Tax Evasion Leads to Prison and £500,000 Repayment Order

Two company directors who lied to HM Revenue and Customs (HMRC) when under investigation for possible tax offences have been jailed for tax evasion and fraud.



The pair ran a successful IT firm. When they were investigated, they were, as is usual, required to prepare a statement of assets showing all their assets. These statements are used by tax inspectors to confirm (or otherwise) that the income declared for tax purposes is sufficient to account for the taxpayer’s lifestyle plus any increase in net assets of the taxpayer.



One of the directors disclosed that he had one offshore account and the other failed to disclose any. Each, in fact, had multiple accounts, and HMRC investigators discovered that they had failed to disclose sales of more than £1 million and evaded more than £500,000 in tax.



The two men were jailed for 12 and 15 months respectively and ordered to repay (under the Proceeds of Crime Act 2002) £500,000. In addition, both men were ordered to pay £5,000 in court costs.



Anyone who is the subject of a tax investigation should be aware of the increasingly sophisticated means HMRC inspectors have at their disposal of discovering offshore assets, in addition to the ever-increasing number of information exchange agreements between tax authorities, to which the Isle of Man is a recent addition.