Introducing a criminal offence for making reckless untrue statements or declarations in direct tax

Question 1

Summary

Accepted Answer

Subject of this consultation

This consultation seeks views on proposals to introduce a criminal offence for making reckless untrue statements or declarations in relation to direct tax matters, aligning the legal framework with existing offences in indirect tax.

Scope of this consultation

HMRC is exploring the introduction of a new offence for direct taxes to mirror the offence of recklessly making untrue statements or declarations currently available under section 167(1) of the Customs and Excise Management Act 1979 (CEMA), and in section 72(3) of the Value Added Tax Act 1994 (VATA). The aim is to ensure consistency across tax regimes and produce prosecutorial outcomes in direct tax cases that justly and fairly reflect the defendant’s behaviour and culpability, ultimately supporting efforts to close the tax gap.

Who should read this

Individuals, trustees, tax practitioners; those involved in corporate restructures including business owners and advisors; non-Governmental organisations with an interest in business or tax; including:

tax professionals and advisers
legal experts in tax and criminal law
representative bodies and advocacy groups
businesses and individuals affected by HMRC compliance and enforcement
academics and policy analysts

Duration

The consultation will run for 8 weeks from 23 June 2026 to 16 August 2026.

Lead official

The lead officials are Ric Acda and Siddique Amjad of HM Revenue and Customs.

How to respond or enquire about this consultation

Written should be sent by email to asres.consult@hmrc.gov.uk or by post to:

Assets and Residence Team
HM Revenue and Customs
Area 3C/03
100 Parliament Street
London
SW1A 2BQ

Additional ways to be involved

HMRC welcomes meetings with interested parties to discuss these proposals.

After the consultation

HMRC will publish a summary of responses, together with any draft legislation as soon as possible after the end of the consultation period.

Getting to this stage

At Autumn Budget 2025 the government announced that it would publish a consultation in early 2026 on the introduction of a new criminal offence of ‘recklessness’ in direct tax.

Question 2

1. Executive summary

Accepted Answer

The government is consulting on a proposal to reform the criminal offences for direct tax. Whilst it is an offence to fraudulently evade both direct tax and indirect tax, an offence for making reckless statements or declarations only exists for indirect taxes. This creates an inconsistency in policy which the government considers needs to be addressed.

The inconsistency between indirect and direct offences has reduced the court’s ability 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.

The government is seeking views through this consultation on proposals to harmonise and strengthen the criminal offences available to prosecutors and juries in respect of direct tax. The key principles underpinning these reforms are to ensure that they are fit for the intended policy purposes.

A summary of questions within this consultation document is at section 7.

Question 3

2. Introduction

Accepted Answer

The government is committed to closing the tax gap by tackling non-compliance through targeted enforcement, stronger penalties, and improved detection of deliberate evasion. At the same time, it promotes voluntary compliance by making the tax system simpler, clearer, and easier to use, helping taxpayers get things right first time. These efforts aim to protect revenue, maintain fairness, and build trust in the tax system.

The tax gap in 2023 to 2024 was estimated at approximately 5.3% (£46.8 billion) and the government announced a groundbreaking £7.5 billion intervention package that will ‘go further and faster’ to ensure everyone pays their fair share.

To achieve these goals, the government prioritises a balanced approach that combines prevention, support, and enforcement. It provides clear guidance and digital tools to help taxpayers meet their obligations and seeks intelligence to identify and address high-risk behaviours. The government aims to create a system where compliance is straightforward and non-compliance is effectively deterred.

This consultation seeks views on a proposed change to the law to address an inconsistency between direct and indirect tax offences to ensure fairer outcomes in cases that are prosecuted. This consultation proposes the introduction of a new offence for making reckless untrue statements or declarations for direct taxes, consistent with that available to prosecutors and juries in respect of indirect taxes. The aim is to harmonise the criminal offences available across direct and indirect tax and create an enforcement tool which could be used in direct tax cases where dishonesty cannot be established but where a sanction is appropriate.

The proposal would also provide greater clarity for taxpayers, who could expect a consistent approach to enforcement across all tax types. For prosecutors, it would offer 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. Where a jury is unsure that a defendant has acted dishonestly it is right and proper that they find the defendant not guilty of fraudulent evasion. This should not change. However, where a jury is sure that a defendant recklessly made a false statement, the government considers that the jury should be able to return a verdict that reflects this culpable and harmful behaviour, rather than the defendant remaining unconvicted. The new offence being proposed would enable juries to return verdicts that accurately and fairly reflect a defendant’s behaviour. Sanctions being proposed for the offence are a custodial sentence and/or a fine.

