Tax fraud - is it a criminal offence? Or a civil liability?

Tax fraud is the practice of deliberately and dishonestly evading tax. It comes in all sorts of forms such as (i) submitting false tax returns, (ii) hiding income to reduce income tax, and (iii) smuggling taxable goods, to name a few.

Tax fraud is a serious offence. In this blog we look at the ways that HMRC is cracking down on tax fraud, through the civil and criminal routes.

Is tax fraud a criminal offence or a civil liability?

Tax fraud can be either a criminal, or a civil offence, or it can be both. It depends on the seriousness of the offence. In some cases, criminal investigations arise out of civil investigations and both of these investigations can run in parallel.

Criminal investigations may be opened for offences such as money laundering, submitting false or forged documents, or for hiding assets overseas.

Civil investigations tend to be around offences that are more easily resolved. It could be repeated errors on your tax submission, or large discrepancies in income year-on-year. HMRC will want to recover the shortfall between what the person has paid in tax, and what they should have paid.

Why does it matter?

There are two main differences between a criminal and a civil investigation.

First, the standard of proof is different. In a criminal case, the HMRC will need to prove guilt beyond reasonable doubt. In a civil case, it turns on the balance of probabilities. That means that it is more difficult to prove a criminal charge than it is to prove a civil case.

Secondly, the punishments differ. In a criminal case, an offender could face a fine, and a prison sentence, together with a criminal record. On the other hand, the punishment for a civil offence is a fine and additional penalties.

It’s also worth being aware that HMRC can use police powers in criminal investigations. That means that they may be able to use surveillance to gather evidence, or conduct a dawn raid out of the blue.

HMRC’s approach

HMRC is focused on recovering what is owed in terms of the shortfall in tax. Their preference is to manage cases through civil investigation, which will achieve this result.

However, they will open criminal cases when the potential fraud is very serious, or there are particularly large losses afoot. In these cases, they want to tackle organised crime groups and send a strong deterrent message that tax fraud will not be tolerated.

How solicitors can help

If you have been accused of tax fraud, you need a solicitor on side as soon as possible. In some cases, it may be an honest mistake. You might have been unaware that you made an error on a tax return for example. But how you respond to HMRC is very important. If you don’t accept culpability, it could turn into a criminal investigation.

We can help you respond to HMRC to minimise the impact on you, and set the record straight as soon as possible.

Contact us today, we work on both privately funded and serious Legal Aid cases across Leeds, Bradford, Halifax, Wakefield, Huddersfield, Keighley and across West Yorkshire and the UK.

0333 3448377 | info@harewoodlaw.com