What Is Tax Evasion and What Are The Penalties?
07th June 2018
Make no mistake; trying to screw the taxman out of what he's owed is never a good idea. Deliberate tax evasion can cost you a lot more than just money. Fines, penalties and interest are only the start of it. Get caught cheating HMRC and you could well be looking at criminal prosecution. The worse the evasion, the harder they come after you, with over 1,500 dawn raids taking place in 2016 for severe cases. With up to 10 years in prison on offer for serious offences, this definitely isn't something to mess around with.
What Is Tax Evasion?
So, what does tax evasion actually mean? In basic terms, it's exactly what it sounds like. Any time you're deliberately hiding your income or lying about your circumstances to pay less tax, you become a tax evader. That typically means doing things like:
- Failing to declare your income from all sources.
- Failing to record cash payments.
- Lying about your expenses to bring down your tax bill or boost your refund.
It's easy to fall into the trap of thinking that HMRC's got bigger fish to fry than you. According to HMRC, over half of tax evasion is done by small and medium-sized enterprises. That's why they've got their crosshairs locked so tightly on them. Not all of it is done deliberately, either – although it can be challenging to prove a mistake was genuine.
Are Tax Refunds Legal?
Rest assured there's a world of difference between cheating the tax system and claiming back the refunds you're owed. A HMRC tax refund, despite what you might hear from know-nothing “armchair experts”, is a legal right. There's absolutely nothing dodgy about claiming back overpaid tax, and HMRC actively wants you to do it. Remember - the taxman's not out to cheat you either.
What Can I Legally Claim?
Under tax law, you can claim tax back on a whole range of essential expenses you shell out to do your job. Depending on your situation, that could mean travel costs to temporary workplaces, meals and accommodation or equipment repair. Even subscriptions to professional bodies can count, if they're necessary for your work. The key is to know exactly what you're entitled to – and never claim a penny more than you're owed.
What Should I Do If I Think I've Made A Mistake With My Tax Return?
If you do find yourself explaining an error, your best bet is always to be completely up-front with HMRC. The more pro-active and co-operative you are, the less the damage will probably be.
Keep in mind that the mistakes, or even deliberate evasions, don't necessarily have to be yours to cause problems. For one thing, the taxman does make mistakes of his own from time to time. At RIFT, we've helped many people facing fines, penalties and court action. When we've looked into their cases, we've often found that they were actually owed money instead of owing it! That's a lot of honest customers walking away with healthy refunds instead of sickening penalties.
How Do I Know Who To Trust With My Taxes?
That brings up another key point, of course. When you're getting tax advice, it really pays to know who you're talking to. Sadly, there are a lot of unscrupulous “tax advisers” making overinflated promises about what you can claim in a tax refund or tax return. If you're getting professional advice, make sure it's from a reputable source like RIFT.
We've got almost 20 years of expertise and experience, and we're the only tax company ever to earn the prestigious ServiceMark award from the Institute of Customer Service. Even if your adviser's on the level, when you settle for anything less than the UK's leading tax experts you're still cheating yourself. Read more about how we work in our Customer Charter and Code of Conduct.