Stakeholder engagement is an important part of this process. The government is committed to consulting widely with tax professionals, representative bodies, advocacy groups, and other interested parties to ensure that the new offence is proportionate, effective, and supported by appropriate safeguards.

This consultation is being published in line with Tax Policy Making Principles. These principles underpin the government’s approach to delivering tax policy changes and how it engages stakeholders during the development of tax policy.

Question 4

3. Policy background

Accepted Answer

Under current law, indirect tax regimes such as those governed by the CEMA and the VATA include specific criminal offences for making reckless untrue statements or declarations.

These provisions mean that, for indirect taxes, it is possible to prosecute individuals who make untrue statements or submit incorrect documents either knowingly or recklessly, without the need to prove dishonesty. The penalties for such offences can be severe, including substantial fines and imprisonment.

In contrast, the direct tax regime, principally governed by the Taxes Management Act 1970 (TMA), does not contain an equivalent offence for making reckless untrue statements or declarations ^{[footnote 1]}.

People who are clearly responsible for making reckless untrue statements or declarations in relation to direct taxes engage in behaviour that can cause significant harm to the Exchequer. Where someone is at fault for such harmful conduct, the government proposes that this should be treated as a criminal offence. For direct tax matters, currently, the prosecution must prove that an individual acted dishonestly to a criminal standard to secure a conviction. Where this cannot be established it is right and proper that the defendant be acquitted of fraudulent evasion. However, where a jury is sure that a reckless false statement was made, the government considers it appropriate that the behaviour should be criminalised.

The government recognises that any extension of criminal liability must be balanced with appropriate safeguards. Innocent mistakes, misunderstandings, or errors arising from a failure to take reasonable care would continue to be addressed through existing civil regimes and would not fall within the scope of the proposed offence. The measure may, however, encourage individuals and businesses to exercise greater care where they are aware of uncertainty or risk in their tax affairs, supporting improved accuracy and compliance. It does not alter the treatment of good-faith advice or genuine or careless errors.

Prosecutors across the United Kingdom will continue to play a central role in reviewing evidence and making charging decisions, ensuring that prosecutions are proportionate and justified. Ultimately, it will remain for the courts and juries to determine guilt based on the evidence presented.

Consultees may be aware that relevant amendments have been enacted in the Finance Act 2026 (formerly the Finance (No.2) Bill 2025 to 2026) which apply to agents specifically. These amendments, in section 250 and Schedule 22, amend Schedule 38 to the Finance Act 2012 changing the punishable behaviour of tax agents from ‘dishonest’ to ‘sanctionable’, which is defined in paragraph 5(2)(a) Schedule 22 as ‘in the course of acting as a tax adviser, doing something with the intention of bringing about a loss of tax revenue’. The new offence proposed in this consultation will apply equally to any agent who recklessly makes a statement or declaration to HMRC in relation to a direct tax matter.

Question 5

4. The proposed measure

Accepted Answer

The government proposes a new criminal offence in relation to direct taxes.

The proposed change would introduce a new offence for making reckless untrue statements or declarations in relation to direct taxes, mirroring the provisions already found in the CEMA and the VATA. The intention is to provide prosecutors with a broader range of options, allowing for lesser alternative charges in cases where dishonesty cannot be proven but reckless conduct is evident. Section 5 of this consultation sets out the government’s proposed sanctions for the new offence.

Introducing a criminal offence for making reckless untrue statements or declarations in direct tax would create consistency across direct and indirect tax regimes, give prosecutors and juries an alternative charge where dishonesty cannot be proved, and deter non-compliance. It would support fairer outcomes by allowing conviction for a lesser reckless statement offence where appropriate, while dishonesty-based offences remain reserved for the most serious cases. It would also help provide greater protection for public funds and reinforce public confidence in HMRC’s ability to enforce the law fairly.

Question 1: Do you agree that a criminal offence for making reckless untrue statements or declarations should be introduced for all direct tax matters? And if not applied to all direct tax matters, why not? Please give reasons for your response.

Question 2: What impacts do you foresee for taxpayers, advisers, and other stakeholders if an offence for making reckless untrue statements or declarations is introduced for direct tax?

Question 3: Are there particular types of behaviour or circumstances that you believe should or should not fall within the scope of the new offence? Please give reasons for your response.

