The consultation closed on 16 August 2026. The professional bodies have rejected the case. September commentary is still landing. None of that makes the proposal go away for a CFO who signs corporation tax computations, signs off enquiry correspondence, or sits behind a board attestation that a material relief was “checked.”
Primary sources: HMRC’s consultation on reckless untrue statements in direct tax, the Budget 2025 OOTLAR recklessness announcement, ICAEW’s June explainer, ICAEW’s August rejection (REP 054/26), KPMG, Kennedys, CIOT, September notes from CHC and Ashford Partners, plus CEMA s167(1) and VATA s72(3).
If your control stack still treats “tax risk” as a civil penalty problem only, rewrite the board pack before the government response lands.
What HMRC actually proposed
The proposal is not a rewrite of fraudulent evasion. It is an intermediate criminal tier for direct tax.
Today, dishonest tax fraud and evasion already sit at the top of the ladder for both direct and indirect tax. Indirect tax also has a longstanding route for knowingly or recklessly making untrue statements or declarations — CEMA s167(1) and VATA s72(3). Direct tax does not. Prosecutors must prove dishonesty. If the jury is not sure on dishonesty, the defendant walks on the criminal charge even where the conduct looks seriously culpable.
HMRC’s pitch is simple: close that gap. Create a direct-tax offence where:
- a statement or declaration is made;
- it is untrue (not correct); and
- the maker acted recklessly — aware of a risk the statement was false or untrue, and unreasonably proceeded anyway.
“Statement” is deliberately wide: oral, written, and statements made implicitly by a person’s actions. “Declaration” covers formal assertions that information is true, or believed to be true. “Untrue” is about accuracy of the words, not the maker’s good intentions. Recklessness is the criminal-law standard from R v G — actual awareness of risk plus unreasonable taking of that risk — not “ought to have known” and not ordinary carelessness.
Proposed maximum sanctions: up to two years’ custody and/or an unlimited fine, either-way. Judges sentence on facts. Agents are in scope as well as taxpayers.
HMRC’s own examples of the target zone include claiming a significant relief without proper checks, and omitting taxable income paid into a secondary account — more than carelessness, short of provable dishonesty.
Where it sits on the existing ladder
Do not let “criminal” flatten the map. HMRC’s ladder is:
- Innocent mistake / misunderstanding → civil only.
- Careless (failure to take reasonable care) → civil Schedule 24 FA 2007.
- Reckless untrue statement → proposed new direct-tax criminal offence.
- Deliberate / dishonest → existing criminal evasion, fraud, cheating the public revenue.
KPMG’s board framing is right: most errors should stay civil. The new offence is for the intermediate band where risk was known and the person still proceeded. Kennedys’ practical point is the one CFOs miss: because “statement” includes oral and conduct-based statements, enquiry meetings and informal HMRC contact sit inside the perimeter — not only the CT600.
The agent track already moved in Finance Act 2026, with Schedule 38 FA 2012 shifting agent sanctions from “dishonest” towards “sanctionable” behaviour. The consultation puts agents in scope of the new offence too. An external memo is not a blast shield if you knew the risk and still filed.
Why the professional bodies are pushing back hard
ICAEW’s August response (REP 054/26) does not nibble at drafting. It rejects the case.
Core ICAEW points:
- The indirect-tax recklessness offence is rarely used and may not be a model worth copying into direct tax.
- A new recklessness tier adds complexity next to the settled careless / deliberate / fraudulent vocabulary taxpayers and sophisticated finance teams already understand.
- The consultation examples risk collapsing into mere carelessness, which creates enforcement uncertainty and weakens deterrence rather than strengthening it.
- Severity plus uncertainty may chill voluntary disclosure — COP9, the contractual disclosure facility, and open HMRC engagement — and widen the tax gap.
ICAEW’s recommendation is blunt: abandon the direct-tax offence and consider removing the indirect-tax version, while HMRC uses existing powers better.
