Anti-terrorist Bill 'could inhibit tax deals with Inland Revenue'

The Chartered Institute of Taxation (CIoT) has added to the chorus of criticism warning that the new Proceeds of Crime Bill has been drawn too wide.

Under the Bill, which is being ushered in following the terrorist attacks in the US last month, police are to be given the power to monitor every transaction in British bank accounts where legitimate money is suspected of financing terrorist activities. This would bring mainland Britain into line with Northern Ireland, which already has such anti-terrorist powers.

The CIoT says: "Many people will, rightly or wrongly, think twice before 'confessing' their tax errors if the Bill becomes law. This is because their advisers may in future be obliged to blow the whistle by informing the National Criminal Intelligence Service (NCIS) – an organisation staffed by police officers – instead of the Inland Revenue. The CIoT believes this will increase the chances that people making tax errors will be prosecuted and that fewer people will admit to routine errors in the first place."

David Williams, chairman of the CIoT's tax policy sub-committee, adds: "We fully support the intentions of the Bill to counter terrorists and drug cartels profiting from money laundering. However, the Bill should allow professionals to use the existing channels to inform the Inland Revenue of tax infringements without triggering a full criminal investigation. If the Bill goes through as it is, our tax system could undergo a huge cultural change in the direction of confrontation, and tax inspectors will be seen as police officers. Potentially it could be disastrous for the way the system works."

The CIoT fears that people who once would have admitted errors in their tax affairs, ranging from sheer muddle to serious evasion, may not now do so. Previously, in the belief that they would not be prosecuted provided that they told the full truth and paid what was due plus a penalty, such people have confessed to the Tax Inspector.

Last month Martin Cunningham, head of the Manchester-based law firm Cunninghams and a member of the Serious Fraud Panel, expressed serious reservations that key clauses within the Bill gave the right to seize the proceeds of crimes which occurred up to six years ago. He said this could be in breach of Article 7 of the Human Rights Act, which specifically prevents governments implementing retrospective penalties.