Deliberate understatement on a tax return is a serious offence, and is considered to be a wilful act of fraud. At best, the penalty can be up to 70% of the extra taxation due to HMRC, and at worst criminal fraud prosecutions could be levied against the individual or business, leading to the confiscation of personal possessions under the Part 6 of the Proceeds of Crime Act 2002.
An example of deliberate understatement could be neglecting to file certain income, and thus benefitting financially by failing to pay the tax due on the funds, or paying wages to an employee without factoring PAYE costs into your bookkeeping. Expenses could also fall into this camp, such as attempting to write off personal costs as tax-deductible business expenses. Consult a professional if you are unsure what expenses are eligible for such an action, as this could prove to be extremely expensive to you or your business. Such errors will not be considered innocent mistakes or misrepresentations that could escape financial repercussions.
There is nothing to gain by attempting to understate your taxation that is due – HMRC will discover the discrepancy, and the charges levied in the form of fines will greatly outnumber any financial gain. If you are in any doubt at all as to what needs to be declared upon your tax return, call upon the services of a professional tax accountant.
It is also essential that, if this understatement is captured, no attempt is made to deny or conceal the action. That is the final scale of wrongdoing that leads to HMRC financial penalties, and the most serious offence of all.