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The New Criminal Offence for Tax Evasion

Contributed by Mark Davies & Associates
22 July, 2015

One of the key proposals from the Summer Budget in relation tax evasion was the introduction of criminal offences and punishment for non-compliance by:

  1. failing to give notice of being chargeable to tax;
  2. failing to deliver a tax return; and
  3. making an inaccurate return.

The proposed punishment consisted of fines and potential jail time for evaders on a 'strict liability' basis, meaning that the intention to evade tax is not relevant.

Following responses from the second consultation, the current proposed legislation suggests a modest threshold of £5,000 potential lost tax revenue before the offence applies.

There are also two 'safeguards' proposed that make the offence rather less than 'strict liability':

  1. Reasonable excuse:  this is a defence for offenders who were unable to comply with HMRC requirements due to circumstances outside their control.
  2. Reasonable care:  this provides that where a person has taken reasonable care in filing their tax return they will not be liable for criminal sanctions under the offence.

What does this change?

There are already criminal offences for intentional tax evasion (for example under the Fraud Act) and civil charges and penalties for tax evasion (under the Taxes Management Act). The current civil structure applies penalties for carelessness through to deliberate concealed tax-evasion up to a maximum of 200% of the potential lost tax revenue. 

These tools mean HMRC is already weaponised to recover tax and penalise carelessness under civil law and prosecute deliberate deceit under criminal law.

The new criminal offence would instead look to criminalise carelessness in tax returns.

In addition it makes it easier for a successful prosecution as HMRC only need to show a mistake and this shifts the burden to the taxpayer to prove that he or she has a defence.

The right way forward?

The question we must ask ourselves is whether it is right to label those who carelessly fill in their tax returns as criminals and brand them with the serious and permanent consequences of criminal prosecution?

In other areas of the criminal law strict liability offences are justified to encourage compliance for the purpose of public safety (e.g. wearing a seatbelt).

Although the Government's proposals following the first consultation paper have been tempered by the voices of concerned industry practitioners – it seems that the current proposals seek not to recover lost tax revenue, penalise careless or seek retribution for deceit, but to weaponise HMRC to scare taxpayers into compliance and potentially persecute those who make an honest mistake in their tax return.

It is our view that those who wish to be dishonest will continue to be dishonest and there is existing legislation to deal with them. The proposed legislation only serves to make it easier for HMRC to launch a criminal prosecution at a time when the ever increasing complexity of the UK tax system makes it more likely for the unrepresented taxpayer to make a mistake.


Robert Ratcliffe, Maltin PR: robert@maltinpr.com 020 7287 2575, 07714 738 130  www.maltinpr.com   

Mark Davies, Mark Davies & Associates: mdavies@nondom.com 020 3008 8100

About Mark Davies & Associates

Mark Davies & Associates are a London based boutique firm of chartered tax advisers who specialise in the taxation of international clients.


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