I note that the UK's Chartered Institute of Taxation have issued a press release that says in response to yesterday's publication by the government of a new consultation on creating a criminal offence of failing to disclose offshore income on a tax return:
Tax advisers have welcomed the Government's launch of a debate over penalties for offshore tax evasion but expressed concern over proposals for a new criminal offence for those who fail to declare taxable offshore income and gains, which would mean the authorities would no longer need to show the person had acted dishonestly or with criminal intent.
I am bemused by this response. Firstly, this legislation is very obviously a response to the situation found in recent trials where failures to secure convictions resulted from claims of innocent error however improbable I suspect those might have seemed to those bringing the cases.
Second, the CIOT response ignores the fact that the existence of this law does not require prosecution, it only permits it. There is always discretion not to proceed, and it is widely used.
But most importantly, I frankly do not see how there is anything but intent to act dishonestly or criminally in most cases involving non-disclosure of offshore income that has been deliberately located in a place where, to date, in most places automatic information exchange to HMRC has not taken place, which fact will have been known to all account holders. There can be exceptions: mental ill health resulting in mistaken non-disclosure is one I can foresee. That is why discretion is needed. But what this law says is that the onus of proof is on the tax payer, as it should be, and failure to act properly is a criminal offence.
Just what is wrong with that? And why do the tax profession have a problem with it?
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Probably because they see mens rea as so firmly an established part of UK criminal law.
My suggestion is that the mens rea is implicit in the act
There are many legitimate reasons why people open bank accounts in countries other than their own. Being paid in the local currency whilst working temporarily overseas. Because they own property overseas. For holiday spending money. These reasons are so obvious and so legitimate that the principle of mens rea cannot be overturned just because there is admittedly a tax evasion problem.
Then they should not forget them
That is the law of tax
You say you submit a complete return and that should be your obligation. Nothing less should do
The tax profession should not defend anything less
The idea that it’s OK to turn many people into unwitting criminals because the authorities have discretion whether or not to prosecute is frightening. You may as well pass a law that makes everything illegal, and we’ll just leave it to the authorities to decide which acts of ours do really demand we be prosecuted. It’s totalitarian nonsense and you wouldn’t support it if the stated target was not a group of people whom you (reasonably enough) have a significant quarrel with.
If the intent is to go after wealthy evaders, then you should not pass a law that criminalises ordinary people who just don’t know the rules. I have overseas savings, and I pay overseas tax on them. But I put the income on my tax return and I pay some UK tax too. I know I have to do this because I’m an accountant, and because I’ve always done a tax return irrespective of whether or not I was required to. The sums are small, but I have a strong professional interest in making sure I comply. I would not expect someone in a different trade with similar savings, to be made a criminal.. whether or not they were prosecuted.
If people are getting away with it who should know better, e.g. because they have advisors who should know the rules, then change the law to deal with those situations. I don’t want to defend abuse or abusers. But nor do I want to open hundreds of thousands of people (particularly immigrants) to the prospect of being ‘done’ on a technicality. You might not fear that the authorities might come to abuse that situation, but I certainly do. If you think there’s nothing to fear, look at how some US state administrations have found ways to keep certain groups off the electoral role.. I think there’d be quite an appetite for a law there which, for example, gave a reason to bar almost anyone with a bank account in Mexico from voting.
I have to admit I have read some nonsense in my time and this falls fair and square into that category
Submitting an incorrect tax return is already an offence. Anyone signing that return has committed a crime. And 99% of all found to be doing that now will not be charged with a crime by HMRC. I can confidently say that will not change because HMRC will not have the resources to change it. So to suggest there will be mass criminalisation is absurd. It’s like saying all motor offences result in a criminal prosecution they do not. In that case to say I am suggesting totalitarian nonsense is just absurd: I am saying we should expect taxpayers to comply with the law. There is nothing totalitarian about that. But there is something deeply anti-democratic about what you are saying.
I really do not think that’s what I expect anyone in the profession to be doing
“Submitting an incorrect tax return is already an offence. Anyone signing that return has committed a crime.”
I’m sorry, that’s not true. Knowingly submitting an incorrect tax return, yes, but simply submitting an incorrect tax return is not.
“It’s like saying all motor offences result in a criminal prosecution they do not.”
It’s more like saying that all strict liability motor offences result in criminal prosecution.
“But there is something deeply anti-democratic about what you are saying.”
I want the decision on what is a criminal offence which should be prosecuted to be determined by a democratically elected Parliament and written down in law. I think that to be rather democratic.
