What Are The Penalties of Tax Evasion?

 Tax evasion is a crime that leads to serious repercussions. However, in some instances, it can be committed entirely by mistake. In those instances, professional legal council is required. But what are the penalties if you’re found guilty?  

In this blog, we will address provide information on the question ‘What are the penalties of tax evasion?’

JD Solicitors are a fully (SRA) regulated law firm with a team of highly qualified and specialist solicitors. Our solicitors recognise that being investigated or charged with a serious criminal offence is a daunting prospect.

Our specialist advice and reassurance, from the first phone call through to the conclusion of the case, is the bare minimum of what we offer when it comes to our clients.

Can you evade tax by accident?

Yes, it is entirely possible to accidentally evade taxes. It’s important to distinguish between deliberate tax evasion and unintentional errors. Even unintentional mistakes can lead to HMRC scrutiny. 

Here are some signs that you might be accidentally evading tax:   

Inaccurate records:

• If your financial records are unorganised or incomplete, it’s easy to miss income or overstate expenses.
• This is especially true for self-employed individuals or those with complex financial situations.   

Misunderstanding tax rules:

• Tax laws are complex and constantly changing. If you’re not up-to-date, you could be making unintentional errors.   
• An example of common misunderstanding of tax rules are business expenses, with what can and cannot be claimed.

Self-Assessment returns errors:

Examples of errors on self-assessment returns can include:

• Incorrectly reporting income.
• Claiming ineligible expenses.
• Missing deadlines.
• not reporting all income sources.

“Cash-in-Hand” payments:

Receiving cash is by no means illegal per-say, the issues arise when significant amounts of cash are handled without legitimate or plausible records. 

Unclear employment status:

Confusion about whether you’re employed, self-employed, or a contractor can lead to incorrect tax payments.

Life changes relevant to tax obligations:

Life events like marriage, divorce, or starting a business can alter your tax obligations.  Failing to notify HMRC of these changes when necessary can lead to problems.   

Not conducting thorough research:

Taking tax advice from unqualified individuals or sources can lead to errors.   

Offshore accounts:

While not always illegal, undeclared offshore accounts are a major red flag for HMRC.
  

What should you do if you’re accused of tax evasion?

Tax evasion accusations require an immediate and thorough response with the help of a tax evasion solicitor. Accusations are generally made after HMRC have conducted their own internal investigations to determine if action can be taken.

Here are the steps you should take if you have been accused:

1. Remain calm and composed

Tax evasions are a serious accusation, however, acting irrationally can make the situation worse. Tensions can be high, but keeping a cool head is the best way to approach your defence properly. 

2. Contact a tax evasion solicitor

Look for legal council that specialises in tax evasion defence immediately. In order to create a strong defence, you must ensure legal intervention is taken early. Your solicitor will explain the charges against you and the potential penalties. They will also outline the different stages of the investigation and legal proceedings.

In order for the best possible defence, you must share all the facts that you are aware of with your solicitor. This allows them to present the best strategy for addressing your case. Once they have all the information.

3. Have a lawyer present when talking to HMRC

HMRC will contact you regarding their investigation and pursuit of it. It is critical to remember that anything you say can be used against you. 

There is no obligation to answer questions from HMRC without first getting a consultation from a tax evasion solicitor. 

4. Gather all relevant documents:

Collect all financial records, tax returns, bank statements, and any other documents related to the accusation. Secure these documents in a safe place, and do not destroy or alter any documents, as this could be considered as perverting the course of justice.

5. Comply with guidance from your solicitor:

Your solicitor will guide you through the legal process and inform you of what to expect going forward. It is critical that you listen to their instructions and not to act outside of them without their approval. 

If you neglect their guidance, it can jeopardise your defence. 

6. Communicate to HMRC via your solicitor:

Remember, during the course of the investigation, any communication you have directly with HMRC has the potential to be used against you. You should allow for communication and potential cooperation to be conducted with your solicitor on your behalf. 

What happens if you’re convicted for tax evasion?