Tax & admin · 15 December 2015

Self-employed hit hard by tax evasion prosecutions

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Some 1,258 individuals were convicted of tax evasion in 2014-2015

Criminal prosecutions for tax evasion increased by 58 per cent last year – with self-employed individuals particularly at risk of a prison sentence or criminal record for misleading the tax man.

The Times described the crackdown on contractors and freelancers as a result of HMRC’s focus on “soft targets”.

Some 1,258 individuals were convicted of tax evasion in 2014-2015, according to data released to Thomson Reuters following a Freedom of Information (FOI) request. This is an increase of almost 800 on the year before, and means the tax collecting body surpassed a government target of 1,165 prosecutions.

Those prosecuted in the last year included two double glazing salespeople in Leeds, who received twenty-month suspended prison sentences for failing to register for tax returns.

A statement last month from HMRC said: “Last year, we secured £26bn of additional yield across all our compliance work, ensuring everyone pays what they owe. Tackling tax evasion is a top priority for HMRC and last year alone we successfully prosecuted a record 1,200 cases, resulting in 407 years of custodial sentences.

“We also routinely publish the number of tax avoidance schemes, which show a steady decline as a result of tough government action. We brought in more than £1bn from the first year of applying accelerated payments to avoidance cases and have closed many loopholes and secured tough new enforcement powers.”

The increase in convictions follows concern about the use by HMRC of Accelerated Payment Notices (APNs) to demand disputed tax upfront. The policy, introduced in 2014, means that contractors who believe they are innocent of wrongdoing must pay the amount in question and claim it back at a later date – even if they have to declare bankruptcy to do so.

Adam Craggs, partner and head of tax at law firm RPC, told International Advisor in November:
“APNs are not only being issued to high net worth individuals. HMRC is also targeting modestly well-off self-employed IT contractors who are now being pursued for alleged tax on income earned, in some cases, more than a decade ago.

“It is extraordinary that taxpayers may face bankruptcy as a consequence of being unable to pay an amount demanded in an APN, when that sum remains in dispute and remains to be determined by an independent tribunal or court as being lawfully due,” he added.

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Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics – as well as running a tutoring company.

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