Cheating the Taxman: Busting the Black Market Receipt Scam
01st April 2019
One of the toughest things to explain about tax is that it’s not tricky little game that you can win. When you claim a refund or file a Self Assessment tax return, there’s no secret “cheat code” you have to type in to make the money come out. What you’re doing is making sure that you’re only paying the tax that you owe – and not one penny more or less. The taxman isn’t trying to cheat you. If you give him the right information when he asks for it, he’ll always play fair with you.
He does, however, expect exactly the same respect for you. If you try to get one over on him, you can stand to lose a lot more than just the extra cash you were trying to swindle out of him. The BBC’s been looking into one of the ways people try to cheat the tax system in the building trade. It’s an ugly business, and it’s definitely more trouble than it’s worth.
The scam is simple enough in principle. If you’re self-employed in construction, you need to keep a lot of records of the money you’re spending. When you file your CIS Self Assessment return, those receipts are used to prove the expenses that should be considered in calculating your tax bill and working out any refunds due. As the BBC’s investigation shows, there’s a booming “rogue trader” business in selling fake receipts. Tens of thousands of pounds’ worth of these false documents are changing hands in construction right now, costing HMRC a load of cash and risking serious trouble for people using them.
To spell it out, knowingly submitting an incorrect tax return is Very Bad Business – and HMRC takes it extremely seriously. They’re definitely aware of the problem, and they’re taking steps against the fraudsters. According to their figures, about £1 goes missing for every £17 paid in UK tax each year. Worse still, they believe that over half the people in construction, transport and hospitality are under-reporting their income in their Self Assessment returns. Of those, more than half are under-paying by at least £10,000 a year.
This is a nail we keep on hammering at RIFT. The taxman is not your enemy – and you never want to land yourself in his bad books. Not only is HMRC making random spot-checks on tax returns and tax refund claims all the time, but they’ve also got both highly trained people and computer algorithms constantly scanning for and flagging suspicious activity.
The HMRC “Connect” system, used by trained analysts, sifts though vast quantities of information, from many disparate systems to find otherwise invisible patterns, network and relationships that suggest fraudulent or unusual activity.
You might think you’ve played a smart game by buying a few dodgy receipts online or off the street – but do you really believe for a second that the iffy bloke who sold them to you is some genius cybercriminal with only your best interests at heart? Buying fake receipts means taking bad advice from people with bad intentions. It’s incredibly stupid and puts you in severe danger of getting caught.
Knowingly and deliberately submitting false information in your self-assessment or tax refund claim counts as tax fraud and is illegal. There is no grey area.
If HMRC investigate the false entry and you do not immediately confess to the deception, that means that your “deliberate action has been concealed” and that means more than just coughing up the extra tax you owe.
As well as the overdue tax itself, you will have to pay 50-100% of the amount owed in additional fines.
If you have fallen for a scam of this type and want to put things right with HMRC before you get into serious trouble, get in touch. Although there will still be a penalty to pay for having made a “deliberate and concealed error” on a tax return then it may be possible to reduce the fine if you or your agent:
- tell HMRC about the error;
- help HMRC work out how much extra tax is due;
- give HMRC access to information to enable them to check your figures
You can go to jail for providing false documentation to HMRC, under Tax Evasion laws. Depending on the severity of the case you could receive a summary conviction or via a magistrates court. The maximum UK penalty is a fine for up to £20,000 or a six months prison sentence.
When you’re with RIFT, you’re in safe hands. Our unique Code of Conduct and RIFT Guarantee mean we’ll make sure the tax you pay is nothing but the tax you owe. We won’t ever claim an expense that you’re not 100% entitled to, and we back up our work with expertise and real attention to detail.
Don’t get tricked into forking out for fake paperwork from shady operators. Get your taxes done right with RIFT who've been claiming tax rebates and filing tax returns since 1999.