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HMRC internal manual

VAT Civil Evasion Penalty

Liability to a VAT civil evasion penalty: deferred payment of VAT - permanent deprivation

The decision given by the Court of Appeal in the case of Regina v Dealy [1995] 1 W.L.R. 658 confirmed that permanent deprivation is not an ingredient of a criminal offence of fraudulent evasion under Section 72(1) of the VAT Act 1994.

“Why ever should the Crown have to prove a permanent intention to deprive? The legislature are perfectly capable of putting those words in a statute if they want to. To imply the words would only add to the difficulties of the prosecution in proving their case. They would constantly have to meet suggestions that there was an intention to pay in the end, just as there was here, even though we are bound to say that the case for the prosecution was overwhelming. Why should such words be implied? The word “evasion”, does not, to our mind, imply any sense of permanence.”

By implication then, the intent to deprive permanently is also not an ingredient of civil evasion, and proof of such an intention is not needed to uphold an allegation of dishonest evasion. Intentional postponement of declaration of the correct amount of VAT due (for example, to gain a ‘cash flow’ advantage) may therefore amount to dishonest evasion.