HMRC has faced strong criticism from the Institute of Chartered Accountants in England and Wales (ICAEW) over its proposal to create new criminal offences for reckless tax declarations. The Labour government's tax authority is considering introducing a criminal offence covering “reckless untrue statement or declarations in direct tax.”
ICAEW warns of confusion and deterrence
ICAEW senior tax technical manager Richard Jones said: “We are opposed to this measure, as there is considerable uncertainty around the circumstances in which HMRC may believe that a taxpayer or agent has engaged in reckless behaviour, which could reduce the deterrent effect of the offence.”
Jones added: “If the measure were to be introduced, much clearer guidance would be needed so that taxpayers and advisers gain greater clarity on when it would and would not apply.” He warned that the potential severity of consequences, combined with uncertainties of scope and potential inconsistencies of application, may mean advisors and taxpayers conclude they should limit contact with HMRC, including making voluntary disclosures for fear of a possible criminal investigation, potentially widening the tax gap.
Existing enforcement framework
The existing framework already includes civil penalties for inaccuracies and failures to notify. It also covers criminal offences for fraud and dishonest behaviour. Jones recommended that HMRC makes greater or more effective use of its existing powers to bring appropriate prosecutions and civil actions.
Government defends tax compliance approach
HMRC said: “The government is committed to closing the tax gap by tackling non-compliance through targeted enforcement, stronger penalties, and improved detection of deliberate evasion. At the same time, it promotes voluntary compliance by making the tax system simpler, clearer, and easier to use, helping taxpayers get things right first time.”
According to HMRC, the tax gap in 2023 to 2024 was estimated at approximately 5.3% (£46.8 billion). The government announced a £7.5 billion intervention package that will ‘go further and faster’ to ensure everyone pays their fair share. HMRC stated: “To achieve these goals, the government prioritises a balanced approach that combines prevention, support, and enforcement. It provides clear guidance and digital tools to help taxpayers meet their obligations and seeks intelligence to identify and address high-risk behaviours. The government aims to create a system where compliance is straightforward and non-compliance is effectively deterred.”
