HC Deb 19 July 1923 vol 166 cc2514-6W

asked the Financial Secretary to the Treasury whether it has been brought to his notice that there are taxpayers who have been guilty of Income Tax fraud, and who would be glad of an opportunity of making a full disclosure and a suitable pecuniary settlement but are deterred from doing so by the fear of criminal proceedings; and whether he proposes to do anything to meet such cases?


The question of fraud and evasion in connection with direct taxation is, of course, a matter of great importance to the Exchequer, but it is not desired that fraudulent taxpayers should be deterred by the fear of criminal proceedings from making spontaneous disclosure of their misdeeds and appropriate pecuniary restriction. The following statement explains the practice followed by the Board of Inland Revenue in the matter: Where the taxpayer takes the initiative and voluntarily discloses the fact of his past frauds and their full extent and is also prepared to facilitate investigation and to furnish full evidence (including not only the business books and records, but also private bank books), as may be required on behalf of the Board as to the amount of the correct liability, the Board will not institute criminal proceedings, but will accept a pecuniary settlement. Cases not infrequently arise in which the disclosure, though in a sense voluntary, is not made on the initiative of the taxpayer. For example, the taxpayer may have been requested to furnish accounts, or further particulars in connection with accounts already rendered, or the production of books may have been suggested. If, in such a case, the taxpayer forthwith comes forward with a full and frank disclosure of past frauds, this would be accepted by the Board as equivalent to a voluntary disclosure to the extent that the Board would not institute criminal proceedings, but would accept a pecuniary, settlement. The condition indicated above as to a full investigation and the production of evidence would apply, of course, equally to these cases. The pecuniary settlement which the Board will be prepared to accept will be determined by reference to the circumstances of the individual case, and will in no case exceed the full amount of the unassessed duties for the whole period (whether additional assessments are or are not competent) plus the pecuniary penalties for which proceedings might be taken. Due regard will be had to the taxpayer's means not only in determining the amount of the sum to be accepted in settlement, but also in fixing the date or dates for payment. Normally the Board will feel justified in accepting in cases where the disclosure is purely voluntary, i.e., made on the initiative of the taxpayer, a smaller sum by way of penalty than would be required if the disclosure had not been spontaneous, but had followed upon an inquiry by the inspector. In some cases of voluntary or quasi-voluntary disclosure it has been found that the taxpayer has in past years furnished false and fraudulent particulars in reply to inquiries which have been made by the inspector and have been treated as closed. In such cases the Board do not refuse to accept a pecuniary settlement in the event of a voluntary disclosure or quasi-voluntary disclosure following upon fresh inquiry. The previous fraudulent replies would, however, be regarded as a relevant circumstance in determining the amount to be paid by way of penalty.