12
Examination of witnesses
Antonia Stokes and Adam Craggs.
Q7 The Chair: Good morning. I am Dick Newby, chairing this session of the sub-committee looking at aspects of tax administration in the Budget. We are particularly looking at the requirement to correct, which HMRC is seeking to introduce in this year’s Finance Bill. We have two witnesses in this session: Antonia Stokes, the senior manager at Low Incomes Tax Reform Group, who is with us in person, and Adam Craggs, who will shortly be joining us virtually. He is partner and head of tax investigations and financial crime at Reynolds Porter Chamberlain LLP. We are going to start in his absence.
I will ask Antonia the question that, when Adam appears, I will also ask him: how important do you think this new requirement to correct will be in terms of how errors are dealt with under self-assessment?
Antonia Stokes: Thank you for having me. This is a significant proposal that is being brought in. As you all know, it includes two key measures: first, the requirement for taxpayers to correct, and secondly, the introduction of new customer correction notices. The Low Incomes Tax Reform Group is part of the CIOT: we would echo its support for a general need to fill the gap in civil law in terms of correcting errors in tax returns and other such documents. However, we are concerned that this requirement is particularly heavy-handed. We represent the interests of taxpayers who cannot afford professional advice: such advice is a very important part of this. Since this measure is designed to tackle high-volume but low-value errors across the tax system, it has to be a process that works for people who cannot afford to pay for tax advice. There are concerns that it is difficult for people to navigate if they do not have advice.
Moving the penalties potentially at stake from being careless to deliberate is particularly concerning, especially if the original error was made despite taking reasonable care. If the person does not understand the new obligations in terms of having to correct, it seems very harsh that they could potentially face a deliberate penalty for the original error. From what we can see, there is no method of appeal by claiming that there was a reason they were not able to meet that obligation to correct, and that is particularly concerning. In terms of the way this has been constructed, the taxpayer has to do that correction within HMRC’s assessment time limits; they have to understand whether HMRC would in theory be in time to do an assessment on this error, whether they are still within that time frame, what that means and what their next steps are. We are very concerned that for many taxpayers that is going to be way beyond their capabilities without professional advice.
The Chair: Can I ask you a question that I have been asking others? Given that you are talking about people who are not going to have tax advice—the amount of tax involved will be relatively small—do you think there should be a de minimis limit below which this process should not operate?
Antonia Stokes: Yes: in principle, we would like to see a de minimis built in. The only reservation I have is that this seems to be driven by low-value, high-volume errors; HMRC might say, “That defeats the point of why we’re doing this”. Personally, and as part of the CIOT, we would like to see that, but whether HMRC would go for it is another question.
Q8 Lord Carrington of Fulham: We are presumably talking about people who are largely self-employed—genuinely self-employed and not caught under IR35—and who would have an income that would not justify employing a tax accountant to do their affairs. Say you are a successful plumber, earning £70,000 a year; if you make an error in your tax return, it is likely to be £1,000 or £2,000 at the most, or something of that order. If there is no de minimis—in any case you would not know what the de minimis should be until you looked at the error—then HMRC will go after you, presumably not because it knows there has been an error, but because it suspects there might be one. Chasing small amounts of money that are going to be pretty hard to recover in any case seems an extremely heavy-handed way of operating. Is there something completely wrong about the way HMRC is approaching people who are self-employed?
Antonia Stokes: I would absolutely agree that it seems heavy-handed. It is also hard to see how HMRC would know that this person made the error that they failed to disclose. I am talking about issues here outside customer correction notices, where the taxpayer learns they have made an error. Do customers know about these rules and know what action they have to take? It feels as if HMRC is trying to force people into action with the threat of higher penalties, in the hope that they will comply so that HMRC does not have to get involved. It remains to be seen how that will play out in practice, and whether it will increase voluntary compliance. Much of the success of this measure will come from easy disclosure facilities. The current digital disclosure facilities are hard—nigh on impossible—for people to navigate without an adviser. HMRC needs to improve its disclosure facilities and guidance in relation to all the forms where these corrections can be possible. At the moment, it is not straightforward for people to deal with historic issues.
Lord Carrington of Fulham: In terms of HMRC’s internal costs, do we have any idea of the cost of implementing this?
Antonia Stokes: No. In the policy paper that accompanied the draft legislation the summary of impact in terms of costings was entirely silent on this, which was disappointing. There is no indication of the potential yield, how much it will cost HMRC to implement, and what it thinks will be the ultimate upside result.
