UK Government Criticised In Tax Evasion Crackdown

by Caroline Maxwell, Tax-News.com, London

26 October 2001

The government and the Inland Revenue have been criticised by two major tax and accounting industry bodies for failing to clarify the extent of their new crackdown on tax evasion and money laundering.

When the Proceeds of Crime Bill is passed through Parliament, reportedly before Christmas, tax advisers will be obliged to report under-declared tax to the National Criminal Intelligence Service (NCIS), if they suspect that it may have arisen from criminal activity. The Bill also gives the government new powers to jail or fine tax evaders.

However, John Whiting, President of the Chartered Institue of Taxation believes that the way in which the Bill is worded suggests a small, genuine mistake made by a self-assessing taxpayer will be judged as harshly as a deliberately false and criminal declaration. 'Taxpayers who have made innocent mistakes on their tax forms might get caught up in the Bill's wide net, because it implies accountants and advisors have to report any underpaid tax which is even slightly suspicious, no matter how small the amount,' he explained.

The tax chief at the Association of Chartered Certified Accountants (ACCA), Chas Roy-Chowdhury, agreed, warning that: 'Because the Bill's powers are wide-ranging, the government needs to make it clear small mistakes and civil offences won't be considered for prosecution.'

However, the Inland Revenue insisted recently that it is gunning for terrorists, drug dealers and arms smugglers, and would not be targeting legitimate entrepreneurs and self-employed business people. A statement was issued to the effect that if the IR is convinced that the mistake is genuine, the defaulting taxpayer will just have to pay the back tax and interest, with the possibility of a small fine.

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