ACCA Seeks Clarity on HMRC’s Proposed Powers to Tackle Tax Fraud

The Association of Chartered Certified Accountants (ACCA) has called on HM Revenue and Customs (HMRC) to explain why existing enforcement powers are not sufficient before introducing additional measures aimed at taxpayers and advisers involved in fraudulent or dishonest conduct.

The intervention comes as part of the ACCA’s response to a consultation by the UK tax authority.

HMRC is considering the introduction of a new criminal offence covering “reckless untrue statement or declarations in direct tax”.

The ACCA acknowledged the government’s objective of strengthening the integrity of the UK tax system. However, it argued that HMRC should first demonstrate why the current regulatory framework is inadequate.

Existing Tax Enforcement Powers

The existing framework already provides for civil penalties relating to inaccuracies and failures to notify, while criminal offences cover fraud and dishonest behaviour.

The ACCA said these measures should be capable of addressing the small proportion of taxpayers whose conduct the proposed changes are intended to target.

The organisation reiterated its request for HMRC to demonstrate where the current mechanisms fall short, particularly given the limited scope of behaviour the proposed legislation is intended to address.

The ACCA did acknowledge that targeted sanctions for serious misconduct could potentially improve consistency, proportionality and deterrence across the tax system.

However, it stressed that any new criminal offence would require careful drafting and implementation.

Protection for Honest Taxpayers and Advisers

The ACCA argued that honest taxpayers and their advisers must be protected from unintended consequences arising from new enforcement powers.

It said criminal liability should be reserved for cases involving conscious disregard of risk or deliberate dishonesty.

ACCA Technical and Strategic Engagement head Glenn Collins said:

“A reassessment of all existing powers is overdue.

“Piecemeal additions and changes without an evaluation of the current powers HMRC have resulted in issues for HMRC, taxpayers and agents.”

According to the ACCA, criminal liability should apply only where an individual knowingly disregards an obvious and unjustifiable risk that a statement is false.

It said the proposed offence should not apply to taxpayers or advisers who have reached a “reasonable interpretation of uncertain legislation”, or to those who have made a genuine error despite taking all reasonable care.

ACCA Calls for Targeted Enforcement

The ACCA warned against creating a regulatory system that is disproportionately shaped by the actions of a small number of bad actors.

Instead, it recommended that enforcement measures should be targeted precisely at individuals who deliberately abuse the tax system.

The organisation’s position is that any expansion of HMRC’s powers should be supported by a clear assessment of existing enforcement mechanisms, while ensuring that legitimate taxpayers and professional advisers are not exposed to unintended criminal liability.

Reference

Source: ACCA seeks clarity on HMRC’s proposed powers on tax fraud The Accountant Online