Home » Nightmares » Prosecution

Prosecution

Criminal prosecution in relation to tax offences is rare. Every year HMRC carry out around 250,000 tax enquiries of which less than 100 will result in prosecution.

The Taxes Acts provides a regime of civil penalties which cover both fraudulent and negligent conduct. As a matter of policy HMRC usually take the view that the powers they have to collect tax, interest and penalties are more cost effective than criminal prosecution, and that they provide a sufficient deterrent and ensure adequate restitution for the unpaid tax. If necessary the penalties can be enforced through the courts and ultimately lead to seizure of goods and bankruptcy. But this is through civil and not criminal proceedings.

There are circumstances where they will prosecute. The main ones being:

  • High profile figures in a position of responsibility – e.g. MP’s or judges
  • Accountants or lawyers involved in money-laundering
  • Where there are links to criminal gangs or organised frauds
  • Previous offenders – Lester Piggott was prosecuted after his third civil tax investigation
  • Where forged documents are used
  • Where the publicity might prove a major deterrent – This was presumably the thinking behind the (ultimately unsuccessful) prosecutions of Harry Rednapp and before him Ken Dodd.

There are in fact very few income tax or national insurance offences which constitute criminal offences. The main ones are fraudulent tax evasion (S144 Finance Act 2000), theft, false accounting, cheating HMRC and obtaining a pecuniary advantage by deception. There are also some obscure criminal offences involving international companies failing to get Treasury consent for share issues. However failing to register for income tax, not sending in your tax return on time or failing to pay your tax on time are not in themselves criminal offences – they are covered by the civil penalty regime.

Impersonating a tax inspector used to be a criminal offence punishable by transportation, but the punishment was repealed. Probably the Australians got fed up with Tasmania being over-run with Inland Revenue impersonators.

And it’s easy to tell whether you’re likely to be prosecuted. You’ll be interviewed under caution “You have the right to remain silent but it may harm your defence….”

I am only aware of one (special) case where an escort has been prosecuted for tax evasion. That is not to say that sex-workers have not been charged with tax evasion where they have also been charged with a number of other serious offences involving organised (or even disorganised) crime.

Illegal businesses are probably more likely to be targetted under the Proceeds of Crime legislation which can result not just in payment of tax on profits (after taking off expenses) but in the confiscation of the entire income – a bit like a 100% tax with no tax relief for business expenses.

You can read the HMRC policy on criminal prosecution.

 

Leave a Reply