This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.


Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

tax investigation question

Posts: 18
Joined: Sun Jun 09, 2013 7:52 pm

tax investigation question

Postby keaton » Tue Dec 03, 2013 11:46 pm

From my understanding tax evasion is classed as fraud. After a tax investigation that finds tax evasion, how does the tax payer pay back the tax if they have no money? As a person cannot file for bankruptsy (as bankruptsy does not cover monies gained through fraud) so how does hmrc get the money back?

Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: tax investigation question

Postby LozaACCS » Wed Dec 11, 2013 9:12 am

They get the money back by applying to the court for a confiscation order.
The prosecutor may not consider it worthwhile to pursue such an order if you clearly have no assets, they may however do so on the basis that any future assets you may acquire could then be included.
Confiscation differs from forfeiture in that the former establishes a benefit which the convicted person must meet in order that he be deprived of his proceeds of crime.
The way in which the benefit is computed inevitably leads to double (even triple) counting such that the figure produced would be considered to be absurd from an accounting perspective, the courts however have made it clear that they have no interest in measuring the benefit in terms of profit or loss as would be recognised by an accountant.

I do not believe bankruptcy alters the position much, S85 of POCA treats any property of the convicted person held as a Trustee to be included in the benefit calculation, secured debts (eg a mortgage) would have priority over the confiscation order but not much else.

Since the confiscation order makes no attempt to seize particular assets, if say you were solvent prior to conviction but insolvent after it, then the order would not be materially affected by your bankruptcy.

Posts: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen

Re: tax investigation question

Postby wamstax » Mon Dec 23, 2013 3:46 pm

Not all tax evasion arises as a consequence of fraud.

Tax evasion can cover a very wide spectrum of irregularities from
(a) a simple error down to " carelessness" - that is failing to take the actions that a reasonable man would have considered it appropriate to take in particular circumstances. For example if you were in doubt about the tax treatment of a matter you would be expected to consult and/or engage a professional tax adviser OR follow HMRC's guidance on such matters (after all they are not always 100% correct). In these circumstances you might not have been aware of the problem and therefore could not amount to fraud - as you cannot become fraudulent in a tax sense accidently

(b) errors that have arisen because of "deliberate" behaviour. In other words you knew what you were doing was wrong but still chose to deprive the Exchequer of his "rewards" from your work. This could be fraudulent but might not be fraud. HMRC's view of fraud is along the following lines:-
There are various tax fraud offences, but all involve intent. You cannot commit tax fraud accidentally. Tax fraud includes, deliberately:
• concealing or withholding relevant facts, or
• failing to disclose a liability to tax or duty, or
• misrepresenting your tax affairs.

So clearly it is relevant to first of all ensure that the behaviour that gave rise to the tax fraud was deliberate and that it then fell within the sort of items mentioned. You could of course be involved in deliberate tax evasion in the sense that it was gross and continued carelessness over a prolonged period that might not amount to fraud - but of course this is splitting hairs.
regards and hope this helps
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: tax investigation question

Postby LozaACCS » Mon Dec 23, 2013 10:51 pm


The OP makes it clear in his post that tax evasion is in point.
In order for there to be tax evasion (an indictable offence) there must be a deliberate (not just careless) action on his part, In this context careless means failing to take reasonable care.
Your post appears to suggest that a careless error in itself might give rise to a charge of tax evasion.
Have you ever met or known of any one who has been indicted on the strength of a careless error, without the behaviour being regarded as deliberate.

Return to “Tax Investigations and Enquiries”