Under a strict liability system which requires discretion to reach the “correct” result, the decision is made by an unelected official, apparently together with the accountant who determines whether HMRC have sufficient budget to proceed. Any law which only reaches the desired outcome because the prosecution doesn’t have enough resources to apply it is a pretty poor law.
Mens rea is an important part of the UK’s judicial system for good reason. Nobody is saying that there shouldn’t be an obligation to follow tax law, just as nobody is suggesting that (say) handling stolen goods shouldn’t be a crime. But we do rather want them to have knowingly handled stolen goods, rather than accidently bought a stolen item second hand off ebay, before we lock them up.
Yet more nonsense
You want parliament to decide who may be prosecuted? It is in this case – it will be setting a law.
But the decision as to who to prosecute has never been a role for parliament in our democracy and should never be so (hence they should not regulate their own expenses). That is a decision for delegated authority within the executive subject of course to review in the courts
That’s how our democracy works. It is dependent upon judgement throughout the system with checks and balances hopefully built in
And no doubt mens rea will be considered when exercising that judgement or a court will direct a jury to find a person innocent, I have no doubt
Shall we base op arguments on facts and sense and not hysteria?
“Submitting an incorrect tax return is already an offence. Anyone signing that return has committed a crime.”
I would hope that you know that to be incorrect. Not only is it legislated for, but it is made clear on the SA100 that you are signing that the return is correct to the best of your knowledge.
I hope you don’t give such advice to your clients.
First you have no excuse for not making enquiry as to what the law is and what you must declare – to paraphrase ignorance of the law is no excuse, so this one is a lame let out
Second you ignore the fact that it also says “I understand that I may have tio pay financial penalties and face prosecution if I give false information”
An absence of data is false information
Respectfully, I am within all reasonable parameters right
“You want parliament to decide who may be prosecuted? It is in this case — it will be setting a law.”
No, I want Parliament to decide who WILL (not may) be prosecuted, except in exceptional circumstances. This is because Parliament is directly accountable to the electorate. Passing a law where 99% of people who fall within the scope of the criminal law are not intended to be prosecuted is a bad law. It’s like replacing the crime of speeding with a crime of “being present when speeding occurs”. You could argue that the intention is only to prosecute the driver, but if that’s how you want the law to apply then you should write that in the books. Anything else is bad law.
“And no doubt mens rea will be considered when exercising that judgement or a court will direct a jury to find a person innocent, I have no doubt”
Why would that be? A UK court has never directed a juy to read mens rea into a strict liability case, ever. There’s plenty of, for example, gun ownership cases where the owner honestly believed that he was comitting no crime (e.g. because the gun was an antique); and the jury were explicitly directed to ignore mens rea.
And if you think mens rea will be considered, why would you have a problem with writing that into the law?
I am sorry to say I really do think you have some big misunderstandings on how out system of government works
Your quest for certainty is also wholly inappropriate
Life is uncertain and all things, the law included, have to allow for that. That’s why this new law is needed. The old one allowed too much uncertainty on an issue; clarification is needed
That’s the reality of an evolving legal system
Your suggestions appear to recognise no reality I know of
“I am sorry to say I really do think you have some big misunderstandings on how out system of government works”
I’m afraid that you, Richard, have some big misunderstanding about how the law works. That’s fine, you’re not a lawyer, but the fact that you’re too arrogant to see this is a problem.
You’ve insisted that submitting an incorrect tax return is a crime and a strict liability offence, despite numerous people pointing out that you’re wrong, and despite contradicting the point yourself by admitting points to the the contrary. At no point, however, have you admitted you’re wrong.
I have accurately described how the law works in the vast majority of cases
Your problem is you want to nit-pick that
We’re all too familiar with such nit-picking. It is, amongst other things, the basis for tax avoidance
So, no apologies. Just a suggestion that youy are deliberately talking at cross purposes to create a straw man
It’s not ‘nit picking’ pointing out that you’ve got a fundamental legal concept wrong. Especially when that is the very concept that this law seeks to set aside It’s not ‘nit picking’ to point out that you’re wrong about tax returns already carrying strict liability, when if that were actually the case this law would not be needed.
There’s no straw man, and there’s no attempt to excuse abuse. You’re just saying those things because it’s easier to go with ad hominem attacks than to your errors.
Nobody here has claimed there isn’t a problem that the law should be changed to deal with. There is just a difference of opinion as to whether this particular change might do more harm than good.
