Total tax avoidance

[babyhammock]

If someone hasn't paid any tax for over 20 years even though they have been working the whole time with significantly above average earnings, what is likely to happen if the Inland Revenue caught up with them?

At the moment they pretty much don't exist to the tax man. Earnings have been either cash or have been in other people's bank accounts
Thankyou

[nancy75]

I think they can send you to prison if it's been done on purpose - bt I'm not am expert. I would imagine their first step would be to work out how much is owed and try to get the money

[babyhammock]

Thanks for that Nancy. What you said makes sense.
Yup I think it can be considered to have been on purpose...

[STIDW]

As well as paying the amount of tax owed there are civil penalties such as fines for not completing tax returns, surcharges for not paying on time as well as interest on the tax owed. There are also costs if a solicitor or accountant is required to investigate. However there are discounts available on the the penalties if there is proper disclosure, co-operation with HMRC and depending on the seriousness of the case.

[ChristinedePizan]

Tax evasion for above average earnings over 20 years = prison sentence.

[babyhammock]

Thanks Christine and STIDW.
So Christine, you think it will be that black and white?

[ChristinedePizan]

I'm not a tax expert nor a lawyer but I have worked with the HMRC and I know they take a very dim view of people who deliberately evade paying tax over a very long time.

I think you are talking about tax evasion incidentally - tax avoidance is perfectly legal and means arranging your affairs to minimise your tax liability. Tax evasion is fraud.

[babyhammock]

Yes you're right, it is tax evasion.
Thanks again for replying.

[neuroticmumof3]

Sounds like prison to me. I hope they catch up with this person. I can't stand tax evaders, they steal from us all.

[Lizcat]

Lester Pigott went to prison for evading payment of only so of his taxes.

[threeisamagicnumber]

I think this depends on whether they volunteer to HMRC that they have not paid tax - if they did - then clearly there would be hefty penalties and all the back tax to pay, but the individual may avoid a custodial sentence. If they left it for HMRC to deliver, I agree then they are looking at prison

[babyhammock]

Thanks Three, I can't imagine them fessing up for a minute, but would more likely come up with a fantastical story of why they had never paid tax if the HMRC did catch up with them...
The person in question effortlessly lies about everything as a matter of course, even when there is no reason

[ThatsNotMyBabyBelly]

For HMRC to consider a case further back than 4 years I think now, but was 6, then there has to be fraud.

And this would be evasion, it is not avoidance which is a legal way of reducing your tax bill.

Please report this person.

[babyhammock]

Thanks Babybelly,
So if they've evaded tax for more than 4 years its automatically considered fraud?
I'm worried about the consequences if I did.

[prh47bridge]

Why are you worried about the consequences? People should not get away with evading tax.

[babyhammock]

Consequences for me... he's quite a nasty piece of work.
Sorry babybelly, I read the other thread and you answered my question already x

[ThatsNotMyBabyBelly]

If this person has been an evader for a long time, he probably wouldn't know where to start thinking about who may have reported him. There would be a long list of potentials including ex partners, business and personal, disgruntled customers, people he has bragged to down the pub...

You can do so anonymously. Just provide as much information as possible.

[STIDW]

I can empathise. It became apparent through a CSA assessment that my ex wasn't declaring his earnings and I was torn between my public duty and a duty to the children of keeping conflict between parents us minimal. Whilst I was deliberating what to do someone else reported him to the HMRC, he was then bankrupted and I got the flak anyway.

Apparently he hadn't been declaring his above average income for much longer than 6 years but civil penalties were imposed rather than criminal proceedings.

[babyhammock]

STIWD that's a tough one. I'm guessing also that you couldn't get anything at all through the CSA as they only go on taxable income, which puts you in another difficult situation with regards it all.
So was he not paying any tax at all then?

Babybelly, thanks. I would get the blame I think... long story x

[MrsTax]

There are a few issues here. Firstly you can report him anonymously via the HMRC website. Secondly he is UNLIKELY to go to prison - HMRC prosecutes relatively few cases so tend to go for the really big ones or crooked accountants etc - however if he has been claiming benefits as well, DWP may well prosecute. If he is caught by HMRC he will eventually have to pay the tax plus interest and penalties. Thirdly, banks have a duty to report suspicious transactions and amounts paid into other accounts may already have been reported to HMRC and the account owners may end up under investigation. Fourthly, information about him such as building society interest, investments, house purchases (Stamp Duty) is automatically reported to HMRC so it is likely he will be picked up at some point. They have invested in a sophisticated intelligence system which will cross reference a lot of information and pick up on people like this.

