The UK tax authority needs to demonstrate why it wishes to acquire greater powers to deal with taxpayers who are fraudulent and dishonest.

Responding to a consultation by HMRC on introducing a criminal offence for making reckless untrue statement or declarations in direct tax, ACCA said that is recognised the Government’s objective to strengthen the integrity of the tax system.

But the leading global accountancy body said that HMRC needed to explain why the existing framework – civil penalties for inaccuracies and failure to notify plus criminal offences for fraud and dishonest conduct – are insufficient to deal with the minority of taxpayer behaviour the government is trying to address.

ACCA added that, in principle, targeted sanctions for serious misconduct can lead to greater consistency, proportionality and deterrence across the UK tax framework.

However the well-documented complexity of UK tax legislation and the use of voluntary compliance mean that any new offence would have to be carefully designed and implemented to support honest taxpayers and advisers. Criminal liability must be concentrated on those who consciously disregard risks or act with deliberate dishonesty. 

Glenn Collins, Head of Technical and Strategic Engagement, said: ‘A reassessment of all existing powers  is overdue. Piecemeal additions and changes without an evaluation of the current powers HMRC have resulted in issues for HMRC, taxpayers and agents.’

Criminal liability should only arise where an individual consciously disregards an obvious and unjustifiable risk that a statement is false. It should not arise because a taxpayer, or professional advisor, has reached a reasonable interpretation of uncertain legislation, or made a genuine error while having taken all reasonable care possible.

Joe Fitzsimons, Senior Manager Policy and Insights – EEMA & UK, said: ‘If HMRC were to be given such powers, HMRC would have to provide comprehensive guidance including covering to the extent to which advisors would need to verify client information in order to not be considered reckless.’ 

The tax system should support the vast majority of taxpayers who seek to comply voluntarily while targeting those who deliberately abuse the system.  ACCA cautions against designing a system overly shaped by the actions of the worst players. Instead there should be direct, targeted actions against the criminal abusers of our tax system.

See the ACCA response here. 

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