Tax Fraud

Are you tempted by tax fraud? Read the seven short case reviews

Tax evasion is illegal and tax avoidance is legal, providing that the avoidance strategy taken is not too aggressive and stays within the rules. Tips and warnings collated in our blog under "Beware HMRC" abound. Note that HMRC has powers to snoop and investigate like never before; that it uses big data to track and compare (benchmarking), and that the consequences for getting caught evading tax can be very serious indeed in all ways, financially, to your reputation, and can even deprive you of your liberty.

DNS finds every way to minimise your tax bill legally. We have a duty to oversee that our clients are compliant and we appreciate it when clients are honest about their income (that is all income). We are only human, however, and sometimes people make mistakes. Remember that our agreement of confidentiality means that you can talk to your account manager in confidence, so if ever you are in any sort of mind to pull a stunt involving not declaring all of your income, don't be, divulge everything to us and you'll be okay.

Recently HMRC published details of tax fraudsters prosecuted and jailed, here are a few examples to remind us all of the likely results. Bear in mind as well that the published details include the full name, date of birth, and the residential address of the convicted individuals. To read the full details, click here.

Andrew Phillips and Michael McGrath were sentenced to forty months in prison after HMRC officers caught them laundering £115,000 cash, including £60,000 found in the boot of a car and £22,000 from their houses. The cash was from criminal activities.

I am ashamed to list among this "rogues gallery", a Harrow-based accountant Abu Talib Ghadiri, who was convicted for his direct involvement, together with his brother Mohsin Raza, in a £400,000 gift aid and VAT fraud. Together, they filed fraudulent gift aid claims for charities purported to promote education and help victims of natural disasters in Pakistan. The fraudulent claims were made for donations from deceased persons before the alleged donations were made.

Geoffrey Johnson and his son Gareth Johnson were ordered to pay back £109 million of VAT fraud proceeds. These two are currently the subject of international arrest warrants after absconding before trial. However, the rest of the sixteen-strong gang involved in mobile phone VAT fraud have been jailed for a total of 135 years.

Kenneth Crookes was jailed for four years for deducting PAYE payments from his staff; instead of paying what was owed to HMRC, he funnelled the money into his failing business. He has been ordered to pay back £884,000 or face another six years in prison.

Ozcan Donmez, a Leicester based restaurant owner, was jailed for twenty-eight months for avoiding £165,000 in tax. Not only did he suppress the daily takings of his restaurant by £50 to £100, he also failed to declare his two rental properties to his accountant. He has been ordered to pay back the unpaid tax or face another two and a-half years in prison.

Brian Brader, director of a Cambridgeshire recycling company, was jailed for four years for fraudulently claiming £1.1 million of VAT. HMRC became suspicious after a routine compliance check. Not only did officers find faked invoices to claim input VAT, it then transpired that he had paid himself a salary of £82,000 but failed to put it through PAYE. He admitted to generating fake invoices worth £350,000 to make fraudulent VAT claims.

Lastly, there is James Turner, director of a security company, who was jailed for twenty-eight months for committing VAT fraud of £300,000. He charged the VAT to his customers but failed to pay it over to HMRC. The fraud was revealed in July 2012 when HMRC officers discovered James Turner, age fifty-six, from Rise Park had been issuing invoices charging VAT using invalid registration numbers, some de-registered numbers, and others showing no VAT registration number at all.

Conclusion

These few tax evasion and fraud cases here are the worst of the worst, but even small omissions and errors can leave you in deep water. Please remember, the government is hot on tax evasion, HMRC is well funded and better equipped to fight it than ever before. To protect you against innocent error, tax investigation insurance is essential. DNS can protect you against the human desire to play the system, so long as you are always honest and open about your income, expenditure, and assets. Let these cases be a warning to us all.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.