Lord Carrington of Fulham: Presumably, it would be very hard to automate this. There would need to be an officer inside HMRC who would look at the individual case and take a judgment as to whether the response—assuming there is a response—is acceptable or not. There are going to be several hours, if not days, of work on one individual. I do not know what HMRC’s overhead cost charge is, or its employees’ hourly rate, but my guess is that it will lose money.
Antonia Stokes: I obviously cannot say whether it would automate. We are in a new world where automation is more possible than it was before; HMRC might plan to keep this largely a hands-off method. We would hope that the process would still include human intervention to ensure that taxpayer safeguards are in place. We do not want HMRC firing out customer correction notices without having tried to verify that there is a reasonable expectation that tax has been lost in some way.
Lord Carrington of Fulham: Is the problem a cultural problem inside HMRC? Is the HMRC organisation moving away from looking after its client base—taxpayers—to being antagonistic towards them?
Antonia Stokes: Resourcing seems to have moved away from the personal approach of HMRC of old. We have lost the tax offices; everything is now being moved to self-service, digital first and so on. Noise about the tax gap has become ever louder in recent years; HMRC realises that it has to be seen to be taking action and chipping away at that gap. It is trying to move towards increased compliance and forcing compliance as far as possible, while still managing resources as best as it can.
Q9 Baroness Wheatcroft: Are there any safeguards that should be included that are not at the moment? If so, what would they be?
Antonia Stokes: At the moment, the safeguards seem very weak. On a basic level, what time frames are we talking about? The legislation does not include any explanation as to what it means to become aware of an error. How long does a person have to act on that error? If they are entitled to get tax advice before coming forward, is there a reasonable time frame in which they are allowed to do that? All this information is missing, and that is very problematic. We definitely think that safeguards should be put in place for vulnerable people. In general, people who are unrepresented should have a manual review to help them understand if they require extra support. HMRC has an extra support team to help people who are vulnerable or going through any difficulties that might prevent them from being able to represent themselves effectively.
Baroness Wheatcroft: That would play into Lord Carrington’s argument about the cost-effectiveness ratio straight away.
Antonia Stokes: Exactly. Obviously, it would not be appropriate for the extra support team to help every unrepresented taxpayer, but for those who are at the most risk of not being able to correctly represent themselves in these situations, it is particularly important. That also applies in the case of reckless untrue statements; the two marry together.
Baroness Wheatcroft: What about a de minimis requirement?
Antonia Stokes: As I said before, we are certainly supportive of that. My only concern is that HMRC would say that it goes against the whole premise; but it is logical that there must be a de minimis.
Q10 The Chair: Could you say a bit more about the extra support team? It is potentially significant if HMRC is able to provide support. How does it work? If the extra support team is part of HMRC, is it potentially advising the taxpayer against the rest of HMRC? Or are external people brought in independently? Are there enough members of the team? There might be a lot of takers.
Antonia Stokes: It is unreasonable to expect that the extra support team is going to be able to assess every single unrepresented taxpayer to see if they would qualify for assistance. It is more the case that the taxpayer has to be aware that if they are struggling, if they are frozen with fear and cannot see a way forward, they may qualify for help from the extra support team to navigate the issue. To answer your question, the extra support team is not separate from HMRC; it is very much a part of HMRC’s customer service team. The team members are specially trained to deal with people in vulnerable circumstances, and they do a wonderful job. We are very supportive of HMRC’s extra support team and what it does for taxpayers. It is brilliant.
There are also other organisations that can help, such as TaxAid, an external charity that supports unrepresented taxpayers who have problems. As a result of these new measures, its resources will undoubtedly be put under strain by people coming forward saying, “I’ve have received this notice, I don’t know what to do”, or, “I’ve heard about this new rule to do with correcting errors, and I’m worried”.
Baroness Wheatcroft: Do you have any idea how many cases the extra support team helps?
Antonia Stokes: No, I do not; I might be able to find that data and let you know.
Baroness Wheatcroft: That would be helpful.
Lord Carrington of Fulham: From what you said, they would not help my plumber, who is clearly quite capable of doing plumbing work, but is not able to cope with a tax return. What you are saying is that they are going to deal with people who are challenged because of disabilities, age or whatever.
Antonia Stokes: I suspect your plumber would not qualify and would need to consider if he needs to take advice for this particular issue.
Lord Carrington of Fulham: Taking advice might cost him £5,000.