[mollymole]

as a former accountant i can say that it is not likely he will go to prison.
he will need to approach HMRC and co-operate FULLY AND HONESTLY in all aspects of his case - the reason Lester Piggott went to prison was that he continually lied to the Inland Revenue (as it was then) - even when it came to signing his final disclosure he was still not telling the Revenue the truth and this is why he went to prison.- you may remember a similar case regarding Ken Dodd, who did not go to prison, the reason Dodd kept out of prison was that he did actually tell the truth in the end.
the best thing you can do is tell HMRC and the person would need to appoint an accountant to act on their behalf as the situation is complicated and they will not be in the best position unless you have an accountant to guide them
it is going to cost a goodly sum, but they should pay what is due

[babyhammock]

Thanks Molly and MrsTax
He uses other people's bank accounts and the Inland Revenue did try to catch up with him about 5 years ago be it only with the previous 5 years no tax return penalties! He just uses adresses where he doesn't live and so managed to stay under the radar. He also bought and sold another property other than his mortgaged one with a 50K profit and again this went undeclared.
Are they really unlikely to prosecute? He's actually been earning about 40K per year.

[WutheringTights]

HMRC is massively under-resourced. They simply don't have the staff/ time to investigate and follow up everything so they tend to focus on the really big cases or specific sectors where they know that can get results. £40k a year is a lot to us but the tax on that isn't a huge amount to HMRC and the costs of tracking him down and investigating him properly might mean that they would be better spending that money elsewhere.

I deal with large corporates who get a pretty good service so it's not too bad, but the tax professional journals are constantly complaining about 'phones ringing out, letters going unanswered etc. It could take years to see any results from HMRC, even if they do take action.

[ChristinedePizan]

How absurd that you can go to prison for nicking a couple of bottles of water from a shop that's already been looted but you can get away with ripping off the State to the tune of £200,000 or so and just have to pay it back.

Something's very wrong in this country

[babyhammock]

Thanks all
Yes Christine... its mad isn't it .. and you're right it would be about 200K :(

[Glad2BeFree]

If your ex, the father of your children is on a tax avoidance scheme so he pays little to no maintenance in the UK, read on as to what you can do.

Firstly, although tax avoidance schemes are not illegal they have to be used in the way Parliament intended. A tax avoidance scheme is a loophole that these aggressive tax avoidance people use to pay nothing. They usually do this in a few ways, especially if they are Directors of their own company. Look them up on Company House, then firstly, reported to HMRC and AAG for tax avoidance. It's all anonymous. Parliament did not intend them to be able to use this tax loophole.

About child maintenance and how to get all of his income included in the assessment. A variation to the CSA won't change anything. You have to appeal the CSA decision so it goes to the appeals department in the CSA who have more power, and when you do you write this to them:

1. That you have failed to include as (INSERT FATHER'S NAME)income that part which he draws through a loan arrangement and probably via a remuneration trust.
   

It is my view that these payments either form part of the basic remuneration package and so should be taken into account within the underlying assessment or that they should be brought into account as a variation under regulation 19(4)(a)(ii).

1. That you have failed to take into account as assets in applying Regulation 18 any balance held in his remuneration trust, the value of his shares in his company and the balance on his loan account with his company.
   

1. That you have failed to take into account under Regulation 19(1A) the dividends received from his company.
   

1. That you have failed to properly apply Regulation 19(4) to the diversion to (INSERT FATHER'S NAMEE) company by his failure to draw an appropriate salary.
   

1. That you have failed to properly apply Regulation 20 by your acceptance without supporting evidence that (INSERT FATHER'S NAME) partner pays all their outgoings.
   

This letter covers all aspects of the aggressive tax avoidance scheme he's on. Also by getting him investigated by HMRC tax avoidance and AAG Aggressive Avoidance Group he may well find himself been investigated for the last 6 years of tax and have a hefty bill to pay to HMRC.

This income will all be used in his child maintenance assessment. If at this stage for some reason the CSA appeal can't do anything, they will send it to Tribunal. You will win the outcome.

I write from experience, didn't have go to Tribunal just CSA assessment and WON.

Good luck and fight for your children's money for their upbringing.