Tax Evasion

Failure to Prevent

Ebook
 Evasion
• Making VAT refund claims on goods that do not exist

• Not declaring income from a second job that pays cash in hand

• Diverting profits to an offshore bank account which is not declared

• Artificially deflating the value of assets to reduce tax liabilities

Not evasion
• Registering a company with a holding company in a jurisdiction
with a zero tax rate
• Placing an estate in an offshore trust to benefit family members
and save on inheritance tax
• Registering a company that employs only one person and their
spouse and pays dividends rather than salaries
• Being domiciled in a low-tax jurisdiction and spending less than
180 days per year in the country where income is derived from
 Quick guide to tax
Evasion
Could result in legal penalties
Follows the law as intended
Uses methods that are legal
Lowers the tax risk
Tax evasion key facts
100+
countries exchange
taxpayer information
on offshore assets.
90%
of the charges were
resulted in a conviction.
Avoidance
Could result in legal penalties
Follows the law as intended
Uses methods that are legal
Lowers the tax risk
1,135
charges were brought
against tax evaders in
2015/16.
58,000
people disclosed offshore
additional revenue was collected.
assets to HMRC.
Mitigation
Could result in legal penalties
Follows the law as intended
Uses methods that are legal
Lowers the tax risk
£2.2bn
in revenue was prevented
from being lost.
£2.7bn
 Wesley Snipes
The actor who starred in Blade was charged by US
federal prosecutors with a host of tax evasion
offences. The prosecution alleged that Snipes hid
income in offshore accounts and did not file
federal income tax returns for a number of years.
His tax debt was estimated to be at least $12
million.

In 2008, the actor was acquitted of tax fraud and

conspiracy charges, but found guilty of lesser
charges and sentenced to three years in prison.
However, his accountant Douglas Rosile was
convicted and sentenced to four and a half years
in prison.

Lionel Messi
The Barcelona FC player and his father Jorge were
handed 21 month sentences by a court in
Catalonia for tax evasion. They were convicted of
hiding more than €4m in tax havens in South
American tax havens. While neither of the pair
went to jail, they both paid millions of euros in
fines for defrauding the Spanish tax authority.
Messi claimed he knew nothing of how his money
was managed and admitted to signing documents
without reading them, but the judge found his
ignorance did not remove responsibility.
Spot a tax avoidance scheme
Warning signs
• It sounds too good to be true
• Pay in the form of loans that are not expected to be paid back
• Huge benefits which are disproportionate
• Money is moved around in circles
• It has a Scheme Reference Number (SRN)

What might happen if someone

enters a tax avoidance scheme?
HMRC is taking ever harsher action against tax
avoiders and those who profit from these as it can:

• Require the tax to be paid upfront (accelerated

payment notices)
• Take legal action
• Treat the person as a high-risk taxpayer and
closely scrutinise all affairs
• Undertake asset seizure and insolvency
proceedings
HMRC enforcement action

Karen Millen

The fashion designer was declared bankrupt after failing to pay

£6m in taxes owed to HMRC over her involvement in a tax
avoidance scheme. She invested in the ‘Round the World’ scheme
which offered to lower capital gains tax on the sale of shares by
transferring them to trustees in offshore tax havens with 0% capital
gains tax. While the scheme was recommended by a number
accountancy firms, it was voided by the Court of Appeal.

Rangers Football Club

HMRC is taking the Glasgow football club to the Supreme Court

over an estimated £46.2m of unpaid tax. Rangers used trusts in
Jersey to fund tax-free loans to employees. Many companies put
money into offshore employment benefit trusts (EBT’s) for top
employees in order to postpone or avoid paying tax while
benefiting from the loans. Then Chancellor George Osborne took
action to shut down those kind of schemes.
Reasonable procedures checklist
• Assess the nature and extent of the risk of tax evasion. What
do existing procedures cover and do they mitigate the
potential risk?

• Communicate and discuss with others on institutional

obligations for checking for tax evasion.

• Deliver training to frontline staff on how to spot potential tax

evasion.

• Ensure financial teams understand tax evasion, how to spot

and investigate it, and they are empowered to question
frontline staff.

• Adapt IT and secure internal communication systems to

support staff in identifying and managing risk.

• Check that procedures cover not just staff, but other associated
persons.

• Ensure corporate governance takes account of the risks and

senior managers are aware of their responsibilities.
Major red flags

Someone living beyond their apparent means

without an obvious income stream

Overly extravagant lifestyle

Secretive about the type of work they do

Overuse of cash or exclusive use of cheques or money orders

Owning large amounts of real estate, bonds, boats, or other

luxury products such as art and jewellery

Transactions involving known tax havens