The offence that we propose would be committed when a ‘statement’ or ‘declaration’ is made that is ‘untrue’, and the maker of the statement has acted ‘recklessly’.

By ‘statement’, we mean any statement, including oral statements, written statements made in documents, and statements made implicitly by a person’s actions.

By ‘declaration’, we mean 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.

by ‘untrue’ we simply mean not correct. This is a term used in CEMA and is concerned with whether a statement is accurate, not with what the person making it knew or intended. A statement can be untrue because of an innocent mistake. In those circumstances it would not be reckless, and the offence would not be made out. However, where the statement is about the person’s state of mind, for example ‘to the best of my knowledge and belief’, the statement is true so long as it genuinely reflects what they believed at the time, even if that belief later turns out to be wrong.

We use ‘reckless’ in the way that term is used across a range of existing criminal offences. We mean that the maker of the statement was aware of the risk of their statement’s falsity or lack of truth, and they unreasonably proceeded to make the statement notwithstanding this risk of which they were aware. It would not suffice that the statement maker ought to have known or was careless. To commit the offence the statement would need to be false or untrue and the statement maker aware of this risk in circumstances where it was not reasonable to take this risk.

Question 4: We are interested to hear whether consultees find ‘statement’ or ‘declaration’ easier to understand. Please explain your answer and provide any alternatives.

Table 1 sets out the existing civil and criminal sanctions available to address direct and indirect tax offences which involve the making of reckless untrue statements or declarations made in direct tax and indirect tax cases.

Any sentence available to the courts properly reflects the seriousness of reckless conduct, without capturing behaviour that is more appropriately addressed through civil penalties or existing criminal offences. References to unlimited fines reflect the approach taken in comparable criminal offences and the principle that courts should retain discretion to impose penalties that are proportionate to the circumstances of the offence and the offender. This does not imply that unlimited fines would be appropriate or expected in all cases. Where a person is convicted of the proposed offence, it would be for judges to impose a sentence that properly reflects the seriousness of the offence, including the harm caused and the culpability of the offender. Whilst the maximum sentence we propose is a fine without limit or up to 2 years imprisonment, 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.

Table 1: Existing sanctions available to address offences involving reckless untrue statements or declarations made in direct tax and indirect tax cases

Reckless untrue statements or declarations	Civil Penalty under Finance Act 2007 (see degrees of culpability in paragraph 4 of schedule 24)	Criminal offence	Maximum sentence
…incorrect information without reasonable excuse	None	None for direct tax (save for strict liability ‘offshore’ offences in sections 106B onwards of the TMA 1970); None in s72 VATA; Section 167(3) CEMA ‘…makes… any…document… or makes any statement… which is untrue…’.	s167(3) CEMA: Level 4 fine — maximum £2500
…being ‘careless’ (but not being aware of the error): Defined in paragraph 3(1)(a) of Sch 24, Finance Act 2007 (FA) as the inaccuracy being due to failing to take ‘reasonable care’.	Yes	None for direct tax (save for strict liability ‘offshore’ offences in sections 106B onwards of the TMA 1970); None in s72 VATA; Section 167(3) CEMA ‘…makes… any…document … or makes any statement… which is untrue….	s167(3) CEMA: Level 4 fine — maximum £2500
…being ‘reckless’: Defined in paragraph 41 R v G [2003] UKHL 50 as: A person acts recklessly when they are ‘aware of a risk that [] exists or will exist’, and it is ‘in the circumstances known to him, unreasonable to take the risk.’	For ‘careless error’, as above but no distinct civil penalty	None for direct tax (save for strict liability ‘offshore’ offences in sections 106B onwards of the TMA 1970); Section 72(3) VATA: ‘recklessly makes a statement which is false in a material particular’; Section 167(1) CEMA ‘knowingly or recklessly makes any declaration…or makes any statement…which is untrue in any material particular…’.	S72(3) VATA: 14 years custodial sentence or unlimited fine or both ; s167(1) CEMA: 2 years custodial sentence or unlimited fine, or both.
…deliberately but not concealed: Defined in Para. 3(1)(b) of Sch 24, FA as ‘the inaccuracy is deliberate on P’s part but P does not make arrangements to conceal it’.	For ‘deliberate but not concealed’ error	Likely to be ‘dishonest’ (defined in paragraph 74: Ivey v Genting Casinos (2017) UKSC 67 as based on P’s ‘actual state’ of knowledge or belief as to the facts, was P’s conduct dishonest by ‘the (objective) standards of ordinary decent people’ and therefore tax evasion, see: section 106A TMA, section 72(1) VATA, section 170(1) and (2) CEMA, cheating the public revenue (not applicable in Scotland), or fraud, contrary to the Fraud Act 2006 (not applicable to Scotland).	Income Tax Evasion — s106A TMA): 14 years custodial sentence or unlimited fine, or both; VAT Evasion — s72(1) VATA: 14 years custodial sentence or unlimited fine or both; Customs duty evasion — s170(1) and (2) CEMA: 14 years custodial sentence or unlimited fine or both; Cheating the public revenue: Life imprisonment or unlimited fine or both; Fraud, contrary to the Fraud Act: 10 years custodial sentence or unlimited fine, or both.
…deliberate and concealed: Defined in Para. 3(1)(c) of Sch 24, FA as ‘the inaccuracy is deliberate on P’s part and P makes arrangements to conceal it (for example, by submitting false evidence in support of an inaccurate figure)’.	For deliberate and concealed error	Very likely to be offences immediately above.	As above

