Should I report my ex for tax evasion?
By
HuutiMoney
This blog post answers the question “Should I report my ex for tax evasion?” It discusses the logic behind the civic duty of telling the authorities of your ex’s tax fraud. Other tax fraud crimes like VAT carousel and transferring stolen tax to fictitious offshore companies also need to be reported.
Should I report my ex for tax evasion?
Yes, you should report your ex for tax evasion. Reporting tax fraud has big rewards in the UK and saves the government around £600,000 each year. This lost revenue being recovered by the British Exchequer will help your own council to provide citizens like you with essential benefits.
Tax evasion deprives your tax council of the funds it needs and in turn makes your town financially worse off in the future. By reporting your ex or anyone you knew in the past for tax evasion you are doing your community a favour. HMRC will withhold your personal details when you report your ex and also when he/she is charged with tax fraud.
Although you are not in such a major liability of not reporting your spouse’s council tax in this case (which will also affect your tax as the two of you are joint occupants) it is still not a bad idea to inform tax authorities of what you know.
What is Tax fraud and what are the crimes which can be convicted under this offense?
The definition of tax fraud activities as put forward by HMRC includes:
- Setting up or operating a business without informing HMRC
- Income tax evasion
- Falsely claiming benefits from the Coronavirus Job Retention Scheme
- Trading goods subjected to VAT and not being registered for declaring VAT
- Falsely claiming tax reduction or child benefits
- Avoiding paying VAT or other taxes on the goods and services bought by the entity
- Concealing money, shares, bonds pr physical assets such as gold in offshore bank accounts (bank accounts in foreign countries)
- Failing to charge VAT (or other taxes) on the selling price of goods and services purchased by customers
Suspicious transactions and anomalies in the operation of accounts may reveal underlying offenses including both tax fraud and other crimes.
The Value Added Tax Act of 1994 established criteria that should lead the reporting party to question the existence of tax fraud. As soon as one of these criteria is met the institution must mention it in its report.
The following three situations illustrate cases of tax fraud frequently encountered by the
services:
VAT carousel as a tax fraud
Carousel fraud is VAT fraud organized between several companies in the same commercial chain,most often established in at least two European Union member states or sometimes outside the European Union, in order to :
- capture the evaded VAT and share it among the actors ;
- obtain the deduction or refund of the VAT related to a supply and which has not been paid to HM Treasury by the supplier;
- to reduce the price of the goods.
Tax evasion is likely to concern all products. They are particularly aimed at the following sectors
cell phones, computers and vehicles. The accumulation of several factual indicators, such as those mentioned below is likely to raise suspicion of tax fraud in the UK:
What is the Intending Trader tax fraud?
In this form of tax fraud the person gets their VAT registration number and interim certificate as an intending trader. But the fraud aspect of the deal is in their disguised intention not to develop or trade the product.
The entitlement which needs to be established to register as an intending trader constitutes the following when relating to property trading:
- The trader’s parent company history. To facilitate their activities of tax evasion, fraudsters set up several speculative companies (relating to land purchase) which opt against being taxed until planning permission is granted.
This delay is in reality to disguise their illegal intentions of not trading the property in the first place.
- The trader or company’s financial plans or objectives state (or do not state) that they intended to recover the VAT expense (from future sales) on their land purchases
- The facts in the company or trader’s initial business proposal or organizational purpose must be consistent with their actions. If the project consists of a series of housing projects, office buildings or a shopping complex, the trader should make an option and accept the VAT responsibilities on this business venture.
In the case that a large scale construction project opts out of tax and does not have taxable supplies being used, it is most likely a case of tax evasion. In case of any doubt about the dealer’s intentions in the event of such transactions, the Land and Property Unit of Expertise must be consulted
The above mentioned 3 indicators prove the existence (or absence) of taxable supplies.
What is the missing trader fraud?
In this form of tax fraud one or more (taxable) people involved in a chain of phony transactions abscond from HMRC without paying any VAT or making any VAT declarations. This “missing trader” can be an individual trader or any other kind of business entity which evades VAT payments and goes missing to conceal this fraud.
The term “missing trader” also applies to person’s who build up or accumulate a liability to pay VAT without any desire to actually make the payment, even if they have not absconded from HMRC.
Example: The Missing Intra Community Fraud is an example of Missing trader fraud. In this kind of tax fraud false invoices are used to misguide HMRC. Evidence of fake invoices includes copies of original invoices, manually raised invoices, invoices prepared by using genuine invoices obtained from insolvent or existing traders (through unfair or deceitful means) and computer generated invoices created from data about other merchants which has been obtained illegally
Which tax fraud situations are considered as a “sham”?