My view is that an strict liability offence should only be created where the offender must have, or reasonably should have, known what the law is. Tax is very complicated, particularly when it concerns matters of residency and domicile, and when other countries are involved. You know very well that this is the case because, as you regularly point out, this is one reason why people are able to abuse. Tax law is also something that every single one of us is affected by. That is why I don’t think strict liability is appropriate. You are free to disagree. Further, I don’t think it’s reasonable to give so much discretion to the tax authorities because, I am afraid, I just don’t that those powers won’t be abused, even if just by a small number of people. Again, you are free to disagree. It would just be nice if you did so without so much hostility.
What you do not seem to appreciate – in fact, I know you do not understand – is that the debate you want to pursue and the one that you think I am engaged in is not the one I am actually pursuing
You seek to play within existing rules
I seek to change them
Those are different terms of reference. They make your commentary on issues such as being right or wrong irrelevant: that is only true within the legal space you have sought to define. Within the political economic spaces in which I am operating that does not follow.
Under this law, *not* submitting a tax return, for many, will be a crime. Even if they don’t know they have to submit one, and even if there is only a minimal amount to pay.. perhaps even nothing to pay at all.
Of course nobody expects HMRC to go after them, but they will still be criminals, and that’s the problem. Just like everyone who commits a motor offence is a criminal.. but they usually know they are doing it, and they have passed a test, so it’s very different. If they are caught (and many are, it’s just that enforcement is effectively random) they should have no complaint. That said, I believe that, at least by convention, minor motoring offences are not classed as criminal acts. They certainly don’t count as convictions for things like DBS.
If submitting an incorrect tax return is already a crime, then why is this new law needed? Is it not designed to get evaders who submit incorrect returns and then plead ignorance? If I have misunderstood then I apologise. But I’m sure I recall being asked if my return is correct ‘to the best of my knowledge’, which would suggest the liability is not strict.
Laws which make criminals of people going about their daily business with no knowledge, let alone intent, of the crime are totalitarian. I think you are so done who does believe in civil liberties, but you sometimes (not always) seem to disengage your radar where tax is concerned.
You are wrong again
There will be a de minimis in the law so there is no chance of prosecution of people failing to disclose a minimal amount by not submitting a return
I accept there is a good question as to why this law is needed. In principle I do not think it is. The answer appears to be the difficulty in securing prosecution in high profile cases. In that case to ensure the pressure to comply exists it is needed. Society needs to have the power to prosecute those who aberrantly chose not to comply with tax law at cost to us all
So, just to be clear, anybody who has ever submitted an incorrect return has committed a CRIME. This is even if HMRC classes it as “despite taking reasonable care” and so is unable to take a penalty or as “careless”, meaning not deliberate.
And if the advisor is responsible for the error, WHICH ALL ADVISORS HAVE BEEN AT SOME TIME,are they all criminals? Does that make you a criminal Richard?
Potentially yes
But not if they can show they signed the declaration on the tax return in good faith
But we should all know that requires some effort to prove that to be true
I suggest you go and read a tax return and wonder what is so surprising about my suggestion
But you just said that
“Submitting an incorrect tax return is already an offence. Anyone signing that return has committed a crime.”
Rather inconsistent, non?
I agree to some extent
But clearly it has been hard t make that stick in court
It seems that the Chartered Institute of Taxation are not the only people who dislike the Government’s proposals! Might I suggest that those expressing dislike have a rather less than disinterested reason for expressing their opposition?
Richard Blaber
Are you a telepathy? If not, how exactly do you arrive at that conclusion? Based upon what evidence exactly?
Could it be instead you have to notice people’s astonishment at seeing Richard showing himself again to be the fascist we all suspected:
“But not if they can show they signed the declaration in good faith. But we all know that requires some effort to prove that to be true”
Priceless Richard.
Beancounter – Dominic – or whatever else you call yourself (for they are all the same), I made a factual observation on the state of play regarding signing a tax return – the reference to effort referring to the need for counsel’s opinion, for example
Having an inclination to uphold the rule of law in a democracy is not fascist. It is, in fact, the precise opposite
I think you have got the emphasis on this wrong RM. I appreciate the problem, but it could be tackled better with severe civil penalties rather than make it a criminal offence. Once again a sledgehammer is being used to crack a nut. Proper resources to prosecute and a reformed legal system I think are the answer. Draconion legislation reminds me of some overseas places I worked in, where its effect was- useless.
