Directors are Wrong to Think They Can Avoid Taxman

The 10-year prison sentence a Yorkshire woman recently received for her part in a VAT scam described as ‘brazen and meticulous’ should be a lesson for any business owner or director who thinks they can outsmart HM Revenue and Customs.

Jayne Mitchell, 40, and six others imported 7,000 new cars which passed through a chain of fraudulent companies before being sold to unsuspecting car dealerships and supermarkets.

The scam turned over £80m in two years generating hundreds of thousands of pounds for the gang to transfer between their business and personal accounts.

Mitchell was charged with conspiracy to cheat the public out of £12m after a HMRC investigation found that most of her companies had disappeared without paying VAT on the car sales.

Following the recent hike in VAT and the lack of compassion HMRC currently demonstrate towards small and medium-sized businesses, I predict a huge number of similar crimes will be committed over the next 12 months.

According to tax expert and anti-poverty campaigner Richard Murphy, every year HMRC lose around £70bn as a result of VAT, PAYE, Income and Corporation tax evasion, and a further £20bn through avoidance schemes similar to those used by fashion retailer Sir Philip Green (pictured) and corporations such as HSBC and Vodaphone.

Tax avoidance increases during recessionary periods when otherwise law abiding individuals are more easily tempted into illegal activities and the taxman and other government departments are seen as low hanging fruit and viable targets.

What most business owners don’t realise is: for the most part, tax avoidance is only a problem once a company becomes insolvent.