The Association of Chartered Certified Accountants (ACCA) is urging HMRC to justify why existing powers are insufficient to tackle errors, as the Government consults on creating a new criminal offence that could see people jailed for making “reckless” false statements about their tax affairs.
While the ACCA says it backs efforts to protect the integrity of the system, it questions whether another offence is needed when civil penalties and established fraud offences are already available. The ACCA argues HMRC already has routes to tackle errors, including penalties for inaccuracies and failures to notify, alongside criminal offences designed to cover fraud and other dishonest behaviour.
ACCA Criticises Piecemeal Approach
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 HMRC have have resulted in issues for HMRC, taxpayers and agents."
The proposed offence would focus on cases where someone is said to have consciously ignored an obvious and unjustifiable risk that a statement was false. The accountancy body says criminal action should not be triggered where a taxpayer has taken reasonable care but made a genuine mistake, or where the law is unclear and they have reached a reasonable interpretation.
Joe Fitzsimons, Senior Manager Policy and Insights – EEMA & UK at ACCA, 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."
Proposed Penalties and Scope
Under the Government’s proposals, the new offence would carry a maximum penalty of two years in prison, an unlimited fine, or both. It would not mean an automatic prison term, with sentencing ultimately determined by the courts based on factors such as seriousness, harm caused and culpability.
The offence would be classed as an “either way” matter, meaning it could be dealt with in a Magistrates’ Court or sent to the Crown Court, where there would be a jury trial.
Ministers insist the proposal is not aimed at people who make genuine mistakes or misunderstand complex rules. The focus, the Government says, is on people who are aware there is a risk their statement is false but submit it anyway. It also says it would not apply simply because someone “ought to have known” or was merely careless.
The new measure would cover statements and declarations linked to direct taxes such as Income Tax and Capital Gains Tax. The Government says a comparable offence already exists for certain indirect taxes, including VAT and customs duties, and argues the absence of a general equivalent for direct taxes creates an inconsistency.
Government’s Rationale for the Change
The Government says it wants to close that gap and provide prosecutors with an additional option in serious cases where dishonesty cannot be proven. In its consultation, it says the aim is to improve consistency across tax regimes, ensure court outcomes reflect a defendant’s behaviour and culpability, and support efforts to narrow the tax gap.
It argues that, under the current system, juries must be satisfied dishonesty has been proven to convict someone of fraudulent evasion - and if they are not convinced, the defendant must be acquitted of that offence. Ministers say there can be situations where a jury believes someone acted recklessly, even if dishonesty has not been established, and the courts should have the option of a “lesser” offence where evidence supports it.
The Government also says the proposals would help protect public funds and bolster confidence in HMRC’s ability to enforce the law fairly. It estimates the UK tax gap was £46.8billion - 5.3% of total theoretical tax liabilities - in 2023/24, and says it remains committed to tackling non-compliance through targeted enforcement, tougher penalties and improved detection.
The consultation closed on August 16, and HMRC says it will publish a summary of responses, along with any draft legislation, as soon as possible. HMRC has been contacted for further comment.
