.

4 – Failure to declare income

Deliberate misleading of the HMRC when individuals complete their tax returns is one of the most severe tax evasion UK penalties. This penalty can only apply if the relevant documents are destroyed, or the money involved has been wired to an offshore account. The penalty can usually result in penalties of up to 200% of the tax due.

VAT Tax evasion penalty

The maximum prison sentence for VAT tax evasion is six months in the magistrates’ court. A fine of up to £20,000 can also be levied. The VAT tax evasion cases sent to the Crown court can carry up to 7 years of unlimited fines. Therefore, you should consult VAT investigation specialists for the best advice.

Cheating public revenue 

This is a criminal charge that the HMRC is most likely to levy in case of a serious tax evasion charge.

This charge will result in a life in prison sentence and or an unlimited fine.

Final Thoughts 

If you have a tax evasion case, you should reach out to tax solicitors in the UK for help. Your solicitor will take your case and help with the tax evasion investigation. It is also important that you understand all the penalties charged by the HMRC on tax evasion to avoid being on the wrong side of the law.