UK Finance and the Association for Financial Markets in Europe (AFME) fundamentally oppose HMRC’s proposal to introduce a criminal offence for making reckless untrue statements in direct tax. While we support effective tax administration and tackling genuine non-compliance, we believe the proposed approach creates uncertainty for the financial sector without delivering clear policy benefits.

 

A central issue lies in the broad and subjective definition of "recklessness," which risks penalising legitimate, good-faith technical disagreements. Direct tax compliance involves nuanced and subjective legal interpretations (for example, under complex frameworks like transfer pricing). Applying a criminal standard originally developed for factual, transaction-based indirect taxes (such as VAT or Customs) fails to account for these fundamental differences. Furthermore, exposing non-deliberate conduct to potential custodial sentences and unlimited fines creates a clear imbalance alongside existing civil regimes, where even deliberate and concealed errors incur only financial penalties.

 

Rather than improving compliance, the measure is likely to add administrative complexity, disrupt voluntary engagement with HMRC, and unfairly affect individuals signing returns who must rely on legacy work or complex internal processes.

 

Should HMRC decide to take the proposal forward, we strongly recommend narrowing its scope strictly to formal, written declarations rather than broad statements. We also encourage HMRC to reserve criminal sanctions for deliberate dishonesty, while introducing clear statutory safeguards to protect reasonable professional judgements, voluntary disclosures, and businesses operating under established governance frameworks (namely Banks and Financial institutions).