International tax adviser Mark Davies & Associates said the Government’s plans to introduce criminal offences for non-compliance, regardless of intention to evade tax, would “weaponise” HMRC.
“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 prosecutions,” said Mark Davies, managing director at the company.
“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.”
He added that the powers, originally announced by chancellor George Osborne in March’s Budget, do not fully constitute strict liability due to their inclusion of “safeguard” exemptions from prosecutions for people with a reasonable excuse or who took reasonable care.
“There are already criminal offences for intentional tax evasion and civil charges and penalties for tax evasion,” said Davies. “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.”
Under the new rules, criminal offences and punishment will broadly apply to those who fail to give notice of chargeable tax; fail to deliver a tax return; or make an inaccurate return.
Deterrence
They have been introduced in preparation for the automatic exchange of tax information among the 90 nations signed up to the Common Reporting Standard, which begins in 2017.
Ray McCann, partner at New Quadrant Partners, also said he does not believe strict liability is the right approach, and instead creates a “policy of deterrence” which will only frighten those who would otherwise be compliant but who accidentally fail to comply.
He also said he was concerned about HMRC being given such strict powers: “There has been a tendency to introduce new idea after new idea without there being sufficient evidence to show whether earlier changes have made a meaningful difference.
“Overall, I do not believe that it should ever be easier or simpler to impose a criminal conviction on a citizen, this should always be difficult where a person’s liberty is potentially at stake.
“Indeed, it seems to me that absent the possibility of prison there is no point to these new powers given the existing criminal remedies open to HMRC.“
