A rule change quietly introduced by HM Revenue &
Customs has blocked people accused of tax
fraud from trying to clear their names before a criminal or civil
investigation is launched.
Previously taxpayers who believed they were innocent had
the option to co-operate with HMRC and were invited to supply evidence to
support their innocence.
But this option has been phased out. Instead individual’s
have two options: either admit or deny the allegations made. Those who plead
‘not guilty’ will be investigated straight away, which could lead to a prison
sentence.
During the investigation the taxman will be able to
obtain information from third parties, including banks, credit card providers,
employers and other government agencies such as the Land Registry.
Accountants warned the move will lead to a “significant”
increase in the number of criminal prosecutions against tax evaders, which has already been
rising at an alarming pace in recent years as HMRC toughens up its approach to
tax collection.
A total of 165 people were jailed in 2010, but in 2013
the number had jumped to 1,165. The rise coincides with HMRC hiring an extra
200 tax investigators over the past three years, taking the total headcount
above 1,600.
Andrew Watt, a partner at Watt Busfield Tax Investigations,
said: “Prohibiting taxpayers from denying the suspected tax fraud and
co-operating with the revenue’s
enquiries will only lead to one thing – a significant rise in the number of
prosecutions.
“The taxman is determined to catch the tax evaders and
rightly so, but my concern is that people who believe they are innocent will be
worried out of their minds as they will subjected to a criminal investigation
that cannot be fought until it goes to the courts.”
Other accountants also flagged concerns that innocent
taxpayers will face unnecessary stress.
James Bullock, of tax firm Pinsent Masons, said: “Those
who want to deny the claims made will be unduly stressed in facing what is now
a very unfair process. It is a subtle tactic but one which fits in with the new
tougher regime the taxman is carrying out, which will inevitably lead to more
criminal prosecutions.”
Cases that could result in a prison sentence mainly
involve cases of obvious tax fraud, such as undeclared taxable income and gains
in offshore accounts. Individuals who use undisclosed tax avoidance
arrangements are also targeted.
A spokesman for HMRC said the rule change has been made
to make the tax system easier to understand.
"Removal of the denial option does not adversely
impact anyone who believes they have nothing to disclose. This is about
streamlining our approach to evasion and making the tax system more
transparent. It makes things simpler for those who want to bring their affairs
up to date while making things harder for committed tax cheats,” the spokesman
said.
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