Reckless tax statements: a lower threshold for crime?

The UK government is proposing to introduce a new criminal offence of making a reckless untrue statement or declaration to HMRC in relation to direct tax.

This blog is based on an article written by Adam Craggs and Tom Jenkins that was published in Tax Journal on 11 September 2026. Reproduced with permission. 

Background

The new proposed new offence was outlined as part of a consultation which opened on 23 June 2026 and concluded on 16 August 2026. The consultation paper set out the aims of the measure as ensuring consistency across both the direct tax and indirect tax regimes, producing prosecutorial outcomes in direct tax cases that "justly and fairly reflect the defendant's behaviour and culpability" and, ultimately, supporting efforts to close the tax gap (the difference between the total amount of tax that should theoretically be paid to HMRC and the amount that is actually paid). 

The criminal offences that currently exist in relation to the direct tax regime, such as fraud by false representation and fraud by failing to disclose information, under sections 2 and 3, Fraud Act 2006, and the common law offence of cheating the public revenue, require the prosecution to prove that the defendant's conduct was dishonest. Under the proposals for the new offence, a prosecutor would not be required to prove dishonesty, but rather, that the defendant's behaviour was merely reckless. The proposed offence would provide a prosecutorial avenue in circumstances where the prosecution cannot establish dishonesty, but is satisfied that it can establish that untrue statements or declarations were made as a consequence of recklessness. 

For indirect tax, there are already offences of recklessly making untrue statements or declarations to HMRC. The offences exist under section 167(1), Customs and Excise Management Act 1979 (CEMA) and section 72(3), Value Added Tax Act 1994 (VATA). It is stated in the consultation paper that introducing the offence of making a reckless untrue statement or declaration in relation to direct tax would bring the two regimes into closer alignment. 

The proposal

The proposal for the new offence is that it would be committed when a statement or declaration is made to HMRC that is untrue, and the maker of the statement or declaration has acted recklessly in making it. The proposed offence would apply not just to taxpayers but also to any agent who recklessly makes a statement or declaration to HMRC in relation to a direct tax matter.

For these purposes, a "statement" is defined in the consultation paper as any statement, including oral statements, written statements contained in documents, and statements made implicitly by a person's actions, whilst a "declaration" is defined as a formal assertion of fact made in a prescribed manner in which a person declares or solemnly affirms that the information is true, or that they believe it to be true. What will constitute statements and declarations is therefore wide in scope and will not only include the contents of tax returns, claims for tax relief and correspondence with HMRC, but will also include statements made orally and potentially implicit statements through conduct.

A statement or declaration becomes "untrue" if it is not correct as a matter of fact. Where a statement is made by reference to a person's knowledge or state of mind, it would be untrue if it did not in fact reflect that person's state of mind at the time they made the statement. So, for example, if a person states in a letter to HMRC that a particular fact or figure is accurate "to the best of my knowledge and belief", a prosecutor would need to demonstrate that the person did not, as a matter of fact, have that level of belief or knowledge, when they made the statement. 

The definition of "reckless" is the same as that used for the mental element in various other English law criminal offences, as established in R v Cunningham [1957] 2 All ER 412 and reaffirmed by the House of Lords in R v G [2003] 4 All ER 765. The test is a subjective one, that is to say, the prosecution would need to demonstrate that the accused had foreseen a particular unjustified risk. For the proposed new offence, this would be based on two components: firstly, the maker of the statement must have been aware of the risk of their statement's falsity or lack of truth; and secondly, the maker of the statement must have unreasonably proceeded to make the statement notwithstanding this risk of which they were aware. Carelessness, or the fact that the statement maker ought to have known something, will not suffice. 

Recklessness will not include innocent mistakes, misunderstandings or accidental errors. Equally, it will not replace or dilute the existing dishonesty-based offences. Rather, it is proposed that it will fill the perceived gap where dishonesty cannot be proved, but culpable taking of known risks can be. 

Examples of recklessness

To assist in an understanding of what might be caught by the new offence, the consultation sets out some examples of behaviours that HMRC considers would fall within the scope of the proposed new offence.

For example, the consultation paper indicates that HMRC would consider a taxpayer who claims a significant relief, neglects to read relevant guidance properly, does not seek advice or clarification but submits the claim nonetheless, to be acting recklessly for the purposes of the proposed new offence. This would be on the basis that they recognised a risk that the claim may be incorrect but proceeded without taking reasonable steps to verify the position.

Further, HMRC indicates that it would consider a taxpayer who completes their own tax return, knowing that they have multiple bank accounts which may contain some taxable income, but who fails to check accessible statements before estimating a materially inaccurate taxable income figure, to have acted recklessly. In such circumstances, the taxpayer is considered by HMRC to have acted in a reckless manner as they identified a clear risk that income may be missing but chose not to check the position from readily available information. 

Conversely, HMRC has indicated that it would not consider a taxpayer who made an error in a tax return arising from 'a genuine misunderstanding' to have been reckless. Of course, what constitutes a genuine misunderstanding for these purposes is likely to be subject to much debate should the proposed offence be enacted. 

