How an 18th Century Tax Law Still Catches People Out
It is definitely an offence at common law to defraud or “cheat” the general public . The offence was preserved by section 32 of the Theft Act 1968, which abolished the offence cheating generally. The offence is incredibly wide. It can include a dishonest act or omission that's meant to prejudice HMRC or the Department for Work and Pensions . The deception need not be operative. You don't have to prove a real loss to the revenue, or the accused’s conduct led to a gain to himself.
The offence can include:
- Making an incorrect statement relating to tax.
- Delivering a false document associated with income tax.
- Failing to account for VAT.
- Withholding PAYE and National Insurance.
- Failing to join up for VAT.
- Failing to reveal income.
The breadth from the offence could cause alarm bells to practitioners, particularly examples 3 to 6.
The failure to join up for VAT and make the requisite returns and payments towards the Commissioners of Customs and Excise when due, is sufficient to constitute the offence.
Offences for omission are not restricted to this common law offence, they can also be found in statue. Let's consider Section 72 of worth Added Tax Act 1994, for example. Under this section, a person commits an offence if he is knowingly concerned in, or in the taking of steps having a view to, the fraudulent evasion of VAT by him or any other person.
The words “taking steps having a view to” are wider than “knowingly being concern in”. Although, on a literal reading, the words “taking steps” claim that omissions are excluded, this isn't what the law states. It will actually include conduct which could otherwise be viewed as perhaps being merely preparatory towards the fraudulent evasion, for instance an omission:
In the case of R v McCarthy [1981] STC 298, the appellant carried on a company having a turnover in excess of the VAT threshold; but he did not register for VAT. He was subsequently convicted under the then Finance Act 1971, s.38 for neglecting to register in circumstances by which his taxable supplies exceed the prescribed limit.
Practitioners should therefore be careful not to inadvertently find themselves embroiled in possible criminal prosecutions for a simple omission. They should ensure they act promptly in dealing with financial affairs. In particular, contrary could be learnt in the cases above, registering for VAT.