At present, submitting an incorrect tax return is not a crime. Anyone who disagrees should feel free to cite the relevant law. I
Tell us why it is not and why HMRC are wrong to imply it is
HMRC imply no such thing. If that were the case, HMRC wouldn’t need this new law.
“2.9 There are very few strict liability offences in tax law, and none in the field of direct tax.”
That’s a quote from HMRC’s consultation. There is no criminal offence for filing an incorrect tax return which ignores mens rea.
And as I have said time and again, I do not think the new offence will in effect ignore mens rea
There is always mens rea in holding an offshore account for a start – and ignorance of it is not a possible excuse – bit has, nonetheless been offered and succeeded in court
This proposal overcomes that
HMRC don’t say or imply it is. The law is very clear. Section 106A TMA criminalises being “knowingly concerned in the fraudulent evasion of income tax”. The historic common law offence of “cheating the Revenue” has a similar mens rea requirement.
If you disagree then please cite the legislation you are referring to. Otherwise it’s a little silly for you to make assertions as to what the law says on the basis of your gut feel.
Please read my new blog on this issue
OK Richard, let’s use names from now on. Will theremustbeanotherway and sickoftaxdodgers and anonymous tax officer be held to the same standards? Thought not.
“Having an inclination to uphold the rule of law in a democracy is not fascist. It is, in fact, the precise opposite”
This indicates a man who displays no knowledge of and certainly no interest in concepts such as the tyranny of the majority. How many evil laws over the past century have been ‘democratic’? A majority of people in this country support the reintroduction of capital punishment. By your logic we would be fascists to oppose it.
No, you simply don’t understand fundamental, inalienable rights; you wouldn’t would you. So you don’t understand that the person pre-exists the State and the State only exists to serve the person.
A fascist naturally would think a person needs to prove that their declaration was given in good faith; not that the State needs to prove it wasn’t. A consequence of the third law of thermodynamics applies here: such a heavy block head is very, very difficult to move, almost impossible in fact.
So now we have it: democracy is a tyranny
I rest my case on who might be proposing fascism
You really should read my book
But you certainly won’t be commenting here again
I’m reading this discussion with interest. I won’t comment on the detail, but I do have a slightly meta-observation.
Whether you think it’s a hammer to crack a nut, or a brick wall, there’s obviously a problem with taxing offshore income. The proposal aims to tackle an area of massive cost to society – billions of pounds I presume?
What I find poignant is that this is just a CONSULTATION. Giving professionals lots of time to respond, after which, despite the best efforts of campaigners, the initial proposals will either be abandoned or severely watered down. The reason for this will be that, (sarcasm alert) heaven forbid we actually target or vilify someone for doing something that turns out to be an error or for which they may be innocent. Oh no, we shouldn’t introduce any legislation unless it perfectly filters out the innocent from the guilty and treats each accordingly. We can’t trust the state to deal with grey areas.
Now imagine the government applying these same principles to the bedroom tax, or the cuts to benefits, or any other of the damaging policies falling disproportionately on the poor or disabled over the last few years. It would never happen. No these cuts have to be rushed through, applied indiscriminately, and accompanied with the torrent of verbal and social abuse that comes with terms like ‘scroungers’, ‘cost to society’, ‘problem families’, ‘shirkers’, etc. Woe betide those who try and recognise that actually, some people might be homeless, or on benefits, or unemployed because of reasons that aren’t their fault. Nope we say, you’re all a drain on society, and you’ll all suffer as a result.
I suppose where I’m going with this is that it’s clear, both in the government’s initial approach, as well as the commentary responses to this article, that this is a class thing. One rule for the rich and another for the poor, despite the reality of the true numbers and costs involved. Poor people don’t have income offshore…
You are exactly right Matt
The tax profession appears to have no such concerns on benefits prosecutions
Matt
I understand where you are coming from, but this is somewhat of a strawman. When you say “Oh no, we shouldn’t introduce any legislation unless it perfectly filters out the innocent from the guilty and treats each accordingly”, people aren’t asking for perfection, we’re asking for the absence of reasonable doubt. That’s the standard on which almost all criminal law in the UK is based, and it’s a good standard.
I think that tax evaders should be convicted, but only where it is proven beyond reasonable doubt they they did it conciously. Strengthening the law is fine (and probably overdue), but the strict liability proposal is nuts. Personally I think higher penalties for underpaid tax is a better approach – the UK is less punative than may other countries in this respect.
Nobody sensible thinks that mistakenly claiming benefits should be criminalised as a strict liability offence.
Benefits do tend to be criminalised in that way