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Contractor accountants should be wary of HMRC prosecutions

UK individuals, including limited company contractors, appear to be committing less tax offences than in previous years according to law firm McGrigors.

In the 12 months to the end of September 2009, 157 people were found guilty of tax offences. That was a drop of 62 compared to the corresponding period the year before. Of the 157 convictions, 74 were for VAT related offences.

A former Inland Revenue prosecutor who is now a partner at McGrigors said that HMRC is not prosecuting as many people for tax evasion as they did in previous years because they are concerned about losing cases that come before a jury. The law firm also claims that HMRC lost £7bn through tax evasion in 2009. It is expected that the Revenue will recoup around £3bn through its tax amnesties but that still leaves a huge shortfall.

HMRC are concerned that few people took advantage of the recent New Disclosure Opportunity and the Liechtenstein Disclosure Facility but believe that this is because people are no longer afraid if prosecution.

However, things may be set to change. It appears that the Revenue plans to increase the number of prosecutions and call on judges to pass longer sentences. They also plan to ‘name and shame’ guilty parties.

A spokesman from the tax office said that they do tackle fraud effectively and prosecute where appropriate. But civil settlements are obtained where possible in tax evasion cases as this is more cost effective. By using civil proceedings the taxman ensures that all undeclared tax, plus penalties, is repaid.

Meanwhile, employers and employees are being given a limited time of 2 months to minimise tax and NIC payments due on accommodation provided through Employee Benefit Trusts. If they come forward, they will not face prosecution providing they settle outstanding tax liabilities in full.

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Image: Just_In_Jail by Mark Strozier

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