UK Government proposes a new criminal offence for reckless direct tax statements

The proposals would create a new criminal offence for making reckless untrue statements or declarations in relation to direct tax. The maximum sentence for the new offence, if introduced, would be an unlimited fine and up to two years imprisonment.

What problem does the government want to tackle?

It’s already an offence to fraudulently evade both direct tax and indirect tax. However, an offence of making reckless statements or declarations currently only exists for indirect taxes under section 167(1) of the Customs and Excise Management Act 1979 (CEMA), and section 72(3) of the Value Added Tax Act 1994. 

The government considers that this inconsistency reduces the ability of prosecutors and the courts “to ensure that those who are clearly at serious fault by engaging in serious non-compliance are fairly tried and properly brought to justice when prosecuting direct tax cases.”

What are the proposals?

The consultation proposes to harmonise the criminal offences available across indirect and direct tax. A new offence for “making reckless untrue statements or declarations for direct taxes” would be introduced, aligning the approach with existing offences for indirect taxes.

The stated intention is to:

• Provide greater clarity for taxpayers through a consistent approach across all tax types.
• Give prosecutors an alternative charge “in cases where they have concerns that a jury may not be convinced of dishonesty but is more likely to be satisfied that making reckless untrue statements or declarations has taken place.”

The proposed sanctions are a custodial sentence, a fine, or both. The consultation notes that the maximum sentence would be “a fine without limit or up to 2 years’ imprisonment”, but this is a maximum and “it would be for judges to consider all the facts of any particular case and to impose an appropriate sentence."

How does the proposed criminal offence affect agents?

As ICAS members will know, the recent Finance Act 2026 has already amended Schedule 38 Finance Act 2012 to change the punishable behaviour of tax agents from ‘dishonest’ to ‘sanctionable’. This is defined as, “in the course of acting as a tax adviser, doing something with the intention of bringing about a loss of tax revenue." Penalties can be imposed on agents who engage in sanctionable conduct.

If it is introduced, the proposed new criminal offence would apply equally to any agent who recklessly makes a statement or declaration to HMRC in relation to a direct tax matter. If convicted, they could face the potential criminal sanctions outlined above.

Examples of careless and reckless errors

The government explicitly states that innocent mistakes, misunderstandings or accidental errors won’t be criminalised. Errors arising from a ‘failure to take reasonable care’ will also continue to be addressed through existing civil regimes. 

The new offence is instead intended to address “a specific category of culpable behaviour that falls between carelessness and dishonesty, ensuring that conduct is sanctioned in a way that accurately reflects the individual’s level of fault.”

If the proposals are implemented, identifying behaviour that falls into this new category (which might lead to prosecution) will be critical. The consultation includes a table of examples setting out what HMRC considers to be careless, reckless or deliberate errors, highlighting the differences between the behaviours and illustrating what the new offence is intended (or not intended) to capture.

Let us know your views

ICAS will be responding to the consultation - we would welcome members' thoughts on the proposals. Please send us your views by 20 July, including any feedback on HMRC’s examples of behaviour it considers would fall within the new offence. 

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