Penalties

The proposed penalty for the new offence is a custodial sentence and/or fine. The consultation makes it clear that the decision as to exactly what sentence would be appropriate would be a decision for the court, as it is for indirect tax offences. 

The consultation explains that the government is considering sanction levels that are proportionate to the seriousness of the behaviour, consistent with comparable offences and are effective as a deterrent. The proposal is to align the maximum custodial term with section 167(1), CEMA, reflecting a step below dishonesty, permitting a maximum of up to 2 years imprisonment, or an unlimited fine (on indictment).

Potential impact 

If the proposed offence is enacted (which is likely), it would significantly expand HMRC's criminal enforcement powers in relation to direct taxes. Such a development would form part of a wider move to expand the powers available to HMRC (and other enforcement agencies) to investigate and prosecute the conduct of taxpayers, both individual and corporate, and their professional advisers. Developments in recent years, which have enhanced prosecutorial powers, include:

i. the introduction of the offence of failure to prevent the facilitation of tax evasion, in sections 45 and 46, Criminal Finances Act 2017, which created new routes for HMRC to establish criminal liability for companies;

ii. the introduction, in section 250 and Schedule 22, Finance Act 2026, of a new penalty to tackle tax advisers engaging in "sanctionable conduct", in an amendment made to the previous provision which targeted "dishonest conduct"; and

iii. the recent widening of the laws relating to establishing corporate criminal liability, under which the acts of "senior managers" can be attributed to a corporate entity, initially in relation to financial crime offences under section 196, Economic Crime and Corporate Transparency Act 2023 and subsequently in relation to all criminal offences, under section 250, Crime and Policing Act 2026. 

Notwithstanding these increasing powers, and perhaps surprisingly, HMRC appears to be reluctant to use its additional powers. For example, despite being in force for almost nine years, HMRC only brought its first prosecution under the failure to prevent the facilitation of tax evasion offence, in 2025 (against a Stockport based accountancy practice). Similarly, as discussed above, one of the principal arguments put forward in support of the introduction of the new proposed offence relating to direct taxes, is to bring the direct tax regime in line with the indirect tax regime. However, the equivalent recklessness-based offences for indirect taxes have been in force for multiple decades and yet there have been few criminal prosecutions of the 'reckless' offences contained in CEMA or VATA (a request for confirmation of the number of prosecutions brought under section 72(3), VATA, in each of the last six years, was recently submitted to HMRC pursuant to section 1, Freedom of Information Act 2000 (FOIA), by the Contentious Tax Group but, disappointingly, HMRC refused to supply this information relying on section 35(1)(a), FOIA (which permits the non-disclosure of information which "relates to the formulation or development of government policy"). 

Against this backdrop, the proposed new offence has generated considerable debate as to whether it is appropriate, or necessary, to introduce a new criminal offence based on the lower standard of recklessness. Key industry bodies have issued public statements opposing the proposed offence. For example, the Chartered Institute of Taxation has said that it does not support the introduction of the proposed offence. In a statement issued on 14 August 2026, it stated that the case for extending criminal liability had not been established and that there is uncertainty regarding safeguards. Similarly, the Association of Taxation Technicians, in its published response to the proposed new offence, criticised the proposals, stating that they risk creating unnecessary overlap with the existing civil penalties regime and lowering the threshold for criminal liability by introducing criminal sanctions in circumstances where dishonesty is neither alleged nor capable of being established. The Institute for Chartered Accountants in England & Wales (ICAEW) has also published a response to the consultation, in which it opposes the proposed measure. The ICAEW argues, amongst other things, that HMRC should make fuller use of its existing enforcement powers and be adequately resourced before a new offence is created. It expresses concern that the meaning of recklessness in this context is unclear, which may reduce the proposal's effectiveness and create uncertainty as to when criminal liability would arise. The ICAEW has also called for clearer guidance on the practical application of the proposed offence.

One particular risk the introduction of the new offence may create in due course relates to the willingness of taxpayers to report to HMRC identified instances of historic tax errors. The risk that HMRC may allege that the historic error arose through recklessness and therefore created criminal liability, may cause taxpayers to think twice before making such a disclosure. 

Conclusion

Following the closure of the consultation on 16 August 2026, HMRC is expected to publish a summary of responses alongside draft legislation and there are likely to be key developments to follow as the proposed legislation progresses through Parliament. In particular, and in light of the criticism levelled at the proposals by various representative professional bodies, there is likely to be considerable focus on the distinctions in place between recklessness and innocent mistakes or carelessness, and the implementation of sufficient safeguards to ensure that such distinctions are clear and understandable to taxpayers and their professional advisors. While HMRC has already provided some hypothetical illustrations, it is likely that it will be called upon to provide more specific and detailed guidance on the important distinction between carelessness and recklessness, and the circumstances in which it is likely to seek a prosecution. 

Should the proposed offence be enacted, taxpayers and their advisors will need to take even greater care in their interactions with HMRC and maintain clear contemporaneous records of the basis for decisions taken in support of any tax positions adopted.