The warning follows the publication by HMRC of a shopping list of new criminal investigation powers it would like to have, highlighting how it wants to bolster its existing powers by adding many police powers.

For example, HMRC wants its officers to have the right to make arrests and take fingerprints without police officers being present.

Draconian powers
But according to PKF accountants, HMRC's powers should relate to the seriousness of the crime. PKF also expressed concern that the consultation makes no distinction in the powers to investigate a sole-trader who may be under-reporting income and the activities or organised tax fraudsters.

PKF's Tax Investigations partner, John Cassidy, said: "I have repeatedly called for HMRC's powers to be in proportion to the seriousness of the offence. This proportionate approach should be enshrined in law, not left to the discretion of overstretched and, possibly, overzealous tax investigators seeking a quick win against suspected tax fraudsters.

"However, as originally suspected, HMRC is trying to take this opportunity to 'level up' the powers of its officers so these proposals would see a substantial increase in HMRC's powers in dealing with the individual taxpayer.

"No one objects to HMRC becoming more efficient but giving it draconian powers to investigate taxpayers carries significant risks. The consultation makes no distinction between the powers used to investigate a sole trader that HMRC suspects, based on limited information, may be under-reporting income and the powers it uses to tackle a known team of organised tax fraudsters. It even suggests that the 'seriousness' tests applied under its current powers should be removed.

"HMRC claims it will use the new powers proportionately but our experience suggests its officers often take an unnecessarily heavy-handed approach with some taxpayers who are eventually proven to be innocent. It would not need such sweeping powers if parts of the tax system, such as Tax Credits, were better designed in the first place."

Consultation
The creation of the list is part of HMRC's consultation on 'Modernising powers, Deterrents and Safeguards' which was intended to balance the investigation powers of officers from the former Inland Revenue and those from HM Customs & Excise.

Many of the powers that HMRC is seeking are contained within the Police and Criminal Evidence Act 1984 (PACE) but, rather than just following PACE, HMRC wants to pick and choose the powers it can use.

For example, it wants to retain its existing power to search any person on the premises it is raiding without having an arrest warrant for that person – this exceeds the powers available under PACE
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Susie Hughes
The Editor © Hardhatter 2006