by Matt Fowell Tax evasion is the illegal activity of someone purposely avoiding paying their true tax liability. This crime that can be ...
Tax evasion is the illegal activity of someone purposely avoiding paying their true tax liability. This crime that can be committed by;
Citizens
Organisations
Corporations
Trusts
People and organisations commit tax evasion by intentionally giving false information about their affairs to the tax authorities. The reason people do this is to try to decrease their tax liability. They attempt this by;
Submitting deceitful tax reports
Declaring less income, profits or gains than the amounts actually earned
Overstating deductions
Tax evasion doesn’t just cover a person intentionally paying no taxes; it covers any person or organisation that knowingly pay less than the amount they are supposed to.
Tax evasion is sometimes confused with tax avoidance, which is very different. Tax avoidance is defined as “the legal use of tax laws to reduce one's tax burden”.
The effects:
In 2013-2014, HM Revenue and Customs estimated that tax evasion cost them £4.4 billion.
Anybody who is found to be evading taxes will usually face criminal charges and costly fines, as tax evasion is a federal offence, under the Internal Revenue Service (IRS) tax code.
Taxes in the business world:
A business will need to pay different types of taxes and different amounts, based on multiple factors, but mostly by how much they are earning.
What is VAT?
VAT (value added tax) is a tax charged on goods and services, it’s a tax on the value added to a product or service (hence the name) - basically, it’s a tax on the price difference between what you've paid for a product and what you then charge for that product.
A business is legally required to pay VAT on their products or services if they have an annual turnover of £83,000 or more.
You can register to pay VAT here:
https://www.gov.uk/vat-registration/when-to-register
What is Corporation Tax?
Corporation tax is a tax charged on a company’s annual profit.
A business is legally required to pay Corporation Tax if they have an annual profit of £300,000 or more. If the company’s profit falls between £300,000 and £1.5 million the rate for corporation tax is 20%.
The deadline by which corporation tax needs to be paid is different from the other major taxes (e.g. VAT) and you need to pay corporation tax before you file your company’s tax return. Corporation tax must be paid 3 months before your next annual accounting period will start, so if your accounting period finishes in March, as most do, you have to pay corporation tax by January.
Tax penalties:
Below are a list of common causes of tax penalties, so that you know what to look out for and what not to do as a business.
Not registering a new business
Not registering for VAT when your turnover reaches the threshold (currently £83,000 )
Not keeping adequate records — especially if you do not implement HMRC recommendations for improvements
Deliberate fraud or tax evasion
Taxes may seem like a pain to some businesses, but the repercussions are far worse if you commit tax evasion.
For a reputable accounting firm to handle your taxes
, visit Accountancy Solutions’ website here;http://www.accountancysolutionsuk.com/
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