ACCA Applied Knowledge · Business and Technology · Regulation and financial crime
A company director decides not to record cash sales of 40,000 made at a market stall, so that profit and tax are lower. What is this?
This is tax evasion. The director deliberately leaves genuine cash sales out of the records so that less tax is paid. Concealing income from the tax authority is dishonest and illegal, unlike legitimate tax planning or avoidance, which work within the law.
- ATax avoidance, because the sales were never invoiced
- BTax planning, because the director is reducing costs for shareholders
- CTax evasion, because income is deliberately concealed from the tax authorityCorrect
Explanation
Deliberately omitting known income from the records and tax return is dishonest concealment, which is tax evasion and a criminal offence. It is not planning or avoidance, which operate within the law. The lack of invoices does not make it legal.
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