New offence risks penalising careless mistakes, warns Tax Institute
The Chartered Institute of Taxation (CIOT) has criticised the Government’s announcement today that it will be pressing ahead with the introduction of a new ‘strict liability’ offence for offshore tax evasion. Whilst generally strongly supportive of HMRC’s efforts to tackle tax evasion, the CIOT is opposed to the creation of a criminal offence which will require no proof of intention.
Patrick Stevens, CIOT Tax Policy Director, commented:
“Tax evasion is a serious crime. The Government are right to have put additional resources into investigating and combatting it. There is already tough legislation in this area, but if the Government feel it needs strengthening further in particular areas then it is reasonable of them to look at how this can be done, and the CIOT will be happy to work with them on this.
“However any new measures should be based on sound legal principles. One of these is that in order to make a criminal conviction it should generally be required to show that the act was committed with criminal intent. The proposed strict liability offence for failing to declare overseas income and gains fails this test. A taxpayer may fall within the ambit of the offence without any intention or knowledge on their part.
“It is easy to see why this is attractive to the tax authorities. But UK and international taxation is a minefield of complexity and, while some taxpayers do actively seek to hide their income by intentionally failing to declare it, there are others who simply make mistakes in their financial affairs without intending to act wrongly. We cannot conceive that it would ever be reasonable for someone to be convicted, let alone imprisoned, for offshore tax evasion without guilt being proved beyond reasonable doubt.
“In light of our concerns, we look forward to engaging with HMRC on the further consultation that has been announced to consider appropriate defences and thresholds. However, they will do nothing to change the fact that someone who has no intention to evade tax could still be liable to criminal sanctions, and we think this is wrong.”
The Government has also announced today that it will be consulting on introducing a new offence of corporate failure to prevent tax evasion or the facilitation of tax evasion. It will also consult on new civil penalties for those that enable others to commit tax evasion, and the public naming of such enablers.
Commenting on these proposals, Patrick Stevens said:
“There is already plenty of law in this area. If a bank employee, for example, has knowledge of or suspects (or has reasonable grounds for knowing or suspecting) money laundering, which can include tax evasion, they can already be liable to a criminal offence under the Proceeds of Crime Act 2002. Additionally, they commit an offence if they are involved in any arrangements which they know or suspect facilitate money laundering by another person.
“But if it is felt that criminal sanctions need to be strengthened – for example, outside the currently regulated sectors – then we would be pleased to work with the Government to frame proposals that will effectively achieve this.”
Notes for editors
1. Strict liability offence
HMRC consulted last year on plans to introduce a new strict liability offence of failing to declare taxable offshore income and gains, and sought views on the design of the new offence.
In its response to the consultation, the CIOT criticised the proposal as being wrong in principle, and questioned why the offence was needed when HMRC already have the power to investigate criminally anyone with either UK or offshore untaxed funds where they can show these were deliberately not declared. If they cannot show dishonesty or criminal intent then civil penalties, up to double the amount of tax owed in addition to the tax itself, can be levied under existing legislation.
CIOT response: http://tinyurl.com/pts69mv
2. Proceeds of Crime Act 2002 section 330 already imposes a duty on employees in a business in a regulated sector (i.e. a sector that has a supervisory or other appropriate regulatory regime – such as banks) to make reports where they "know or suspect" that another person is engaged in money laundering and where (even if they do not know or suspect) they "have reasonable grounds for knowing or suspecting" that another person is engaged in money laundering. A person guilty of an offence under this section is liable to imprisonment for up to five years or to a fine or both.
Proceeds of Crime Act 2002 section 328 is an offence that is targeted at persons who launder on behalf of others. It catches those working in financial institutions who in the course of their work become involved in arrangements that they know or suspect facilitate money laundering by or on behalf of other persons. A person guilty of an offence under this section is liable to imprisonment for up to fourteen years or to a fine or both.
3. The Chartered Institute of Taxation
The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.