HMRC Have Opened a Consultation on a Proposed Offence for Reckless, Untrue Statements for Direct Taxes
- Jul 22
- 6 min read
What Small Business Owners Need to Know
HMRC has opened a consultation on whether a new criminal offence should be introduced for making reckless, untrue statements or declarations in relation to direct taxes.
This is only a consultation at this stage. It is not yet law.
However, it is important because it shows HMRC’s direction of travel.
The focus is on taxpayers who make statements to HMRC where they know there is a risk the information may be wrong, but they go ahead anyway without properly checking.
The consultation was published on 23 June 2026 and runs until 16 August 2026. HMRC is asking for views from taxpayers, advisers, businesses and other interested parties.
What is HMRC proposing?
At the moment, indirect taxes, such as VAT and Customs and Excise duties, already have criminal offences for making untrue statements or submitting incorrect documents either knowingly or recklessly.
However, HMRC says the direct tax regime does not currently have an equivalent offence for reckless, untrue statements.
Direct taxes include taxes such as Income Tax, Corporation Tax and Capital Gains Tax.
HMRC is now consulting on whether a similar offence should be introduced for direct tax matters. The aim is to create consistency between direct and indirect taxes and give prosecutors an option where dishonesty cannot be proved, but reckless behaviour can be shown.
What would the new offence cover?
The proposed offence would apply where:
a statement or declaration is made;
the statement or declaration is untrue;
and the person making it acted recklessly.
HMRC explains that a statement could include oral statements, written statements in documents, and statements made implicitly through a person’s actions.
A declaration would mean a formal assertion of fact made in a prescribed way, where the person declares or confirms that the information is true, or that they believe it to be true.
An untrue statement means one that is not correct or accurate.
But an untrue statement alone would not be enough. The person would also need to have acted recklessly. HMRC says this means the person was aware of the risk that the statement was false or untrue, but unreasonably went ahead and made the statement anyway.
Innocent mistakes should not be caught
This is an important point.
HMRC says the proposed offence is not intended to criminalise innocent mistakes, misunderstandings or accidental errors.
A genuine mistake may still be wrong, but it would not be reckless if the person did not know there was a risk that the statement was untrue.
HMRC also makes a distinction between:
careless errors;
reckless errors;
and deliberate or dishonest behaviour.
Careless errors would continue to be dealt with under the existing civil penalty system. Deliberate or dishonest behaviour would continue to be dealt with under existing dishonesty-based offences.
The proposed offence is aimed at behaviour that sits between carelessness and dishonesty.
In simple terms:
Careless means you got it wrong because you failed to take enough care.
Reckless means you knew there was a real risk it might be wrong, but you went ahead anyway.
Deliberate means you knew it was wrong and submitted it anyway.
HMRC examples of reckless behaviour
HMRC gives examples of the type of behaviour that could fall within the proposed offence.
One example is where a taxpayer makes a significant relief claim, such as a claim for business expenses or losses, without reading the relevant guidance properly or seeking advice. They submit the claim on the basis that it will “probably be fine”. HMRC says this could be reckless because the person recognised a risk that the claim may be incorrect but did not take reasonable steps to check.
Another example is a self-employed taxpayer who knows they have more than one bank account and suspects that taxable income may have been paid into a secondary account. They do not check the statements, even though they could easily do so, and only estimate income from the main account. HMRC says this could also be reckless if the return later proves to be materially inaccurate.
These examples are useful because they show what HMRC is concerned about.
It is not simply about getting something wrong. It is about knowing there is a risk and choosing not to check.
What penalties are being considered?
HMRC is considering whether the new offence should carry a custodial sentence and/or a fine.
The government’s proposed option would broadly align with the Customs and Excise rules. This would mean:
a maximum custodial sentence of up to 2 years on indictment;
and an unlimited fine on indictment.
HMRC says the sentence would be decided by the courts, not HMRC. The consultation also says the proposed offence would be an “either way” offence, meaning it could be heard in either the Magistrates’ Court or the Crown Court.
