Partner Article

A blow to the rule of law in tax?

The Chancellor announced in the Budget that the Government would support the 800th anniversary of the signing of the Magna Carta in 1215 ‘to ensure that today’s generation learns lessons from the past’. But should these lessons also apply to Treasury ministers?

As part of the Government’s drive against tax evasion and avoidance to ensure there are “no safe havens” for those deliberately seeking to evade tax by the use of offshore means, HMRC is now raising the stakes. It proposes to start from the premise that those with offshore assets and who have associated tax irregularities have committed a criminal offence. This change of emphasis is alarming as HMRC will no longer need to prove “intent” to push the case into the criminal arena.

Individuals may have overseas accounts and investments for many reasons. Given the complexity of the UK tax regime, simple and often innocent issues can arise which result in additional tax liabilities. For example, a taxpayer who was born and has lived abroad all of his life may come to reside in the UK for the first time and continue to maintain a bank account in the home country. Would strict criminal liability apply in this circumstance?

This seems unlikely, but other questions arise. How will HMRC cope with such a fast growing number of criminal investigations? Already the number of such investigations resulting in the taxpayer being charged has risen from just 165 in 2010/11 to an anticipated 1,174 in 2014/15, so will HMRC have adequate resource once the proposed new criminal sanctions become law?

The Magna Carta stated that “No free man shall be seized or imprisoned, or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any other way, nor will we proceed with force against him, or send others to do so, except by the lawful judgement of his equals or by the law of the land. To no one will we sell, to no one deny or delay right or justice.”

HMRC already has the means to criminally investigate and prosecute tax fraudsters. So is it not a step too far in a just society to automatically criminalise those holding offshore assets without questioning whether an intent to avoid tax is present?

The Magna Carta outlawed some of King John’s methods of taxation, but he had no intention of allowing it to stand and wrote immediately to the Pope to have the charter annulled. This sparked a civil war and the barons invited Prince Louis of France to become King of England, whereupon in 1216, the Prince besieged Berkhamsted Castle – now in the home constituency of one Mr David Gauke!

This was posted in Bdaily's Members' News section by George Bull .