Antonia Stokes: Our position is that most people should be able to navigate the tax system without having to pay for an adviser; that is an important principle. It is problematic if we are getting to a stage where people feel they have no choice but to pay for advice. HMRC could also help by ensuring—as I have already said—that its guidance is clear and its processes are straightforward. It also needs to be prepared to have call handlers available to answer questions because those will undoubtedly result. I know that it is trying to push people away from calling on the phone towards digital self-service, but with a measure such as this, it has to expect that people want reassurance. Often, they might be the worried well, but it should not assume that such people are not legitimately making a phone call. That person should still be able to get reassurance, if that is what they need to be able to sleep at night.
Q11 Lord Leigh of Hurley: On the other side of things, we should never forget that Al Capone was only brought to justice because his tax affairs were incorrectly submitted.
There is a huge tax gap: we can argue about its size, but we need to do something about it. One would have thought that with the current state of technology, one could create AI and algorithms showing that a person is living well above their declared lifestyle, including indicators of expensive holidays and so on that do not match income. Should we not be encouraging HMRC to be much more sophisticated and to go down this route of doing a wealth assessment—it used to be called a balance-sheet assessment—of individuals from one period to another? Or do you have a better idea of how we should attack the tax gap?
Antonia Stokes: It would not be appropriate to use customer correction notices in circumstances where HMRC run the AI on somebody and it appears that they are living above their means, or there are red flags on the system. That situation has to be dealt with through good old-fashioned inquiry: if HMRC has something it wants to dig into, it will have to do it that way. We have to be clear: a customer correction notice must be based on a reasonable, defined suspicion that there is something wrong, not a broad, vague unease. That is important.
Another thing HMRC could do about the tax gap is to identify patterns in errors; in due course this could feed into possible customer correction notices. For instance, in recent years there have been high-value repayment agents—essentially bad actors—in the tax advice market, who reel in customers on social media, saying, “We’ll claim back all your working expenses, your uniform, and things such as that”. A lot of the claims are hugely inflated and without evidence. The taxpayer clicks a button and goes along with it. We have heard from HMRC recently that high-value repayment agents have spiked instances of high-volume, low-value errors in the tax system. If HMRC is able to spot a pattern such as people over-claiming expenses incorrectly, it can use that as a way to tackle it from the other side, to look at these agents and their end-to-end processes and shut down incidents, rather than going directly after the taxpayer. That would potentially be an effective way to tackle the tax gap.
Lord Leigh of Hurley: To push you a little, there are communities and trades that are very cash focused and do all sorts of business with each other. It is commendable going after dodgy advisers but, at the end of the day, this is the taxpayer’s responsibility. I do not see why you think it is down to HMRC to investigate whether a person is living above their income; surely, it is down to HMRC to push the taxpayer to explain.
Antonia Stokes: Yes, I agree. Having these additional measures in place—particularly the requirement for the taxpayer to correct outside a customer correction notice—will hopefully prompt more people to come forward and decide to rectify previous errors. In some ways that will undoubtedly be the case. But the majority of people are honest about their tax affairs and want to get things right. They might make a mistake because they cannot afford advice, or because they are not quite sure about it, or they feel nervous. Those people should be the priority in terms of not losing out as part of this measure.
Lord Leigh of Hurley: To confirm, you think these measures will lead to an increase in revenue by adjusting behaviour.
Antonia Stokes: Yes, there is a strong argument that it will. However, when you look at taxpayer behaviour in the context of reckless untrue statements, which we are coming on to next, there is a worry. On the one side you have this draft legislation that is pushing people to correct errors and do so promptly or risk getting much higher penalties. On the other side, you have these proposed measures where HMRC is saying—perhaps with regard to the correction of errors—“If we find out you’ve made an error, and we think it was reckless, you could be on the hook for criminal prosecution”. There are these two competing pressures, and we are worried that they could cause huge anxiety for taxpayers. It could diminish trust in the tax system; the impression is no longer being given that, “HMRC is supporting you to get it right, and if you get it wrong, don’t worry, we’ll help you”. With these two measures as they stand, that whole ethos is out of the window.
Q12 The Chair: Can we come on to the issue of recklessness? The overarching question that we have been asking others is that, given the existing civil and criminal penalties that are available to HMRC, is the addition of a “reckless” provision necessary?
