HMRC has been very keen to beef up in its use of criminal law to close the tax gap. For one particular population of users (or abusers) of the tax system – namely promoters of tax avoidance –the Spring Budget 2023 confirmed that the government will consult on underpinning the POTAS scheme with criminal consequences – in particular making it a criminal rather than civil law matter if a promoter continues to operate in the face of ‘stop notice’.
Outside criminal offences for facilitation of tax evasion itself, the UK system has a surprisingly benign approach to using criminal law where a third party does not meet an obligation. The only other example I can think of (outside customs and excise) is the criminal regime for wilfully destroying information responsive to a Schedule 36 notice – but, even then, that only applies where the tribunal has pre-authorised the issue of the notice. This is part of a tougher approach to the ‘enabler’ community – which HMRC's criminal enforcement team has said – in partnership in particular with the J5 (Joint Chiefs of Global Tax Enforcement, a collaboration between the UK, US, Australia, Canada and the Netherlands) – will be a priority focus area for them in the years ahead.
The Budget also announced that the government ‘will double the maximum sentences for the most egregious forms of tax fraud from 7 to 14 years’. Tax fraud can be prosecuted in a number of different ways. The maximum sentence for the common law offence of cheating the revenue is life imprisonment (theoretically at least – sentences handed down tend to be more modest), and for the Fraud Act 2006 s 1 offence (which can cover tax fraud) is ten years. However, there are three specific statutory tax offences, each carrying a maximum sentence of seven years: fraudulent evasion of VAT (VATA 1994 s 72), fraudulent evasion of income tax (TMA 1970 s 106A), and fraudulent evasion of excise duty (CEMA 1979 s 50). False accounting (Theft Act 1968 s 17) can also be charged and carries a seven year maximum but given it also applies outside the tax sphere, it is unlikely to be a candidate for change.
14 years would bring egregious tax fraud into line with money laundering. In fact, money laundering is the worst financial offence to be caught committing – and it has often been noted that one can spend 14 years at his majesty’s pleasure for laundering the proceeds of a fraud but only 7/10 years for actually perpetrating it – so this measure will look to close that anomaly, in relation to tax fraud at least (it has been mooted for other frauds too).
Outside the criminal sphere, assessment powers will be amended to close a loophole which allowed time to run out before HMRC became aware of a chargeable disposal under an unconditional contract – in particular where there is a gap of over four years from exchange of contracts and completion of the sale. Currently, the four years runs from exchange. The change will mean time runs from completion.
Finally, self-assessment forms will be amended to introduce a standalone section in the CGT pages requiring the reporting of disposals of cryptoassets. The Budget documents note that many individuals and trusts are not currently declaring amounts arising from crypto transactions properly. This change appears to be intended to help both by creating a ‘prompt’ for when a tax return is completed, and to make it easier for HMRC to pick up crypto risks when making bulk risk assessments of tax returns.
Home >Articles > Spring Budget 2023: a tougher approach to compliance and enforcement
Spring Budget 2023: a tougher approach to compliance and enforcement
HMRC has been very keen to beef up in its use of criminal law to close the tax gap. For one particular population of users (or abusers) of the tax system – namely promoters of tax avoidance –the Spring Budget 2023 confirmed that the government will consult on underpinning the POTAS scheme with criminal consequences – in particular making it a criminal rather than civil law matter if a promoter continues to operate in the face of ‘stop notice’.
Outside criminal offences for facilitation of tax evasion itself, the UK system has a surprisingly benign approach to using criminal law where a third party does not meet an obligation. The only other example I can think of (outside customs and excise) is the criminal regime for wilfully destroying information responsive to a Schedule 36 notice – but, even then, that only applies where the tribunal has pre-authorised the issue of the notice. This is part of a tougher approach to the ‘enabler’ community – which HMRC's criminal enforcement team has said – in partnership in particular with the J5 (Joint Chiefs of Global Tax Enforcement, a collaboration between the UK, US, Australia, Canada and the Netherlands) – will be a priority focus area for them in the years ahead.
The Budget also announced that the government ‘will double the maximum sentences for the most egregious forms of tax fraud from 7 to 14 years’. Tax fraud can be prosecuted in a number of different ways. The maximum sentence for the common law offence of cheating the revenue is life imprisonment (theoretically at least – sentences handed down tend to be more modest), and for the Fraud Act 2006 s 1 offence (which can cover tax fraud) is ten years. However, there are three specific statutory tax offences, each carrying a maximum sentence of seven years: fraudulent evasion of VAT (VATA 1994 s 72), fraudulent evasion of income tax (TMA 1970 s 106A), and fraudulent evasion of excise duty (CEMA 1979 s 50). False accounting (Theft Act 1968 s 17) can also be charged and carries a seven year maximum but given it also applies outside the tax sphere, it is unlikely to be a candidate for change.
14 years would bring egregious tax fraud into line with money laundering. In fact, money laundering is the worst financial offence to be caught committing – and it has often been noted that one can spend 14 years at his majesty’s pleasure for laundering the proceeds of a fraud but only 7/10 years for actually perpetrating it – so this measure will look to close that anomaly, in relation to tax fraud at least (it has been mooted for other frauds too).
Outside the criminal sphere, assessment powers will be amended to close a loophole which allowed time to run out before HMRC became aware of a chargeable disposal under an unconditional contract – in particular where there is a gap of over four years from exchange of contracts and completion of the sale. Currently, the four years runs from exchange. The change will mean time runs from completion.
Finally, self-assessment forms will be amended to introduce a standalone section in the CGT pages requiring the reporting of disposals of cryptoassets. The Budget documents note that many individuals and trusts are not currently declaring amounts arising from crypto transactions properly. This change appears to be intended to help both by creating a ‘prompt’ for when a tax return is completed, and to make it easier for HMRC to pick up crypto risks when making bulk risk assessments of tax returns.
