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Hansard on tax fraud
A revised statement about Inland Revenue procedure in cases of serious tax fraud has been made by the Chancellor of the Exchequer in response to a written question. The revised statement makes clear that the Revenue will not pursue a criminal prosecution where the taxpayer makes a full confession under the Hansard procedure, and is set out below.
Hansard on tax fraud
A revised statement about Inland Revenue procedure in cases of serious tax fraud has been made by the Chancellor of the Exchequer in response to a written question. The revised statement makes clear that the Revenue will not pursue a criminal prosecution where the taxpayer makes a full confession under the Hansard procedure, and is set out below.
'Further to the statement made on 18 October 1990 at column 882 [in Hansard] by the then Chancellor, the Rt Hon John Major, the practice of the Board of Inland Revenue in cases of suspected serious tax fraud is as follows:
"The Board reserves complete discretion to pursue prosecutions in the circumstances it considers appropriate.
"Where serious tax fraud has been committed, the Board may accept a money settlement instead of pursuing a criminal prosecution.
"The Board will accept a money settlement and will not pursue a criminal prosecution, if the taxpayer, in response to being given a copy of this statement by an authorised officer, makes a full and complete confession of all tax irregularities."'
A statement published on the Revenue's website explains further as follows:
'More recently, the House of Lords has considered the case of R v Allen. In this case the appellant claimed that the admission into evidence of statements made in response to the Hansard procedure breached his right to a fair trial under Article 6(1) of the European Convention of Human Rights. This, he claimed, was because he had been subjected to an inducement at the time when the statements were made. The inducement in question was said to be the assurance implicit in the Hansard statement that if the taxpayer makes a full confession criminal proceedings would not be instituted against him.'
Although Mr Allen was unsuccessful with this argument, 'Lord Hutton pointed out that the position would have been different if the appellant had made full disclosure to the Inland Revenue in response to the Hansard statement'.
The statement notes that Lord Hutton's remarks 'are significant in terms of the Hansard statement. The Board of the Inland Revenue had previously reserved to itself full discretion as to the course of action it would take in any case. Lord Hutton took the view, however, that in cases of a full confession under Hansard, the Revenue would be unfair to prosecute, effectively placing a limit on the full discretion of the Revenue in this matter.
'A further element to be taken into account according to the previous version of Hansard is whether the taxpayer had given full co-operation to the Revenue during the investigation. This includes the giving of full facilities for investigation into his affairs and for examination of such books, papers, documents or information as the Board may consider necessary. A taxpayer could conclude from this, that even in cases of a full confession, if the right amount of co-operation is not offered, then he or she remains at the risk of prosecution.'
The new statement no longer refers to the degree of co-operation, but that aspect will still be taken into account in determining any penalties which may be applicable.
The Revenue's Code of Practice 9 will be revised in relation to investigations to take account of the changes.
(www.inlandrevenue.gov.uk)
New Act
The Employee Share Schemes Bill 2002 received Royal Assent on 7 November 2002.
The Act amends Schedule 8 to the Finance Act 2000. Schedule 8 contains most of the legislation for the share incentive plan. There are three main changes.
Firstly, the Act helps companies to involve their employees more closely in the operation of the share incentive plan by providing a framework for a board of trustees for the plan that includes professional trustees and employee representatives. This is not obligatory.
Secondly, the Act allows a company an early corporation tax deduction for money it pays to its share incentive plan trust from 6 April 2003 provided that:
* the plan trustees use the money to acquire shares in the company. Shares must not be acquired from a company and not less than ten per cent of the total ordinary share capital of the company must be acquired within a year of the initial purchase of shares made with this money. This allows time to administer and pay for a substantial acquisition of this sort. Shares already awarded to employees under the plan, provided they are still held within it, will count towards the calculation of the ten per cent holding of the trust; and
* at least 30 per cent of the shares acquired with the payment are transferred to employees within five years, and all the shares are transferred within ten years.
Thirdly, the Act extends exemptions which share incentive plan trustees already enjoy from income tax on dividends for shares they hold and capital gains tax on any disposal of them. They will be exempt from these charges for ten years to correspond with the period of time they have to transfer the shares bought with the money paid to the trust by the company. This has been done to ensure that the benefit of the corporation tax deduction is not eroded by these charges.
The Government's intention with regard to the second and third measures is to encourage companies to acquire substantial shareholdings from owners for transfer under the plan to the whole workforce.
Full details of the Act can be found on the Revenue's website: www.inland
revenue.gov.uk/shareschemes/news/index.htm.
(Source: Inland Revenue news release dated 8 November 2002.)
