A new criminal offence for reckless untrue statements in direct tax

The Government has published a consultation on a proposal to introduce a new criminal offence for making reckless untrue statements or declarations in relation to direct taxes. The proposed offence seeks to address a gap in the current criminal framework for direct taxes, which currently requires proof of dishonesty. The proposed offence seeks to mirror the equivalent recklessness offence already in place in indirect tax regimes.

The measure forms part of HMRC’s wider drive to close the “tax gap” and to strengthen HMRC’s compliance and enforcement powers.

What the proposed offence involves

The offence would apply where a person makes an untrue statement or declaration on a direct tax matter and does so recklessly. The offence would involve the following key elements:

The offence would apply equally to taxpayers and tax advisors in their dealings with HMRC.

The suggested maximum penalty for conviction is significant: up to two years’ imprisonment and/or an unlimited fine.

Examples of conduct within scope

The Consultation includes examples of behaviour that HMRC considers reckless rather than careless.

These include:

1. claiming a substantial tax relief despite recognising uncertainty as to eligibility and failing to take reasonable steps to verify the position; and

2. omitting income from a tax return where the taxpayer suspects income may have been received into a secondary bank account but chooses not to review readily available records before filing.

By contrast, a taxpayer who makes an error because they genuinely misunderstand the tax treatment of a receipt, without recognising any risk that their return is inaccurate, would generally be regarded as careless rather than reckless.

What it means for taxpayers and advisers

If implemented, the offence would represent a significant expansion of HMRC’s criminal enforcement powers in the direct tax sphere. It would create a new tier of liability sitting between civil penalties that already apply to careless conduct and the criminal sanctions reserved for dishonest evasion.

HMRC recognise that the mere existence of the offence is likely to cause taxpayers and advisers to exercise a greater degree of caution when reporting their tax affairs. In particular, greater emphasis may be placed on documenting the steps taken to verify tax positions and on obtaining professional advice where risks have been identified. HMRC acknowledge that this will increase the compliance burden on the taxpayer. There may also be a deterrent effect on voluntary disclosures: where taxpayers discover errors in previous returns, they may be less willing to self-report due to concerns that they may be prosecuted for recklessness.

It is also worth noting how broadly “statement” is defined. It is not limited to tax returns: it includes anything said to HMRC, whether in writing, in conversation, or even implied by conduct. A careless remark during an enquiry or an inaccuracy in a telephone call or in informal correspondence could, in principle, be sufficient. This underlines the importance of taking care in every dealing with HMRC.

The proposed measure raises some difficult questions about where carelessness ends and recklessness begins, particularly in complex or novel situations. This is particularly concerning given the increasingly aggressive stance HMRC is taking to characterising taxpayer behaviour for the purposes of civil penalties. There will be understandable anxiety about the prospect of HMRC seeking a criminal conviction in these circumstances.

In practice, however, HMRC do not tend to deploy their existing criminal powers very often. Whether a new offence would change that approach, or would simply serve as another tool to influence taxpayer behaviour, remains to be seen.

Next steps

The consultation is open until 16 August 2026, following which HMRC will publish a summary of responses along with any draft legislation.

In the meantime, taxpayers and advisers would be well-advised to keep clear records of the reasoning behind the tax positions they are taking, to seek advice where there is uncertainty, and to make sure that any risks that have been identified are properly considered before a return or claim is filed.