CIOT lands in the same direction: weak evidence base, uncertain scope, blurred careless/reckless/deliberate lines, and damage to voluntary compliance. Early September practitioner notes repeat the board worry: if “reckless” blurs into “careless,” teams either over-lawyer every filing or go quiet with HMRC. Neither helps the cash map.
Pushback is not death. Autumn Budget 2025 put recklessness on the scoreboard; the consultation closed mid-August; the next beat is the government response and any draft legislation. CFOs who wait for Royal Assent before fixing signature hygiene will be late.
What every CFO should lock now
You do not need the offence on the statute book to act. The consultation already tells you what behaviour HMRC wants to criminalise. Treat that as the control design brief.
1. Signature and attestation hygiene.
Map who signs CT returns, R&D claims, capital allowance elections, s455 computations, enquiry replies, and board minutes that assert “the tax position is supportable.” For every material judgment, keep a short contemporaneous note: what risk was known, what checks were done, what advice was taken, why the filing was still reasonable. If you cannot write that note, you are not ready to sign.
2. Uncertain positions need a paper trail, not a vibe.
Relief claims, valuation judgments, PE/holdco characterisations, transfer-pricing conclusions, hybrid mismatch positions, and “we think this is trading” calls are exactly where awareness-of-risk lives. Document the alternatives considered. If counsel flagged a real risk and you filed anyway, the file must show why that was reasonable on the facts then known — not a retrospective tidy-up after an information notice.
3. Oral HMRC contact is in scope under the draft design.
Brief attendees before HMRC meetings. No improvisation on quantum, purpose, or state of mind. Confirm key points in writing afterwards. “I thought I was being helpful on the call” is not a control.
4. Agent instructions and reliance letters.
If an external firm files or speaks for you, the instruction letter should state the facts you warrant, the judgments you own, and the open risks. Do not outsource awareness. If you knew the risk and the agent filed, both names can sit in the frame under the consultation design.
5. Disclosure culture stays open.
ICAEW’s chill warning is real. Do not respond by shutting the door on HMRC. Respond by making disclosures cleaner: known unknowns labelled, assumptions stated, corrections made early. A well-documented uncertain position is safer than a confident silence that later looks like awareness without action.
6. Board and audit committee language.
Move tax risk reporting off “penalty percentage” alone. Add a line for criminal exposure design: who can create a “statement” to HMRC, how uncertain positions are escalated, and whether any live enquiry involves contested facts the company has asserted. PE boards and lenders care about personal criminal risk for key managers even when the quantum is civil-sized.
7. Group and portfolio companies.
In a PE stack, the portfolio CFO, HoldCo director and deal team member who “confirms the tax DD” can all make statements. Align who speaks to HMRC and what evidence standard applies before a material relief is claimed.
The practical test for next week’s CT pack
Before the next material filing leaves, put four questions on the working-papers cover note:
1. What could be wrong with this number or characterisation?
2. Did anyone in the signing chain actually know that risk?
3. What did we do about it before we filed?
4. Would a cold reader of the file say proceeding was reasonable?
If 2 is yes and 3 is thin, you are in the consultation’s target zone whether or not the offence is enacted this year. Honest mistakes stay civil on HMRC’s own words. The fight is the band above carelessness and below proven dishonesty — exactly where busy CFOs live when reliefs are large and the board wants the return out.
Bottom line
The 16 August close date did not retire the issue. It started the government-response clock. ICAEW and CIOT have drawn a bright line against the offence. HMRC still wants parity with indirect tax and a jury option when dishonesty fails but recklessness is clear. Two years and an unlimited fine are enough to change how a careful finance leader treats every HMRC-facing statement — written, oral or implied.
Lock the file discipline now: known risks written down, checks evidenced, agents instructed, oral contact controlled, disclosures kept open. If the offence arrives, you are ready. If it does not, you still have a cleaner tax control environment than most groups will build.
That is the CFO job on this one — not waiting for the SI, and not pretending a civil-penalty culture is enough when the consultation already reads like a personal-liability design note.