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  • Editorial

    Guilty Even if Innocent..?

    HMRC has published a consultation on new laws which will enable it to prosecute even innocent taxpayers as criminals. Your only ‘crime’ would be to have received income, or to have made a capital gain, outside the UK, and not to have paid UK tax on it - even if you didn't know you had to.

    For those who would say that anyone who deliberately evades tax ‘deserves what they get’, then I would agree – where someone deliberately does so. But this proposed legislation will apply whether someone has done something deliberately or accidentally: under these new rules, innocence is irrelevant – that’s the point of a “strict liability” offence. Neither HMRC nor the courts are going to waste time trying to establish whether or not the accused tried deliberately to evade tax.

    For those who might say that it is about time that measures were introduced to combat the outrageous activities of some of the super-rich, which is causing ‘real harm’ to the UK economy, then I would agree with that as well – although I would also say that I thought we probably already had such laws. But this legislation will not attack global corporates or complex structures: it is aimed at individuals only. The consultation complains about how difficult it is to tackle offshore facilitators of such evasion, but these measures don’t do anything about that either. And although HMRC proposes to overlook smaller ‘misdemeanours’, that proposed limit is less than £2,000 – hardly pop star or oligarch territory. You have to wonder how many people need to omit £2,000 offshore tax, to damage the UK economy.

    HMRC might argue that £2,000 may be a relatively small amount of money but if that’s bank interest, then it represents a very substantial capital sum being hidden offshore. And I would agree with that too. But the proposed legislation does not ‘care’ about that capital sum or its origins, whether it be from historic undeclared takings ‘salted away’ offshore, or a legitimate inheritance. So a small capital gain of £5,000 on the sale of my Thai holiday home could end up with my being clapped in irons – even if I paid the relevant tax in Thailand, not realising that I might also be taxable thereon in UK.

    HMRC’s consultation talks about ‘safeguards’ – such as the aforementioned de minimis threshold which ignores small (arguably miniscule) amounts. HMRC intends to apply the legislation only to income or gains in ‘unapproved’ countries. So it seems that criminality may be determined in some cases by an accident of geography (let’s not forget, we are talking about innocent errors here, since we basically have no issue as regards those who deliberately underpay – although consistency would be appropriate).

    HMRC also says that it will apply its current Criminal Investigation Policy which means, in its own words, that "non-compliance will usually be pursued through civil means". 

    There are many things that this proposed legislation does not do. But what it will do, is allow HMRC to increase its criminal prosecution statistics with minimal cost and effort.  HMRC has set itself the task of a five-fold increase in criminal prosecutions, and has already linked these proposals to that target. One of the reasons why the bar is consistently set so high in most criminal cases is to prevent unfairness and miscarriages of justice. A civil service with a burning desire to criminalise citizens and without that high bar? It can end only one way.

    Regards all,

    TW Ed

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