HMRC must justify proposed new criminal powers, says ACCA

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 statements or declarations in direct tax, ACCA said that it 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 at ACCA, said: “A reassessment of all existing powers is overdue. Piecemeal additions and changes without an evaluation of the current powers 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.

Lloyd Powell, head of ACCA Cymru/Wales, said: “If HMRC were to be given such powers, HMRC would have to provide comprehensive guidance including covering the extent to which advisors would need to verify client information in order to not be considered reckless.”