Finance

What Happens When You Report Someone For UK Tax Evasion?

Business Advice | 20 June 2022 | 2 years ago

what happens when you report someone for tax evasion uk

What happens when you report someone for tax evasion in the UK? As tax evasion is a serious crime, it can result in significant penalties, including imprisonment. If you are thinking about reporting someone for tax evasion, it is important that you understand what this involves and what you can expect. Making a false report or reporting somebody for personal reasons is never a good idea and you could even end up getting yourself in trouble.

In this article, we will provide an overview of the process of reporting tax evasion, including the steps involved and the potential penalties for those who are caught.

What is Tax Evasion?

Tax evasion occurs when someone deliberately tries to avoid paying their taxes by using illegal methods. This could include hiding income, failing to declare assets, or using false information on a tax return. Essentially, anyone who intentionally tries to reduce their tax bill by using fraudulent means can be guilty of tax evasion.

Despite common misconceptions, tax evasion is different from tax avoidance, at least in the eyes of the law. Tax avoidance refers to legal methods of reducing your tax bill, such as taking advantage of deductions or using a tax-efficient investment strategy. This might be done by hiring a particularly shrewd accountant or by taking steps to minimise your taxable income. While it might not be particularly fair, tax avoidance is perfectly legal.

In contrast, tax evasion is illegal and can result in criminal charges. This is because those who engage in tax evasion are deliberately breaking the law and trying to avoid paying their fair share.

What Qualifies as Tax Evasion?

There are a few different ways that someone could commit tax evasion. Some common examples include:

  • Hiding income – This could involve failing to report all of your income, such as money earned from freelance work or rental properties. It might also involve hiding money in offshore accounts to avoid paying taxes on it.
  • Failing to declare assets – This includes failing to declare items such as property, investments, or vehicles that could be subject to taxation.
  • Using false information – This might involve providing HMRC with inaccurate information about your income, expenses, or assets in order to reduce your tax bill.
  • Claiming false deductions – This involves claiming deductions that you are not entitled to, such as business expenses that were never actually incurred.
  • Paying employees “under the table” – This means paying workers in cash instead of through payroll so that they are not subject to income tax or National Insurance deductions.

All of these actions are illegal and could result in serious legal penalties including a hefty crime or custodial prison sentence. This is because it is common knowledge that these actions are in breach of the law and so claiming ignorance or accidental tax evasion is not an excuse.

report tax evasion to HMRC

How to Report Tax Evasion

If you suspect that someone is evading taxes, you can report them to HMRC. This can be done anonymously if you prefer but this may make it more difficult for HMRC to investigate the case.

When making a report, you will need to provide as much information as possible about the individual or business that you suspect is evading taxes. This might include their name, address, contact details, and National Insurance number. You should also provide any information that you have about their income, assets, expenses, and tax deductions.

HMRC will use this information to decide whether or not to investigate the case further. It is important to note that making a report does not mean that the individual in question will automatically be fined or penalised. This can only happen if HMRC finds evidence of tax evasion and is able to prove it in court.

How Does HMRC Investigate Tax Evasion?

If HMRC decides to investigate a case of tax evasion, they will first assess whether there is enough evidence to warrant an investigation. If they believe that there is, they will send a letter to the individual or business in question informing them that they are under investigation.

The next step is for HMRC to gather all relevant information about the case. This might involve reviewing financial records, interviewing witnesses, and carrying out surveillance.

Once they have gathered enough evidence, HMRC will make a decision about whether or not to charge the individual or business with tax evasion. If they decide to do so, the case will be passed on to the Crown Prosecution Service (CPS) who will decide whether or not to bring charges.

If the CPS decides to bring charges, the case will be heard in court and the individual or business could be fined, jailed, or both. This will depend on the severity of the tax evasion and whether or not it is considered to be deliberate or habitual.

How Long Does It Take for HMRC to Investigate?

The length of time it takes for HMRC to investigate a case of tax evasion will vary depending on the complexity of the case. Simple cases might be resolved within a few months, while more complex cases could take years to resolve.

For example, an investigation into a small business where there are only a few employees and a limited number of financial records to review is likely to be much quicker than an investigation into a large corporation with hundreds of employees and millions of pounds worth of financial records. These corporations are also more likely to hire lawyers and accountants to help them with their tax affairs, which can make investigations more complicated.

This doesn’t mean that private individuals or small businesses are more likely to be caught evading taxes. It simply means that their cases are usually much easier for HMRC to investigate and so a decision will be made sooner on whether to prosecute them.

legal penalties for tax evasion

What is the Penalty for Tax Evasion?

