The average prison sentence length for tax evasion has increased by 10 per cent, with HM Revenue and Customs pushing for tax evasion to be considered a more serious offence.
According to figures from law firm Pinsent Masons, the average prison term for tax evasion was two years and seven months in 2018/19, up from two years and five months the previous year.
Tax evasion is the deliberate non-payment or underpayment of tax by individuals or businesses that is legally due to HMRC.
Unlike tax avoidance it is a criminal offence.
In September 2017, HMRC received a boost to its criminal powers following the introduction of the failure to prevent the facilitation of tax evasion offences under the Criminal Finances Act 2017.
The new offences apply to corporates, including advisers, and cover the failure to prevent facilitation of tax evasion, meaning advisers can be held accountable if they fail to stop a client from evading tax.
Paul Stocks, financial services director at Dobson & Hodge, said if a client was suspected of evading tax the firm would follow the usual financial protocol to put this right.
He said: “In a more subtle way, we actively help clients with their tax reporting – not only issuing consolidating tax certificates but also, as an example, highlighting a chargeable gain which could result in a tax liability, should such arise.
“Where tax is due and a client doesn’t usually require a tax return, we’d signpost them to accountants and assist in providing the necessary information.”
HMRC has been pushing for longer custodial sentences to deter people who are considering tax evasion.
This comes after a parliamentary report published in 2016 criticised the tax authority for not having a tough enough approach when dealing with tax evaders.
HMRC and the Crown Prosecution Service have now pushed for tax evasion to be considered in more serious categories of offence.
Currently, the maximum penalty for income tax evasion in the UK is a seven-year prison sentence or an unlimited fine.
According to HMRC, 1,010 individuals were charged with offences relating to tax evasion in 2017/18.
Steven Porter, partner at Pinsent Masons, said: “Longer prison sentences are a clear message from HMRC - it will not tolerate tax evasion.
“HMRC is using its full range of powers to claw back the money that it is owed, making an example of tax evaders by pushing for longer sentencing lengths is a part of its method to deter future tax cheats.”
When prosecuting an individual for tax evasion, judges assess the level of an offender’s culpability or the loss to HMRC using a set of pre-determined categories to decide on sentence length.
For example, tax evasion convictions may result in a longer sentence if HMRC can persuade the judge that the accused had:
- Played a leading role in coordinating the offence for their own personal gain;
- Abused a position of power by pressuring colleagues or friends into complying with their plan to evade tax;
- Planned tax fraud in a sophisticated manner rather than a “spur of the moment type offence”;
- Deliberately concealed information when being investigated; or
- Evaded tax or carried out other forms of fraud for a protracted period of time.
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