Taxation in the England and Wales is regulated entirely by statute. Numerous provisions govern not only the charge, rates and collection of the law abiding taxpayer, but also what should happen in cases of non-compliance. Specific provisions criminalise certain conduct, regulate the investigation of tax evasion and state the penalties to be imposed.
Surprisingly, alongside this purpose-built criminal procedure, there exists an offence which rests largely on a definition provided not by Parliament, but by the courts and commentators of the seventeenth and eighteenth centuries; the offence of “cheating the public revenue”.
It is an offence at common law to defraud or "cheat" the general public (R v Hudson  2 QB 252). The offence was preserved by section 32(1)(a) of the Theft Act 1968, which abolished the offence cheating in general. The offence is incredibly wide. It can include a dishonest act or omission that is intended to prejudice HMRC or the Department for Work and Pensions (but not a local authority or the EU). The deception does not need to be operative. There is no need to prove an actual loss to the revenue, or that the accused's conduct resulted in a gain to himself.
The offence can include:
- Making a false statement (whether written or not) relating to income tax.
- Delivering (or causing to be delivered) a false document relating to income tax.
- Failing to account for VAT.
- Withholding PAYE and National Insurance.
- Failing to register for VAT.
- Failing to disclose income.
The breadth of the offence may cause alarm bells to practitioners, in particular examples 3 to 6.
The failure to register for VAT and make the requisite returns and payments to the Commissioners of Customs and Excise when due, is enough to constitute the offence.
Offences for omission are not limited to this common law offence, they can also be found in statue. Let’s consider Section 72(1) of Value Added Tax Act 1994, as an example. Under this section, a person commits an offence if he is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion of VAT by him or any other person.
The words "taking steps with a view to" are wider than “knowingly being concern in”. Although, on a literal reading, the words “taking steps” suggest that omissions are excluded, this is not the law. It does in fact include conduct which could otherwise be viewed as perhaps being merely preparatory to the fraudulent evasion, for example an omission:
In the case of R v McCarthy  STC 298, the appellant carried on a business 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 failing to register in circumstances in 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, if anything can be learnt from the cases above, registering for VAT.
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