CIOT: New tax offense to remove proof of intention may be a huge mistake

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The Chartered Institute of Taxation (CIOT) in the UK has criticised the HMRC’s announcement that it will be introducing a new strict liability offence for offshore tax evasion.
Whilst they supported the conclusion to target only serious offshore tax evaders and that there will be a threshold of £5,000 of undeclared tax before the new rules apply, the CIOT does not support the “fundamental wrongness” of creating new regulations which requires no proof of intention.

CIOT Tax Policy Director, Patrick Stevens commented:

“The Government are right to have put additional resources into investigating and combatting a serious offense such as tax evasion. There is already tough legislation in this area and considering this it is only reasonable of them to look at how this can be done based on sound legal principles.”

For example, in order to make a criminal conviction there is a requirement to show that the act was committed with criminal intent unless there is potential for an immediate threat to public safety.

The proposed strict liability offence for failing to declare overseas income and gains fails such test. A taxpayer may be found guilty of an offence without any intention or knowledge on their part.

It is easy to see why this is attractive to the HMRC, however UK and international taxation is a minefield of complexity and, while some taxpayers do actively seek to hide their income by purposefully failing to declare it, there are others who simply make mistakes in their financial affairs innocently. It is not reasonable for someone to be convicted, let alone imprisoned, for offshore tax evasion without an intention to evade tax being proved beyond reasonable doubt.