In this form of tax fraud four conditions can apply. Firstly this form of tax fraud can include a transaction created with invoices for goods which were never intended to be delivered or purchased.Secondly this form of tax fraud can be a case where the finished product is different from what was mentioned in the trader’s transaction proposal and sanctioned budget.
Thirdly, this form of tax fraud includes the situation where business organizations have been created with the intention of embezzling revenue from them. Fourthly, this form of tax fraud includes situations where there is a phony production operation created to disguise tax evasion, and no substantial output being manufactured from it.
What happens in the tax fraud “Overstating the Value of Supply”?
In this kind of tax fraud the supplier deliberately overstates the value of the goods being provided so that the customer can make an inflated claim for ”input tax”. So the customer benefits from this overpayment in collusion with the supplier who commits fraud.
What are the other actions of company officials or managers likely to raise suspicion of tax fraud?
Other actions of company officials or managers likely to raise suspicion of tax fraud activity include the following:
- lack of previous experience or specific training in the chosen field of activity
- frequent changes of partners
- anomalies in invoicing
- cash payments for very large amounts that are out of proportion with the company’s
operating means, nor its own capital
- bank accounts are often balanced on a daily basis, transfers to accounts opened abroad
in the case of old or formerly dormant companies
- foreign managers and/or partners or those domiciled abroad
- frequent changes of partners
- exercise of the professional activity in the residential premises
- anomalies in the invoicing of the company carrying out intra-community operations
To make a valid claim for input VAT tax (a tax paid by the person on the goods purchased by him or her which is later added to the final price of the sold good) the person must hold a valid tax invoice, This input VAT can be deducted from the person’s settlement with HMRC, in case of tax fraud.
Section 26 A of the VAT Act 1994 states that a person is not fit to claim credit from input tax where the payment for the “input” being supplied concerned has not been made for more than 6 months (from when it was first due)
On which items does the VAT Tax Order 1992 limit input tax?
The Value Added Tax Order 1992 (Statutory Instrument 1992/3222) limits input tax on the following items:
- Goods sold under the margin scheme ( a scheme aimed at reducing double taxation) for used goods
- Goods and services sold together under a sales package of the Tour Operators Margin Scheme
- Goods and services which are under use by Business Entertainment companies
- These items mentioned are used in buildings under the “zero-rated sale” or “long lease”
Cars, carpets, electrical and gas appliances (excluding those designed to provide water heating or room heating), materials used in the manufacturing of fitted furniture, and furniture which is ready to use or ready to assemble furniture (except kitchen furniture)
Conclusion
This blog post addressed the question “Should I report my ex for tax evasion?” You don’t have to report your ex-husband or wife for tax evasion and there are no major penalties for hiding this information. As you two are separated now, HMRC is not likely to suspect you of being an accomplice, so it depends on you if you feel like taking revenge on your ex or would not want to tell on them.
Please feel free to comment on the content or ask any questions in the comments section below :
Frequently Asked Questions (FAQs) : Should I report my ex for tax evasion?
I own a house which is no one’s main residence, can I claim a discount?
A 50% person discount on council tax can be claimed in the following circumstances:
- Purpose built holiday homes that are unfit for human habitation
- A house owned or tenanted by a person who is required to live elsewhere due to the order of their employers
- A job related property that is occupied by the owner of a house elsewhere that is their primary residence
- A property undergoing major repairs or reconstruction following the 6-month period after purchase by the owner (this period can be extended to 2 years in some cases)
- A property undergoing major repairs or reconstruction for upto 12 months after purchase
How long will my single person discount last?
Your single person discount will last for as long as you continue to occupy the property as the sole adult. The following changes will affect your tax discount:
- Another adult comes to stay with you and they occupy the property as their primary residence
- A child living with you reaches the age of 18 years
- You leave the residence permanently
In these 3 cases, you will have to inform council tax and will not be able to benefit from the single person discount.
A disabled person lives in my house, can I get a reduction in council tax?
Where a property is the primary residence of at least one disabled person the liable person may qualify for a reduction in council tax provided the following:
- A room has been provided to cater for the disabled person’s specific needs
- A second bathroom or second kitchen has to be provided for use by the disabled person
- Sufficient floor space has been provided to permit the use of a wheelchair within a property and that a wheelchair is in use
Citations
Awards for information relating to detecting underpayments of tax