HMRC to change definition of fraud

Taxpayers could face 10 years in prison for a failure to disclose information, as HM Revenue & Customs gears up to treat misdemeanours more seriously.

HMRC is to get new powers to prosecute taxpayers for fraud for deliberately failing to disclose information where they have a legal requirement to do so, according to UHY Hacker Young, the national accountancy group.

Currently taxpayers can only be prosecuted for fraud for knowingly making false statements, rather than for failing to disclose information. The emphasis is shifting from making a positive wrong statement to failing to disclose knowledge.

The new definition of fraud is set out in the Fraud Bill (2006) which is currently before Parliament. The Inland Revenue are continuing to strengthen powers to obtain information and the new definition of fraud could result in a significant increase in the number of taxpayers successfully prosecuted for fraud, says UHY Hacker Young.

Significant difference

Clive Gawthorpe, Partner at UHY Hacker Young, said: "There is a significant difference between knowingly making a false statement and deliberately not disclosing information. The taxman's powers to extract information will be strengthened by this Bill.

"There are many instances of non-compliance involving failure to disclose information, which are currently lightly punished, but which could in future lead to serious criminal prosecutions. Such cases will be relatively easy to prove, so we could see significant numbers of convictions."

UHY Hacker Young says that HMRC can request information from taxpayers during the course of tax enquiries and will, in the vast majority of cases, currently just levy fines if that information is not provided.

Under the Fraud Bill 2006, taxpayers could face imprisonment for intentionally failing to disclose information.

According to UHY Hacker Young, taxpayers' agents - lawyers and accountants - could also face prosecutions for failing to direct their clients to disclose information which they should have known to exist.

Clive Gawthorpe said: "There have already been a number of prosecutions of professional advisers under the new money laundering rules for failure to report suspicions of money laundering, or in some cases for failure to actually be suspicious in the first place.

"Now it seems professional advisers will face the added burden of potentially going to prison for failing to suspect the existence of information which their clients may have concealed from them."