Table 2 sets out examples of what HMRC considers to be careless, reckless or deliberate errors and the difference in the behaviours and what they are and are not intended to capture. In Table 2, the first example is out of scope of the new offence because the error is a result of a genuine misunderstanding and not reckless behaviour. The second and third examples in the Table would be in scope of the proposed new offence as they involve reckless behaviour (that is, being aware of a risk and unreasonably deciding to take it anyway). These are the types of cases that may not be successfully prosecuted under the current offences of fraud or evasion, because it may not be possible to prove dishonesty. The fourth offence in the Table involves dishonest behaviour, so would not be in scope of the new offence, and would likely be pursued using existing powers.

It is important to note that the proposed measure does not criminalise innocent mistakes, misunderstandings, or accidental errors. The new criminal offence of ‘recklessness’ will act as an additional tool and will be consistent with established criminal law definitions of recklessness, distinguishing this from careless and deliberate behaviour already addressed through civil penalties. The offence is designed 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.

Where a person knowingly makes an untrue statement or intends to mislead HMRC (deliberate or dishonest conduct), that behaviour would continue to be addressed through existing dishonesty-based offences. The proposed offence is not intended to replace or dilute those offences; it is designed to fill a gap where dishonesty cannot be proved but culpable taking of known risks can be proved beyond reasonable doubt.

Table 2: Examples of careless and reckless errors

Category	Scenario	Key facts	HMRC’s view
Careless error (not reckless)	Failure to include small amount of bank interest	Employee receives a P60 showing PAYE correctly operated on employment income; Bank provides confirmation stating that ‘tax on savings interest has already been dealt with’ (reflecting the post 2016 position where tax is no longer deducted at source); Taxpayer includes all known employments and other income; Taxpayer genuinely but mistakenly believes the interest does not need to be reported; Taxpayer has no reason to think the return is inaccurate once completed (reflecting the post-2016 position where tax is no longer deducted at source).	The error arises from a genuine misunderstanding, not from identifying and ignoring a risk. The taxpayer believes they are complying correctly and does not suspect the return may be wrong. The mistake therefore does not rise to the level of recklessness. This would be viewed as outside the scope of recklessness and would not be in scope of the proposed new offence.
Reckless (but not deliberate	Claiming a large relief without proper checks	Taxpayer claims a significant relief (such as business expenses or losses); Does not read the relevant guidance properly; Does not seek advice or clarification; Submits the claim anyway because ‘it’s probably fine’.	The taxpayer recognises a risk that the claim may be incorrect but proceeds without taking reasonable steps to check. This shows disregard for the accuracy of the return, which is reckless, but there is no intention to deceive. This would therefore be viewed as inside the scope of recklessness. As it was not deliberate and there was no intention to deceive, it would be behaviour falling within the proposed new offence.
Reckless (but not deliberate)	Omitting income from a secondary bank account	Self-employed taxpayer completes their own return; Knows they have multiple bank accounts, including one used occasionally for side work or consultancy; Suspects some taxable income may have been paid into the secondary account; Does not check the statements, despite it being easy to do so; Estimates income using only the main account; Does not intend to understate income or mislead HMRC; Return later proves materially inaccurate.	The taxpayer identifies a clear risk that income may be missing but chooses not to check readily available information. This disregard of an identified risk makes the behaviour reckless, even though it is not deliberate. This would therefore be viewed as inside the scope of recklessness, as it was not deliberate it would be behaviour falling within the proposed new offence.
Deliberate behaviour	Knowingly understating income	A self-employed taxpayer prepares their own return; Their business records show total sales of £120,000. They know the correct figure, but enter £90,000 on the tax return instead, in order to reduce the tax payable; They do not make a mistake or take a risk — they knowingly use an incorrect figure.	This is not carelessness or recklessness. It is a deliberate inaccuracy because the return is submitted with information the taxpayer knows is false. It is highly to be found to be dishonest. This would therefore be viewed as outside the scope of recklessness as it involves dishonest and deliberate behaviour, it would fall within existing dishonesty-based offences.