The penalty for tax evasion in the UK is a fine of up to £20,000 or imprisonment for up to seven years or both. The business in question will also be ordered to pay back any taxes that they owe, plus interest and penalties. In some cases, the court may also order the individual or business to pay HMRC’s legal costs.

The amount of the fine will depend on how much money was evaded and the seriousness of the offence. For example, someone who deliberately evades £100,000 in taxes is likely to receive a much larger fine than someone who under-reports their income by £500. Ultimately, the court will decide what the fine should be.

If a person is convicted of tax evasion, they do have the right to appeal. This usually involves asking the court to reduce the size of the fine or the sentence, but it can also involve asking for a retrial if there is new evidence that was not available at the time of the original trial.

What Are the Incentives for Reporting Tax Evasion?

There are a number of reasons why people might choose to report tax evasion. Some people do it because they think it’s the right thing to do, while others do it because they hope to receive a financial reward.

If the second reason is your main motivation, it is important to understand that there is no guaranteed reward for reporting tax evasion. The amount of any potential reward will depend on a number of factors, including the amount of money that was evaded and whether or not the information you provide leads to a successful prosecution.

In some cases, the court may order the individual or business who is convicted of tax evasion to pay a percentage of the money that they owe to the person who reported them but this only happens in rare cases.

There have also been instances where an individual has reported a business out of revenge or because they have a grudge against the business owner. It is important to remember that making a false report is a serious offence and can result in a fine of up to £5,000 or imprisonment for up to six months, or both.

High-Profile Cases of UK Tax Evasion

Some of the most high-profile cases of tax evasion in the UK have involved some of the country’s wealthiest individuals and businesses.

In 2017, a number of high-profile individuals were named in the “Paradise Papers”. These were a leaked set of documents that revealed how some of the world’s wealthiest people were using offshore companies to avoid paying taxes. Among those named in the papers were the Queen, Formula One driver Lewis Hamilton, and U.S. President Donald Trump’s commerce secretary Wilbur Ross. All of them denied any wrongdoing.

There have also been some major businesses accused of UK tax evasion. These include Starbucks, Google, and Amazon. In 2017, it was revealed that Starbucks had paid just £ eight million in corporation tax over a period of 15 years despite making billions of pounds in sales.

Google was accused of avoiding £130 million in taxes in by routing its profits through Ireland while Amazon was accused of avoiding £70 million in taxes in 2012 by routing its profits through Luxembourg.

All of these companies denied any wrongdoing and said that they had complied with all UK tax laws.

avoid tax evasion

How Can I Ensure I Don’t Commit Tax Evasion?

There are a few simple steps you can take to make sure you don’t commit tax evasion:

  • Keep accurate records of your income and expenditure. This will make it much easier for you to file your tax return and ensure that you pay the correct amount of tax.
  • If you are self-employed, register with HMRC as soon as possible. This will ensure that you are up-to-date with your tax obligations and avoid any penalties for late registration.
  • Make sure you understand the tax rules that apply to you. These rules are subject to change so it is important to stay up to date so that you know exactly what you need to pay and when.
  • If you are unsure about anything, seek professional advice. This can help you to avoid making a mistake that could result in a tax bill or penalties.

What to do if You are Accused of Tax Evasion

It is important to remember that everyone has the right to a fair trial and you should not assume that you will be found guilty just because you have been accused of tax evasion. If you are facing an accusation, it is important to seek professional advice as soon as possible.

An experienced tax lawyer will be able to help you to understand the allegations against you and advise you on the best course of action. They will also be able to represent you during any meetings or interviews with HMRC and can negotiate on your behalf to try and reach a settlement.

If you are convicted of tax evasion, you may be liable for a fine, imprisonment, or both. You may also be required to pay back any taxes that you owe plus interest and penalties.

A conviction for tax evasion can also have a serious impact on your reputation and your business. If you are convicted, it is likely that your name will be published in the local press and you may find it difficult to get finance or insurance. You may also find it difficult to get a job, especially if you work in the financial sector or if the conviction is for a high-value amount of tax evasion.

Final Thoughts

As you can see, what happens when you report someone for tax evasion UK is that HMRC will investigate the case and decide if it has any merit. If HMRC finds that an offence has been committed, the business or individual in question could face serious penalties. If you have any information about someone who you think is evading taxes, you should contact HMRC as soon as possible. Taxes help provide the UK with the resources it needs to function and everyone has a responsibility to pay their fair share.

Topic

Finance

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