CIoT: HMRC should delay new corporate tax evasion offence

27th July 2016

The Chartered Institute of Taxation (CIoT) has warned HM Revenue and Customs (HMRC) that its new corporate tax evasion offence may result in a host of prosecutions in comparatively smaller cases where civil penalties can already offer sufficient punishment.

The CIOT wants HMRC to consider the possibility of delaying the introduction of the new offence – currently due to become legislation on 1st September 2017 – as it believes the deadline gives HMRC inadequate time to respond to the raft of concerns from tax practitioners.

Questions have been raised about how the new criminal sanctions will be positioned alongside the current civil penalties in place for tax avoidance, as well as the need for clearer guidance on the practical steps businesses can take.

The timetable for the new corporate tax evasion criminal offence was set prior to the EU referendum and the subsequent outcome of the referendum has delayed government activity relating to the legislation.

Glyn Fullelove, chair, technical committee, CIOT, stated the institute understands the purpose of the proposed legislation despite concerns regarding its implementation.

“At the same time, we do not wish to see the serious nature of a criminal prosecution downgraded by prosecutions in relatively small cases that simply add an extra fine on top of civil penalties and are a long way distant from the behaviours that have spurred the introduction of the offence,” said Fullelove.

“If criminal sanctions need to be strengthened in this area, the rule should only be applied in significant cases where large organisations have failed to take their obligations seriously.

“Prosecuting a small company for failing to prevent the evasion of, for example, a small amount of VAT, where the company can already be subject to heavy tax penalties, and where the staff who actually perpetrated the evasion can themselves be prosecuted, could be seen as one punishment too many for the small firm involved and is unlikely to affect the conduct of the management and the overseas staff of a major multinational bank.”

The CIoT added in its response to HMRC’s consultation that the new offence has to be subject to the appropriate defences being available, with clearly defined guidelines made available by Government so that businesses know exactly what is required from them in order to comply.

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