Tax evasion consists of seeking to mislead Tax Authorities by either:
- Suppressing information to which Tax Authorities is entitled, for example by:
- Failing to notify Tax Authorities of a liability to tax
- Understating income or gains
- Omitting to disclose a relevant fact
Providing Tax Authorities with deliberately false information, for example by:
- Deducting expenses that have not been incurred
- Claiming capital allowances on plant that has not been purchased
Minor cases of tax evasion are generally settled out of court via the payment of penalties. However, there is a statutory offence of evading income tax that can be dealt with in a magistrate’s court.
Serious cases of tax evasion, particularly those involving fraud, continue to be the subject of criminal prosecutions which may lead to fines and/or imprisonment on conviction.
Furthermore, tax evasion offences will fall within the definition of money laundering and in certain cases individuals may be prosecuted under one of the money laundering offences. This includes both the under declaring of income and the over claiming of expenses.
If the assets of any clients were derived from illegal activities or if the client has committed tax evasion that considered under money laundering, a threat to compliance with the fundamental principles would be created. In such situations, the professional accountant may consider seeking legal advice and he should report this to the authorities.
Tax avoidance is not defined, but is broadly any legal method of reducing the tax burden.
In recent years there has been a requirement for promoters of certain tax avoidance schemes to
disclose their schemes to Tax Authorities, and for taxpayers to disclose details of which schemes
they have used. This may enable Tax Authorities to take action more rapidly to close the