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CIOT Criticizes New UK Tax Agency Powers

by Robert Lee,, London

19 October 2015

The Chartered Institute of Taxation has criticized the UK Government for proceeding with plans for a strict liability criminal offense for failing to declare offshore taxable income or gains.

Under the proposals, magistrates would be given the power to impose an unlimited financial penalty and a custodial sentence of up to six months. HM Revenue and Customs (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.

A second consultation from HMRC on the proposals closes on October 31.

The CIOT said it was opposed in principle to the creation of a new strict liability offence that would require no proof that the taxpayer deliberately intended to evade tax. According to John Cullinane, CIOT Tax Policy Director, "it cannot be right that an individual who simply makes a mistake in their tax affairs, without any intention to act wrongly, should be charged with, and possibly convicted of a criminal offence."

"We do not think that it is reasonable for someone to be convicted, let alone imprisoned, for offshore tax evasion without guilt being proved beyond reasonable doubt. In addition, we question whether a new offence is necessary at all since HMRC already has wide criminal investigatory powers at their disposal," Cullinane said.

The CIOT is also concerned that the proposed statutory minimum threshold of tax evaded of GBP5,000 (USD7,720) is not high enough. It said that a threshold of GBP25,000 would be more appropriate. The CIOT recommended that there be a comprehensive post-implementation review of the measures, and that a "sunset clause" be inserted in the legislation to ensure that HMRC would have to revert to Parliament to extend the scope of the offence.

Cullinane said that the proposed statutory defence of reasonable care would be vital in limiting the scope of the offence. However, "it would be a stronger safeguard for the taxpayer if the burden of proof was on HMRC to prove that reasonable care had not been taken, rather than being on the taxpayer to prove they took reasonable care."

TAGS: court | tax | tax avoidance | revenue guidance | law | United Kingdom | tax authority | offshore | legislation | tax planning | HM Revenue and Customs (HMRC) | tax reform | penalties | trade association | HM Revenue and Customs (HMRC) | trade

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