CH301100 - The Human Rights Act and Penalties: suspected deliberate evasion
At any stage of a compliance check, you may obtain information that will either identify a risk or give you reason to suspect that
- there is something wrong which may mean that tax is understated, unpaid or over-claimed, and
- this may lead to a penalty being charged and
- this may be the result of a deliberate or a fraudulent attempt to evade tax or duty.
A risk or suspicion of evasion may only emerge towards the end of a check unless you work in a specialist team dealing with these types of cases.
Before you can consider whether there is a penalty, you must first confirm have an evidence-based reason to believe that there is something wrong. During the early stages of the check, your focus will normally be on gathering the relevant facts to evaluate the risk that tax has been understated, unpaid or over-claimed.
However, in some circumstances, you will have identified the risk of both penalties and deliberate evasion before you have established that there is something wrong. You must therefore also consider the risk of evasion when gathering the facts to establish tax has been understated, unpaid or over-claimed and whether this may lead to a penalty being charged. The degree to which you address these risks together at this stage will depend on the individual case.
In all cases you must take the following action before you start to discuss penalties or gather facts about the underlying behaviours that resulted in tax being understated, unpaid or over-claimed.
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Evasion Referral
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If the Evasion Management Team originally referred the case to you or referred a case back to you, there is no need to re-submit it unless more serious non-compliance emerges.
HRA Message
There are no circumstances when you can discuss a potential liability to a penalty without first issuing the HRA message. There may be circumstances where, based solely on the records, your manager has agreed something is wrong but decides not to consider penalties. For example where there is a single transcription error and this warrants no further checks. Even in these circumstances, you must issue the HRA message immediately if you start to discuss the reasons why you believe that there is something wrong and you begin to suspect that a penalty may be due after all. See CH300900 and CH202050.
Customer Compliance Managers
If you are a Customer Compliance Manager (CCM) and you suspect fraud or evasion that meets one of the evasion referral criteria at CH290100, you will need to contact the appropriate specialists in CI, SI, CIF, CTE before you proceed any further with discussions about this aspect of the case. These discussions will determine whether you need to make a formal submission to the Evasion Management Team. Whether you refer it or not, you should keep the Evasion Management Team up to date about the details of the case. You should use your specialist knowledge of the business to decide whether you need to terminate a meeting when you suspect evasion that meets the evasion referral criteria. You must however, always issue the HRA message before discussing penalties.
Cases that have been returned by the Evasion Management Team
If a specialist unit does not take up your case, you should continue with your check in the normal way, following any advice the Evasion Management Team have given you about the evasion risk. If you referred the case before you started to discuss penalties you should make sure that you issue the HRA message as soon you have an evidence-based reason to believe that a penalty may be due.