This helpsheet provides further guidance on the application of the Fundamental Principles and Standards when dealing with tax evasion.
The principles in Voluntary disclosures under Disclosure facilities apply equally to this section.
Tax evasion is illegal and may involve understating turnover, overstating deductible expenses, false invoicing or backdating documents.
Tax evasion can also occur in the context of what purports or appears to be a plan to reduce tax liabilities within the law if there is deliberate concealment of the relevant facts from HMRC or if HMRC is misled.
A dishonest intention not to pay the tax if it is ultimately shown to be lawfully due or a wilful disregard as to how the tax would be paid can be indicative of tax fraud. For such reason a Counsel’s opinion on the technical analysis does not guarantee that arrangements could not be construed as tax fraud.
HMRC and other tax authorities internationally are increasingly considering whether some cases of tax avoidance may involve elements of criminal behaviour. A member should remain vigilant to the possibility of tax evasion when involved in what is ostensibly lawful planning.
A member must never be knowingly involved in tax evasion although, of course, it is appropriate to act for a client who is rectifying their tax affairs. A member should always seek to persuade their client to comply with the law and should follow the advice in Dealing with irregularities, including consideration of anti-money laundering obligations, if concerned about the activities of clients or third parties.
This is a complex and specialised area and a member should not undertake this type of work unless they have the relevant experience and knowledge or obtain specialist support. A member acting in any other capacity, for example, on a self-assessment enquiry, who becomes aware of behaviour which may be considered to be tax evasion should advise the client accordingly. For example:
- Whether the matter should be dealt with under CoP 9
- Whether the matter should be dealt with under an HMRC disclosure facility (see Voluntary disclosures under Disclosure facilities)
- The potential for significant tax-geared penalties
- The potential for HMRC to make public details of the client’s misdemeanours.
A member should also seek to protect both themselves and their clients and avoid any perception of involvement in tax evasion by, for example, ensuring that proper disclosure is made. If a member is aware of any confusion in the documentation, they should avoid misleading HMRC or creating any perception that HMRC is being misled.