Antonia Stokes: We have not been convinced by the case that it is. The consultation on reckless untrue statements has yet to set out why it is felt to be necessary. What is the reason? What are these cases where HMRC would have liked to have prosecuted but could not quite prove dishonesty? For what reason does it now want to bring people who are perhaps careless—and at the borderline upper end of careless—into a criminal prosecution? This could ruin people’s lives; it could ruin their livelihoods and careers and make them white-collar criminals. Is that fair, when dishonesty cannot be proven? We feel strongly that if HMRC is going to go down this route, it should remain within the realms of dishonesty beyond all reasonable doubt.
Lord Carrington of Fulham: This comes back again to the culture in HMRC. Is that something that can be changed? Or is it something that has gone beyond the point of no return? If so, then the legislative attitude towards HMRC ought to change as well. Is that a fair statement?
Antonia Stokes: HMRC is a large organisation and it is fair to say that it does not have only one personality. Without a doubt, it is under pressure to close the tax gap. It is also trying to do its best to support taxpayers where it can, but it feels that it cannot sit on errors and unpaid tax—and other issues such as low-value debts—any longer. It wants to take action but it would be a shame for it to push forward with these measures without bearing in mind that customer trust is important; it needs to be a living, breathing part of its charter and how it operates.
Lord Carrington of Fulham: If I understand you correctly, the driver behind a lot of this is that HMRC is being pushed on the tax gap. How confident is anyone that the tax gap is real, or at least of the size that it is claimed to be?
Antonia Stokes: I have seen the workings and I know that a scientific approach is taken. As I understand it, the scene is quite robust, but I am not an expert on the tax gap and its methodologies so I will not pass comment.
Q13 The Chair: We are delighted to be joined by Adam Craggs. We might come back to where we were, but I would like to start again with a reprise of the questions we have been asking Antonia. The first was: in terms of identifying errors and raising additional revenue, what is your assessment of how significant a change this new requirement to correct will be?
Adam Craggs: Could I clarify whether we are discussing the proposed criminal offence, or the proposals to correct errors?
The Chair: We were talking about the criminal offence when you came on the call, but that was because we had dealt with the first issue already: I am going back to that. I would like your view on the question about correcting errors to start with.
Adam Craggs: It is a fundamental change. There is some uncertainty among the tax adviser profession as to whether there is an existing obligation to correct an error once one has submitted a tax return or a claim for relief to HMRC. There are grey areas: the view of some professionals is that, if it was accurate when it was submitted, it is very much for HMRC to be proactive and contact the taxpayer or the adviser if it feels there is an error or a mistake, and that it is not for the taxpayer to correct it. If this ends up on the statute books, it will certainly clarify the position; in practice, it might have a lot of unforeseen consequences. HMRC may be inundated with questions from overcautious taxpayers and their advisers—an abundance of caution—especially as there may be a new offence of making a reckless, inaccurate statement. That links to the second issue. I would also imagine that there will be a huge increase in compliance, which is fine for those taxpayers who are able to pay professionals to advise and assist; the vast majority of taxpayers, however, are not in that position and they deal with their own tax affairs.
The Chair: Lord Carrington, that has been an issue that has been very much in your mind.
Q14 Lord Carrington of Fulham: Yes. If you are somebody who does not employ a tax adviser and you get something wrong, how clear is the advice on what you have to do to make a correction?
Adam Craggs: At the moment, it is not clear. I often talk to friends and family who are not involved in either the legal or accounting profession: they find tax and the whole UK system hugely complex and rely very much on HMRC telling them how to fill in a tax return and so on. I cannot imagine that many taxpayers would, in good faith, be aware of errors when they filled in their tax return, so it is difficult to see a scenario where they would realise that there was a mistake at a later date. One example that springs to mind relates to changes in case law: there is an argument that, if you filled in your tax return as of 15 October 2026 and the law changes or is interpreted differently by the tax tribunal, then there is an inaccuracy that needs to be corrected. I cannot imagine many taxpayers spend their time reading law reports published by the tax tribunal.
Lord Carrington of Fulham: In that case, presumably, HMRC would contact the taxpayer and say, “We think there is an error”, and would issue a notice to correct. For the taxpayer who does not have an adviser, would there be a requirement for HMRC to say what the correction should be?
Adam Craggs: There ought to be. It should justify and explain the basis for that decision, although in practice that may not help the taxpayer. I suspect most taxpayers who are not fortunate enough to be able to pay for professional representation would accept HMRC’s own interpretation of the law. As any tax lawyer will tell you, there is more than one way to interpret either a statutory provision or indeed a decision, but most taxpayers would simply accept HMRC’s view.
