NCA’s Annual Report 2019-20: a focus on recovering the proceeds of crime and asset denial
With the deadline for responses to HMRC’s consultation on new proposed powers to “crack down” on offshore tax evasion due today, David Sleight and Edmund Smyth set out their concerns relating to the hard hitting proposals, which include a strict liability offence for individuals who are suspected of offshore tax evasion. (See our related blog).
It is disappointing that HMRC did not take on board the strong opposition raised in response to an earlier consultation regarding the introduction of a strict liability offence. Tax evasion by definition requires a deliberate act to deprive the Revenue of monies to which it is entitled.
There must therefore logically be a specific intent to evade tax for the offence to be made out. As such, the basis of any prosecution should require proof of fraudulent or dishonest behaviour to demonstrate that the suspect deliberately evaded tax. Any lesser requirement would mean that someone could be found guilty of committing tax fraud following an honest mistake.
In addition, the proposed legislation is complex and confusing and is likely to create more litigation than it resolves. No examples have been given of the kind of behaviour which would be caught by the proposals that are not already covered by offences under the current tax evasion provisions. The lack of clarity defeats the purpose of the proposed legislation which was “designed to be simpler to administer.”
Recognising the inherent unfairness of a strict liability offence HMRC have proposed a number of defences including “reasonable excuse” and “reasonable care” for not providing accurate information regarding offshore income or assets. However these defences create further confusion as it is not clear how they will be defined, whether guidance is to be issued or whether HMRC will simply wait for the Courts to decide.
Given that the defences have been sourced from the civil tax model, it is our view that it would have been more appropriate to focus resources on effective enforcement under the civil regime and existing criminal measures rather than create a new offence with a series of caveats and defences.
We understand HMRC’s policy objective in pursuing tax evaders and the political and media pressure currently being played out during party conference season. However, the proposals as they stand are unclear, unworkable and ultimately unjust. To impose what would essentially be a reverse burden of proof in circumstances where an individual would be facing a potential custodial sentence cannot be justified. Resources should not be spent on developing a new system that is inherently unfair and which defeats its very purpose.
Read our response to the consultation:
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