Investigation Methods For Self Assessment Tax Fraud
Tax evasion is one of the biggest areas of fraud with many billions of pounds being lost to the revenue. It includes systematic abuse of the self-assessment system by people who simply never declare any of their earnings and often are on state benefit also.
Tax fraud is a big problem for because it is easy to commit. It is possible to hold back on disclosure from HMRC and the odds are that there is a good chance of remaining undetected. To keep all of their self-employed pay many people will take the risk and try to stay off the tax authority records completely.
When forensic accountants specializing in tax investigation carry out inquiries into some companies they sometimes find that the whole workforce is employed on a self-employed basis. This used to happen a lot in the building trade, where subcontractors were normally used and usually paid in cash.
Often these contractors would not declare their income to the tax man. This industry has received the attention of the legislators and subcontractors are now targeted fully for the tax they owe. However, in other industries, it is still easy for the self-employed wishing to avoid tax to do so with every chance of avoiding detection for the fraud they are carrying out.
It is recognized that additional legislation is required to combat the wholesale use of self-employed staff who do not declare their tax. However, there is an equally large problem with people who set up the businesses that always under-declares taxes. HM Customs and Revenue is a public sector organization under severe pressure to cut its costs of operation.
The number of tax inspectors and enforcement officers are reducing and fewer businesses are being checked. All that is needed to get away with paying the full amount due is to fill out all the returns on time with information that seems reasonable.
The tax regulators usually employ their own specific assumptions when assessing how much tax a company should have been paying. For example, they will assume that all income is taxable and unless evidence shows otherwise, all payments are non-tax deductible. It is up to the tax payer to demonstrate if the case is otherwise and often this will require the services of an experienced fraud specialist forensic accountant.
Tax Investigation Services for Individuals and Self-Employed are able to recreate accounting records from partial accounts and present an independent and hopefully reasonable picture of the profitability of the business. There is always the risk that the authorities, including the criminal courts, will not accept these explanations and the answer is that it is better for businesses to keep adequate records and disclose all of its profits at the appropriate time.