Experts Sound Warning Over HMRC's Desire For Police Powers

by Jason Gorringe, Tax-News.com, London

22 August 2006

The United Kingdom's tax authority, HM Revenue and Customs, should not be given powers that exceed those of the police when investigating tax crime, says PKF Accountants & business advisers.

PKF's warning follows the publication by HMRC of a shopping list of new criminal investigation powers it would like to have, highlighting how the use of police powers would boost its fight against tax evasion and organised crime.

HMRC is currently seeking views on applying the relevant provisions in the Police and Criminal Evidence Act (PACE) across all its activities. Currently, those powers and their associated safeguards are only available for specific taxes and duties. According to the agency, having the same law apply across the board will be clearer for those under investigation and will increase the effectiveness of HMRC's investigations.

However, according to PKF Tax Investigations partner, John Cassidy, HMRC is hoping to pick and choose which parts of the PACE laws it can use, and in certain circumstances wants to exceed the reach of these laws, for example, by retaining its existing power to search any person on the premises it is raiding without having an arrest warrant for that person.

"I have repeatedly called for HMRC's powers to be in proportion to the seriousness of the offence. This proportionate approach should be enshrined in law, not left to the discretion of overstretched and, possibly, overzealous tax investigators seeking a quick win against suspected tax fraudsters," Cassidy stated.

"As originally suspected, HMRC is trying to take this opportunity to 'level up' the powers of its officers so these proposals would see a substantial increase in HMRC's powers in dealing with the individual taxpayer," he added.

Cassidy said that giving the HMRC such "draconian" new powers carries with it "significant risks," and he warned that these powers could be used against relatively minor offenses, such as sole trader under-reporting income, as well as against the organised criminal gangs and serious tax evaders for which these powers are primarily intended.

"HMRC claims it will use the new powers proportionately but our experience suggests its officers often take an unnecessarily heavy-handed approach with some taxpayers who are eventually proven to be innocent," Cassidy observed, noting that the badly-designed tax system is as much to blame for tax evasion as HMRC's lack of police powers.

"It would not need such sweeping powers if parts of the tax system, such as Tax Credits, were better designed in the first place," he concluded.

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