In June 2026, the government published a consultation document seeking views on the introduction of a new criminal offence for recklessly making untrue statements or declarations in relation to direct tax matters.

The government believes that the new offence is needed to: 

• Provide consistency between indirect and direct offences. The new offence for direct taxes would mirror that currently in place for indirect taxes (s167(1), Customs and Excise Management Act 1979; s72(3), Value Added Tax Act 1994); and 
• Encourage compliant behaviour. The government says that the new offence would “create an enforcement tool which could be used in direct tax cases where dishonesty cannot be established but where a sanction is appropriate.”    

Further details are provided in an earlier article.   

ICAEW's view 

ICAEW has now responded to the consultation (ICAEW Representation 54/26), making it clear that it does not support the introduction of the new offence.  

ICAEW understands the argument for bringing the direct taxes regime in line with that for indirect taxes. However, the indirect taxes offence, which originated in, and reflects the specific profile of customs duties, has not been widely used and may not be fit for purpose.  

Further, ICAEW believes that the introduction of an offence of recklessness has the potential to: 

• Add complexity. The measure risks causing uncertainty in the way it interacts with  existing penalty regimes which make a clear distinction between careless, deliberate and fraudulent behaviour - concepts which are already well understood within the tax profession and by sophisticated taxpayers.
• Create uncertainty. There is considerable uncertainty around the circumstances in which HMRC may believe that a taxpayer or agent has engaged in reckless behaviour, potentially reducing the deterrent effect of the offence, especially as the examples given in the consultation document suggest that the individual concerned has been merely careless. If the measure were to be introduced, much clearer guidance would be needed so that taxpayers and advisers gain greater clarity on when it would and would not apply.
• Discourage engagement with HMRC. The potential severity of the consequences, combined with the uncertainties of scope and potential inconsistencies of application may mean that advisors and/or taxpayers conclude that they should limit contact with HMRC, including the making of disclosures under code of practice nine or the contractual disclosure facility, potentially widening the tax gap.  

ICAEW’s recommendations 

ICAEW recommends that: 

• the government abandons its plans to introduce a new offence of recklessness for direct taxes and instead considers removing the indirect taxes offence from the statute book. This would deliver greater consistency between direct and indirect taxes while avoiding the difficulties noted above; and
• HMRC makes greater or more effective use of its existing powers to bring appropriate prosecutions and civil actions. This could include consolidating HMRC's existing powers, ideally within the same Act, so that taxpayers and agents can more easily understand all the powers HMRC has at its disposal, which should help to improve compliance.