Lord Carrington of Fulham: Can I ask you the question that I asked Antonia about the cost to HMRC of chasing small errors in individual tax returns? I assume we are talking about people who are self-employed: most other people’s tax returns are relatively straightforward, particularly if they are paid through PAYE and earn a certain amount of dividend interest or dividend income or whatever. I gave an example of a self-employed plumber who maybe earns £70,000 a year and makes some error that is likely to be worth at most several thousand pounds. They would not understand how to correct it. What is the cost to HMRC of challenging that, identifying the error and responding to the individual taxpayer? How much would it cost HMRC in administration costs to recover, say, £2,000?
Adam Craggs: I would not be able to quantify that but it would be disproportionate. One would hope that HMRC would concentrate on larger errors and mistakes; it may well be that there should be a de minimis stipulation, a calculation of value for taxpayer’s money to enforce and take compliance action against taxpayers. As you say in your example, pursuing a plumber for a few thousand pounds would almost certainly cost HMRC more than the amount of tax it was pursuing.
Q15 Baroness Wheatcroft: This measure is aimed, we are told, at catching low-value, high-volume errors. Can you think of a more effective way of doing that?
Adam Craggs: HMRC has a number of tools available at the moment. Its one-to-many letters—they used to be called nudge letters—are very effective in my experience: they point out to the recipient, “There may be an issue, and you need to look at your affairs”. Most honest, law-abiding taxpayers either look at their affairs themselves and double-check to see whether there is an issue, or they ask their tax adviser.
Baroness Wheatcroft: As far as you are concerned, this is not necessary to accomplish what HMRC says is needed.
Adam Craggs: You are correct; that is my view.
Q16 Lord Leigh of Hurley: You gave the example of someone who submitted a tax return in good faith: the case law then changed, or there was a case law judgment that meant extra tax was due that had not been declared at that time. In those circumstances, you said, an adviser may or may not choose to disclose that to HMRC. Does that reach someone who, for example, discovers a source of income that he or she had forgotten about, or who makes a loan to someone and that person decides to repay it with interest, or other cash events? Are you saying that some advisers would not suggest that an extra disclosure is made to HMRC, ex post facto?
Adam Craggs: No. All reputable, honest advisers in that scenario would say to the client, “You’ve been paid interest on that loan, it’s income, and it has to be included on your tax return”. Depending on your personal circumstances, of course, income tax will be due on that.
Lord Leigh of Hurley: Are there currently any penalties for advisers who do not do that?
Adam Craggs: This is obviously a big issue, and an important one. As the committee will be aware, an obligatory registration system is being implemented as we speak to wield out the less reputable advisers. Prior to that, anyone could call themselves a tax adviser: they did not need to be regulated or have any qualifications, which to my mind is shocking. Hopefully, the unreputable advisers out there will be weeded out by having to register with HMRC. There are also professionals who are regulated by their professional bodies and there are codes of conduct. I know that in appropriate circumstances HMRC will report an adviser to their regulatory body and so on, so there are mechanisms that are already in existence.
Q17 The Chair: When you joined the session, we were already on to the second issue: the proposed criminal offence of making reckless, untrue statements or declarations. I will ask you what we have already asked Antonia; to what extent do you think there is a gap here that needs to be filled? Given HMRC’s existing powers, do you think there is still an area that needs to be covered, or are those powers already extensive?
Adam Craggs: I do not think there is a need. I know HMRC has said, “We have this for indirect tax, and it has been on the statute books for many years”, but my understanding is that there have been very few—if any—prosecutions for reckless statements. I am certainly not aware of any, either when I was a member of the old Inland Revenue—when I dealt with prosecutions—or in private practice, so I am not convinced. Superficially, it sounds attractive: if you have it for VAT and indirect taxation, why not also for direct taxation? But in practice, it is not used. HMRC has a record of being given new criminal powers: for instance, the Criminal Finances Act 2017, which addressed the failure to prevent tax evasion. Only one prosecution commenced last year, which was against an accountancy firm, so that suggests that this particular provision was not required. I am certainly not convinced that anything is needed here. I also have serious reservations about criminalising taxpayers who make a reckless, incorrect statement to HMRC. That is not a road that we want to go down. It should be limited to deliberate, dishonest statements.
Lord Leigh of Hurley: You make the observation that a lack of prosecutions implies that legislation was not required; the counterargument is that it implies that the legislation has worked and it has not been necessary to prosecute, or alternatively that HMRC is not doing its job properly.