This is serious.
Even though the offence is only proposed at this stage, it shows how important it is for business owners to take tax returns, relief claims and HMRC declarations seriously.
Why does this matter for small business owners?
Small business owners often have to make tax decisions based on incomplete information.
For example:
whether an expense is allowable;
whether income has been fully included;
whether a relief claim is valid;
whether director’s loan account entries are correct;
whether dividend paperwork supports the amounts taken;
whether a business mileage claim is reasonable;
whether private use has been properly adjusted;
whether figures from bank accounts, Stripe, PayPal, Shopify or other platforms have been fully included.
These are common areas where mistakes can happen.
The proposed offence does not mean that every mistake becomes criminal. But it does mean that, where a business owner knows there is a risk something may be wrong and chooses not to check, HMRC may have stronger powers in future.
Practical examples for small company owners
Here are some practical situations where extra care is needed.
1. Claiming expenses without checking the rules
If you are unsure whether an expense is allowable, do not simply put it through the company because it “feels business related”.
Some costs may be fully allowable. Some may need an adjustment for private use. Some may create a benefit in kind. Some may not be allowable at all.
A good record should show:
what the cost was;
why it was incurred;
how it relates to the business;
whether there was any private use;
and what evidence supports the claim.
2. Estimating income instead of checking records
If your business receives money through several sources, all income needs to be considered.
This may include:
bank accounts;
cash receipts;
PayPal;
Stripe;
GoCardless;
Klarna;
Shopify;
Amazon;
Etsy;
personal accounts used for business;
and director-paid expenses or reimbursements.
If you know another account or platform may contain business income, it should be checked.
3. Making large claims without evidence
Large claims, unusual claims or claims that significantly reduce tax should be supported by proper records.
For example:
loss claims;
research and development claims;
use of home claims;
mileage claims;
travel and subsistence;
repairs and maintenance;
capital allowances;
pension contributions;
and director expenses.
The larger or more unusual the claim, the more important it is to check the rules and keep evidence.
4. Signing tax returns without understanding the figures
Many business owners rely on their accountant to prepare accounts and tax returns.
That is completely normal.
However, the director or taxpayer still needs to review the information and make sure the figures are complete and accurate based on what they know.
If something looks wrong, missing or unclear, it should be queried before approval.
What should business owners do now?
The proposed offence is not yet law, but the message is clear: HMRC expects taxpayers to take reasonable steps to check information before submitting it.
Small business owners should:
keep complete records;
avoid estimates unless they are clearly justified;
check all bank accounts and payment platforms;
keep receipts and supporting documents;
document the reason for large or unusual claims;
ask for advice where the position is unclear;
review accounts and tax returns before approval;
correct mistakes as soon as they are found;
and avoid signing anything they do not understand.
This does not mean business owners need to become tax experts.
It means they should not ignore obvious risks.
How to respond to the consultation
HMRC is asking for responses by 16 August 2026.
Responses can be sent by email to:
HMRC is asking consultees to comment on whether the offence should be introduced, what impact it may have, what behaviour should or should not be within scope, whether the wording should refer to “statements” or “declarations”, and whether unlimited fines would be appropriate.
Final thoughts
This consultation is not about innocent mistakes.
It is about situations where someone knows there is a risk that the information they are giving to HMRC may be wrong, but they go ahead anyway without checking.
For small business owners, the practical takeaway is simple:
Do not guess where you can check.
Do not claim reliefs without understanding the rules.
Do not ignore missing records.
Do not approve tax returns without reviewing them.
Good bookkeeping, clear records and proper advice are becoming more important than ever.
At Busy Bee, we work with small limited company owners to help them stay compliant, tax efficient and in control of their business finances.
We help you understand what your company can claim, what records you need to keep and how to avoid unnecessary tax problems.
Disclaimer: The content on this page is for general information only and should not be treated as tax, legal or financial advice. Tax planning should always be reviewed against your individual circumstances before action is taken.
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