CIOT Criticizes UK’s New ‘Strict Liability’ Tax Offense
The Chartered Institute of Taxation has said the UK Government has taken its campaign against offshore tax evasion too far, after degrading taxpayer rights with confirmed plans for a new “strict liability” offense for offshore tax evasion.
The CIOT said that, while it is generally strongly supportive of HMRC’s efforts to tackle tax evasion, it is opposed to the creation of a criminal offense that will require no proof of intent.
In future, HMRC would only need to demonstrate that the income was taxable and undeclared, rather than that tax was deliberately evaded, as under the current rules. The use of strict liability in criminal law is controversial; in some cases, taxpayers have been found liable even when they are not directly at fault, or where they have taken reasonable care to ensure compliance with the law.
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 offense 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 defenses 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.”