Adam Craggs: Perhaps all those possibilities apply.
Q18 Lord Carrington of Fulham: We have been told that a lot of this is driven by pressure on HMRC to close the tax gap and collect large numbers of small amounts of money that it believes have previously not been paid—very much small parcels, if I can put it like that. If this is all being driven by a political desire to close the tax gap, how confident are we that the tax gap is the size that it is claimed to be? How confident are we that the tax gap lies where HMRC thinks it lies?
Adam Craggs: That is a very good question. I caught Antonia’s answer as I was joining; I am in the same position. I do not know what data or criteria HMRC uses when calculating the tax gap. I would imagine that, by definition, it has to be very much a finger in the air. HMRC is not aware of the size of the black economy—people who are being paid in cash and not declaring it—so I would have thought the estimate is very rough and ready. To be honest, I am not qualified to comment.
Lord Carrington of Fulham: My worry is that these changes are being driven by a political agenda. I am an old cynic who believes that politicians are always looking for easy headline answers to difficult problems: the tax gap sounds like that to me: “Let us say we have a problem and let us then produce legislation to fix the problem that we have dreamed up”. It is not something that can be defined accurately, and therefore you cannot design legislation to address it accurately.
Adam Craggs: I have looked at the tax gap figures and how those are split. From memory, about 6% of the tax gap is made up of tax avoidance—a relatively small amount—and criminal activity is about 15%. One could be forgiven for thinking that the tax gap is almost exclusively a consequence of tax avoidance arrangements. Irrespective of one’s view about the morality of entering into arrangements to minimise your tax, that might be the dragon that has been created so that it can be slain. In reality, the amount of revenue that is lost to the Exchequer as a consequence of tax avoidance arrangements is relatively small, yet a huge amount of legislation in the last 10 years has gone into tackling tax avoidance.
Q19 Baroness Wheatcroft: There is a feeling of inevitability that the Government want to bring in this “reckless” proposal and legislate for it. If that is the case, are there any safeguards that should be built in to protect taxpayers from a potentially heavy penalty? As Antonia said, they could lose their jobs; they could lose everything.
Adam Craggs: I deal with clients who are accused of criminal offences under the existing regime; the effect on innocent people cannot be overemphasised. The decision to prosecute is taken by the CPS, not HMRC, so thankfully there is an independent body that reviews the evidence. Some clients are not prosecuted, but others go to court; even if they are found not guilty, the consequences are huge. My clients are often on medication for stress, their marriages end up in ruins, their businesses and employees are affected; it affects their working life and family life. If we are going to criminalise reckless behaviour rather than deliberate, dishonest behaviour, there needs to be the safeguard of a statutory definition of what recklessness means. That is crucial so that people are not put through the criminal process for innocent mistakes, no matter how foolish or stupid or negligent they might have been. We should not criminalise stupid mistakes unless there is dishonesty involved.
Baroness Wheatcroft: Antonia, do you think it is possible to define reckless?
Antonia Stokes: It is very difficult. The response from ourselves and other professional bodies across the board is that the examples included in HMRC’s consultation represent careless but not reckless behaviour. If it is going to plough forward with this, that definition needs to be tightly drawn.
In terms of other safeguards, we think it is important that there should be explicit exclusions for reasonable reliance on another person. If you have taken advice and you honestly believe that it was correct—even if they knew they were leading you up the garden path—then that should be excluded. Tax issues are rarely black and white; there are judgment cases and instances of legitimate uncertainty which very much need to remain part of this. Behaviour that is already being adequately dealt with under the civil penalty regime should not be criminalised.
As a final safeguard, we suggest that there should be senior approval for anything being pushed forward into a criminal prosecution; there should be an appropriate independent oversight, not one rogue HMRC inspector deciding that it is the route they are going down. There need to be processes in place to ensure people are protected.
In general, the scope needs to be initially limited to higher-value and higher-risk cases. HMRC needs to test and learn and assess how it is going. We would hope this is rarely going to be used, but there is always a risk that there will be creep. If it is still worried about the tax gap, HMRC may decide to wield the axe more frequently.
The Chair: Thank you both. I am sorry, Adam, that we had difficulties in hearing you at the start and that you were not able to hear what Antonia had to say, although she had the advantage of hearing you. Your views are very clear and not totally out of line with what we have heard from other people. Thank you very much; we are extremely grateful.
