Arvind Lall is Lecturer Taxation and Ethics at Kent Business School, University of Kent and a tax practioner and makes comment on the following recent BBC news item:
‘Lauryn Hill responds to tax evasion charges‘
While the charges of tax evasion for Lauryn Hill are in the US, the following comments are from a UK tax law perspective and examine what we can learn from it.
Firstly it is worth mentioning that whilst tax avoidance is legal in the UK, tax evasion is illegal and sometimes it is difficult to see when the line is crossed. In most cases of evasion coming to court it is usually clear the law has been broken (fraud) and the amount of tax evaded is substantial.
Under UK tax law all taxpayers are required to file complete and correct returns on time. Failure to do so can result in penalties or prosecution (as for Lauryn Hill) and can be severe with imprisonment in some cases. It is interesting to note that the onus is on the taxpayer to furnish a tax return, not only when one is sent by HM Revenue & Customs (HMRC) but also, if the tax payer has had any taxable income or gains in a tax year. If so they are to inform HMRC so that arrangements are made for returns to be completed. The kind of excuse for not filing given by Lauryn Hill based on social reasoning and freedom, or sorry I forgot or did not know, will not be a defence to the legal responsibilities to file.
Tax investigations take place for many reasons. HMRC are aware of what most people do for a living and may at times wonder if there are any other sources of income linked to their main job. HMRC also get information from informants about people’s activities and look at adverts in newspapers to see if anyone is running a business and not declaring their taxes.
Most people pay their taxes under PAYE as employees but all other income must also be declared no matter how small. For businesses their annual accounts are closely scrutinised to see if they make sense for their size and type of activity.
There is a distinction between the duty to declare and any tax due, because whilst there may not be any more tax to pay the duty to declare remains. Signing the return means you are confirming that you have declared all income.