If you have been reported for tax evasion, it can be an incredibly distressing ordeal. This article explains what to do if you’ve been reported for tax evasion, what happens during a tax evasion investigation and also looks into a newer bout of tax evasion which regards online sales.
What To Do If You’ve Been Reported For Tax Evasion
But what happens if you’ve been reported for tax evasion, what are the steps you need to take and what are the possible penalties that can be received as a result of an investigation? Well, If you are concerned that you may soon be investigated for tax evasion, the first step you need to take is to make contact with legal professionals who can give you advice and representation on tax evasion and issues with HMRC as soon as possible.
It’s important that you provide them with as much information about your actions as an online seller as you can. They can then help you to collect evidence and build a defence to prove either that any accusations of online tax evasion made against you are false, or that any omissions you have made regarding the payment of VAT or customs duties were the result of an honest mistake that can be rectified without criminal proceedings taking place.
What Happens During A Tax Evasion Investigation In The UK?
- You will receive correspondence notifying you of any official investigation that is to take place.
- HMRC may request further information or clarification regarding the payment of VAT or duties on any products you import or export, and you are usually given 30 days to respond to these requests before they take further action.
- You may also be invited to attend interviews with HMRC staff regarding any activity that has made them suspicious that you are guilty of online tax evasion or the omission of payment of duty. It’s highly recommended that your solicitors look over any correspondence of this kind that you have with HMRC, and attend any meetings alongside you in order to provide proper representation and assistance.
Can You Go To Prison For Tax Evasion? What Is The Maximum Penalty In The UK?
A case of this kind may be tried in either the Magistrate’s Court or Crown Court, and a maximum penalty of seven years imprisonment is possible for tax evasion depending on the case.
Financial penalties for tax evasion, by both online retailers and general persons depends on the amount of VAT and duty that was avoided, and the extent to which the perpetrators went to conceal fraudulent behaviour.
Online Tax Evasion
So-called ‘online tax evasion’ by online retailers is reportedly becoming an increasing concern for HMRC. Many fraudulent Companies based overseas have found to be illegally selling and shipping products without the correct VAT or duty payments being made, and online tax evasion in the UK is just as common. Sometimes, those accused and reported for online tax evasion may not have even been aware that they were committing tax evasion.
Marketplace platforms such as Ebay and Amazon and even applications such as Depop and Shpock are home to a large number of these illegal cases of online VAT evasion and duty-dodging, meaning that these sites are becoming more intensely policed and new laws have recently come into effect.
What Is The Government’s Approach To Online Tax Evasion?
Under new legislation passed in Spring 2018, HMRC can now make overseas retailers register for VAT in the UK, or have them appoint a UK-based VAT representative. Even before these rules came into force, the HMRC crackdown into online tax evasion in the UK was having a positive effect; 7,185 internet retailers registered for VAT in 2016, compared to just 695 in 2015.
In mid-2018, the Fulfillment House Due Diligence Scheme was introduced, which encourages companies storing goods that are imported from outside the EU to complete a series of checks to ensure that all legal processes have been adhered to. Tax evasion on marketplaces such as Amazon and ebay was also made the subject of new legislation, with sites such as Amazon and ebay being required to take responsibility for all sellers using their platform and to ensure that each one pays the correct tax and does not commit fraud.
How Much Can You Make On eBay, Depop, Amazon etc. Before Paying Tax?
Typically, any earnings above an individual’s tax-free personal allowance of £11,850 are taxable if the money is considered to be a profit made from business proceedings. Meaning if your primary source of income is selling online, any money made annually over this threshold is taxable.
If being an online seller is your ‘second job’, also known as a ‘side hustle, as of April 2017, a policy was put into place that means you can earn up to £1,000 in ‘Trading Income Allowance’ before having to declare these earnings to HMRC.
HMRC state that you must inform them if your online sales (or any other side business, for that matter) has:
- Gross trading income over £1,000 – you must register for Self Assessment.
- Other gross income over £1,000 up to £2,500 – you must contact HMRC.
- Other income over £2,500 – you must register for Self Assessment.
If your taxable turnover exceeds £83,000 within a year from online sales, you must also register to make VAT returns too.
How Can I Avoid Investigations for Online Tax Evasion?
The best approach you can take in order to prevent your online business from becoming the subject of an HMRC investigation is to sign up to the aforementioned Fulfillment House Due Diligence Scheme if your company deals in or stores goods that come from outside the EU, and to set up proper processes and checks to ensure that correct tax is being paid by your company of all times.
It’s vital to keep detailed records of these checks to provide as evidence to HMRC if necessary. Your legal advisor should be able to advise you on how to do this. This should help you to avoid the likelihood of being reported for online tax evasion.
And finally, contacting a solicitor as soon as you learn of any investigation against you into allegations and accusations of online VAT evasion or duty dodging is the best way to ensure that justice is achieved in your case. A legal specialist may also be able to advise you in the set-up of processes that will ensure all tax is paid correctly in the future in order to avoid further problems with HMRC.
Tax Disputes and Investigations
Each year the government are dedicating more and more resources to identify corporations and individuals who are in breach of tax regulation.Read More.
HMRC Criminal Investigations
When it comes to HMRC criminal investigations, our solicitors have a reassuring amount of experience. We’ve been defending fraud cases for more than twenty years.Read More.
HMRC Regulatory & Compliance Services
Additional resources are now being directed by HMRC to identify and tackle tax avoidance, tax evasion and organised criminal attacks on the system.Read More.