Deliberate errors and reckless errors are different. An error is reckless where the statement is made whilst aware of a risk that it may be wrong. A deliberate error goes beyond recklessness, it is made knowing it is wrong. A deliberate error will often be dishonest.

Question 5: How might the introduction of a reckless untrue statements or declarations offence affect compliance behaviour among individuals and businesses?

Question 6: What challenges or risks do you foresee in implementing this change, and how might they be mitigated?

Question 7: Do you have any other comments or suggestions regarding the proposed change?

Question 6

5. Proposed sanctions for the new offence of making reckless untrue statements or declarations for direct tax

Accepted Answer

The introduction of a reckless untrue statements or declarations offence may encourage individuals and businesses to exercise greater caution and diligence when preparing tax returns. Enhanced awareness of potential consequences could lead to improved compliance behaviour and a reduction in careless errors.

However, some taxpayers may experience uncertainty or anxiety regarding the threshold for recklessness versus genuine mistake. This could prompt more frequent consultation of guidance or professional advice, potentially increasing administrative burdens.

Challenges in implementing the new offence include ensuring clear communication about what constitutes recklessness, distinguishing it from inadvertent mistakes, and providing accessible guidance to avoid confusion. Mitigation strategies may involve targeted education campaigns and robust support channels.

Other considerations include monitoring the impact on self-assessment processes, reviewing the effectiveness of deterrence, and ensuring sanctions remain proportionate and fair across different taxpayer groups.

The government proposes that the new offence of making a reckless untrue statement or declaration in relation to direct tax should carry a custodial sentence and/or a fine. The decision on an appropriate sentence would be a decision for the courts rather than HMRC, as it is for similar offences for indirect tax now. In addition, the proposed new offence would be an ‘either way’ offence, so would be heard either by a Magistrates’ Court or the Crown Court (trial by jury).

We are considering sanction levels that we believe are proportionate to the seriousness of the behaviour, consistent with comparable offences, and are effective as a deterrent. Dishonesty-based offences remain the most serious and would continue to attract higher maximum penalties.

We are therefore consulting to gather views that our suggested sanction is proportionate to the level of offence committed. HMRC’s suggested option would broadly align the maximum custodial term with section 167(1) of the CEMA, reflecting the step below dishonesty. Please see below.

Proposed sentence option for new offence

Alignment with CEMA level

Maximum custodial sentence: up to 2 years (on indictment).
Fine: unlimited (on indictment).
Rationale: Would be consistent with an established reckless statement offence in indirect tax; signals a step below dishonesty while maintaining a deterrent effect.

Question 8: Do you believe this option best achieves proportionality and deterrence for a direct tax recklessness offence, and why?

Question 9: Do you agree that fines should be unlimited on indictment? If not, what alternative would you propose and why?

Question 7

6. Assessment of impacts

Accepted Answer

Summary of impacts

This measure is not a tax-raising measure but may generate revenue that is currently being recklessly avoided. At this stage, the summary of impacts remains under development, and further analysis will be undertaken as the policy choices are finalised.

Year	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
Exchequer impact (£m)	not yet quantified	not yet quantified	not yet quantified	not yet quantified	not yet quantified	not yet quantified

Exchequer Impact Assessment

Impacts	Comment
Economic impact	This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families	Any future impacts will be fully examined as part of ongoing policy development.
Equalities impacts	For the ongoing development of the policy, it is not anticipated that there will be impacts on groups sharing protected characteristics
A full equality impact assessment is not recommended.
Impact on businesses and Civil Society Organisations	The ongoing development of the policy is expected to have no impact on businesses and civil society organisations at present. Any future impacts will be fully examined and detailed.
Impact on HMRC or other public sector delivery organisations	Implementation will require training and operational adjustments within HMRC. No delivery costs are anticipated at this stage.
Other impacts	The measure is expected to provide legal clarity and enhance public confidence in HMRC’s enforcement regime.

Question 8

7. Summary of consultation questions

Accepted Answer