Tax evasion had been well publicised recently within the media but not everyone understands the difference between tax avoidance and tax evasion. This blog article will explain exactly what both mean and the implications for you.
The difference essentially relates to what you are permitted to do to reduce your tax bill (tax avoidance) and what you are not permitted to do to reduce your tax bill (tax evasion).
Tax avoidance, even though it may not sound it, is completely legal and simply involves taking legitimate steps to reduce your tax bill. This could be by receiving dividends from a limited company rather than a salary. Or putting cash savings into a tax free ISA rather than an ordinary savings account.
Tax evasion is different and this is completely illegal. This is where you commit a deliberate act to deceive the taxman. This could be not declaring income or under declaring income. In fact, prison sentences have been handed to EBay traders who have failed to declare trading income.
Other forms of evasion could be not completing your tax return it hiding taxable assets. If you’re caught you could face up to 10 years in prison.
If you need any further assistance with Abby taxation matters we recommend that you consult an accountant. Our online accountants provide accounting services to small businesses across the UK and can assist you with all taxation matters.