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“However any new measures should be based on sound legal principles. One of these is that in order to make a criminal conviction it should generally be required to show that the act was committed with criminal intent. The proposed strict liability offence for failing to declare overseas income and gains fails this test. A taxpayer may fall within the ambit of the offence without any intention or knowledge on their part.
“It is easy to see why this is attractive to the tax authorities. But UK and international taxation is a minefield of complexity and, while some taxpayers do actively seek to hide their income by intentionally failing to declare it, there are others who simply make mistakes in their financial affairs without intending to act wrongly. We cannot conceive that it would ever be reasonable for someone to be convicted, let alone imprisoned, for offshore tax evasion without guilt being proved beyond reasonable doubt.
“In light of our concerns, we look forward to engaging with HMRC on the further consultation that has been announced to consider appropriate defences and thresholds. However, they will do nothing to change the fact that someone who has no intention to evade tax could still be liable to criminal sanctions, and we think this is wrong.”
Tax evasion
The Government has also announced that it will be consulting on introducing a new offence of corporate failure to prevent tax evasion or the facilitation of tax evasion. It will also consult on new civil penalties for those that enable others to commit tax evasion, and the public naming of such enablers.
Patrick Stevens said: “There is already plenty of law in this area. If a bank employee, for example, has knowledge of or suspects (or has reasonable grounds for knowing or suspecting) money laundering, which can include tax evasion, they can already be liable to a criminal offence under the Proceeds of Crime Act 2002. Additionally, they commit an offence if they are involved in any arrangements which they know or suspect facilitate money laundering by another person.
“But if it is felt that criminal sanctions need to be strengthened – for example, outside the currently regulated sectors – then we would be pleased to work with the Government to frame proposals that will effectively achieve this.”
Strict liability offence
HMRC consulted last year on plans to introduce a new strict liability offence of failing to declare taxable offshore income and gains, and sought views on the design of the new offence.
In its response to the consultation, the CIOT criticised the proposal as being wrong in principle, and questioned why the offence was needed when HMRC already have the power to investigate criminally anyone with either UK or offshore untaxed funds where they can show these were deliberately not declared. If they cannot show dishonesty or criminal intent then civil penalties, up to double the amount of tax owed in addition to the tax itself, can be levied under existing legislation.
Proceeds of Crime
Proceeds of Crime Act 2002 section 330 already imposes a duty on employees in a business in a regulated sector (i.e. a sector that has a supervisory or other appropriate regulatory regime - such as banks) to make reports where they "know or suspect" that another person is engaged in money laundering and where (even if they do not know or suspect) they "have reasonable grounds for knowing or suspecting" that another person is engaged in money laundering. A person guilty of an offence under this section is liable to imprisonment for up to five years or to a fine or both.
Proceeds of Crime Act 2002 section 328 is an offence that is targeted at persons who launder on behalf of others. It catches those working in financial institutions who in the course of their work become involved in arrangements that they know or suspect facilitate money laundering by or on behalf of other persons. A person guilty of an offence under this section is liable to imprisonment for up to fourteen years or to a fine or both.
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Susie Hughes © Shout99 2015
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