Evading Tax

19th December 2015

السلام عليكم و رحمة الله و بركاته

Question: A family business based in England is involved in supplying and fitting kitchen units, as well as providing other services. The family is Muslim. The business, called X-Y (not real name), has been operating for many years. Although the business operates under the name X-Y, the actual incorporated company name is not X-Y. The actual incorporated company and its registered number is not displayed on letter heads used by X-Y. Over the years several companies have been registered from the same address from which X-Y operates by the same businessmen; these companies have under gone compulsory strike off by Companies House after a relatively short period of time as result of not filing company accounts. This is a deliberate ploy of the businessmen running X-Y to avoid paying corporate/ company taxes. In England a new company does not need to submit annual financial accounts for up to 21 months from time of incorporation. The company X-Y is not VAT registered either. The customers of X-Y are told to pay for the kitchen units and other services provided in cash or by direct bank transfer in to the personal bank accounts of the businessmen running X-Y. Again, this is done to avoid paying taxes. The businessmen running X-Y have been avoiding tax for years on a large scale. In the U.K. the state services provided and the welfare system (free education, free national health service, police service, fire service, whole spectrum of benefits etc.) are dependant on individuals and companies paying taxes. If every company in the U.K. was to avoid paying tax then the whole system would collapse.

 In the U.K. it is a criminal offence to avoid paying tax, corporate tax, VAT, personal income tax etc. In the case of X-Y, both the operating business and company registration is in England hence liable for U.K. tax and subject to company law of England and Wales.

 My questions are, from an Islamic perspective:

Q1. What is the status of earnings acquired by deliberately cheating the tax system and thereby avoiding payment of taxes which are due under U.K. law?

Q2. What are the Islamic implications for a Muslim and his family who knowingly and actively makes a living via illegal means such as tax avoidance?

Q3. If the businessmen involved wish to repent and make their earnings halal what needs to be done with earnings already acquired by illegal means, i.e., earning acquired by tax avoidance?


الجواب حامداً و مصلياً

In the name of Allāh, the Most Gracious, the Most Merciful



A1: In reference to the above case scenario, to deliberately evade tax in the manner as explained above is unwarranted Islamically. This is deceiving and could potentially lead to sever repercussions if apprehended, such as humiliation. The Messenger of Allāh sallallahu alayhi wasallam once said. “It is not befitting for a believer to humiliate himself.” The companions enquired, “How does one humiliate himself?” He replied, “To expose oneself to a calamity beyond his capability.”[1]  This suggests that every Muslim must be cautious in their dealings and avoid all those situations that inevitably leads to disgrace and humiliation. It must be made clear that paying off one’s financial obligation i.e. taxes falls in the category of expenditure which does not affect the status of the income Islamically as long as one earns through lawful means. Supplying and fitting kitchen units is a lawful business in Islām, but evading tax does not render the income unlawful. Receiving and expending (or utilizing) are two separate issues.

A2: As indicated above that evading tax does not render the income unlawful, except it leads to humiliation and sin. The Islamic implications that follow is they become guilty of deception and breaching of one’s covenant with the law. Allāh I gives a decisive command in the Noble Qur’an, “O Believers! Fulfil your oaths.”[2]

A3: Their income is already permissible in the first place. They must repent and pay towards their financial obligation i.e. pay their taxes.



[Allãh Knows Best]



Written by (Mufti) Abdul Waheed

Answer Attested by Shaykh Mufti Saiful Islam

JKN Fatawa Department


[1] Sunnan Ibn Majah No: 4016

عَنْ حُذَيْفَةَ، قَالَ: قَالَ رَسُولُ اللَّهِ – صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ -: “لَا يَنْبَغِي لِلْمُؤْمِنِ أَنْ يُذِلَّ نَفْسَهُ” قَالُوا: وَكَيْفَ يُذِلُّ نَفْسَهُ؟ قَالَ: يَتَعَرَّضُ مِنْ الْبَلَاءِ لِمَا لَا يُطِيقُهُ”

[2] Sūrah al-Māidah (5:1)