Conduct involving dishonesty

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Conduct involving dishonesty
  • Introduction
  • Case authority
  • Current HMRC approach

Introduction

Where HMRC suspects serious tax fraud, it reserves the discretion to pursue a criminal prosecution where it considers it appropriate and necessary. Please see the Overview of criminal investigations guidance note for more information. Where a criminal investigation is not considered necessary or appropriate HMRC may decide to investigate using the civil fraud procedure.

The most common reasons for an imposition of a civil penalty for conduct involving dishonesty is where sales have been suppressed or where input tax has been falsely claimed. The suppression of output tax is usually associated with cash businesses suppressing the takings but sales invoices being omitted from the records is also common. In respect of input tax, false purchase invoices or amended purchase invoices showing inflated figures are also common.

In the following situations, the business shall be liable to a penalty equal to the amount of VAT evaded or, as the case may be, sought to be evaded, by its conduct:

  • for the purpose of evading VAT, a business does any act or omits to take any action, and
  • the business' conduct involves dishonesty (whether or not it is such as to give rise to criminal liability)

The business shall be liable to a penalty equal to the amount of VAT evaded or, as the case may be, sought to be evaded, by its conduct. The current penalty regime has replaced the majority of cases that would have been the subject of a civil evasion penalty but it can still be imposed in limited circumstances. Please see the VAT civil evasion penalty guidance note for more information on when a s 60 penalty can still b

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