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In essence, in the UK, can someone raise a defence of an unreasonable yet good-faith misunderstanding if charged with tax evasion?

In Cheek v. US, the US Supreme Court stated that a defendant’s mere honest belief that their actions were not criminal, regardless of whether that belief was objectively reasonable, is a valid defence against criminal charges of federal tax evasion.

Does the UK have a similar defence, or, to disprove the prosecution has established mens rea, must any good-faith misunderstanding of the tax code be objectively reasonable, rather than reasonable in the eyes of the defendant?

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  • What sort of 'Tax' are we 'Evading' here? Income tax, capital gains, VAT etc. etc. It's incredibly hard to actually get charged with evading income tax if there was a reasonable misunderstanding; even if you were deemed to have not taken reasonable care HMRC just add a penalty charge, it doesn't actually become a prosecution per se, it's all dealt with as a civil claim. They just add it on the bill, you pay it, no further action necessary.
    – JeffUK
    Apr 17 at 10:33
  • @JeffUK Whilst I agree it’s rare, tax evasion can also be a criminal matter. In that situation, can an unreasonable yet honest understanding still be a valid defence? For example, can someone who claims to be a ‘freeman on the land’ and genuinely believes they are not liable to pay council tax use this as a defence, like how Mr Cheek said he ’sincerely believed, based on his indoctrination by a group believing that the federal tax system is unconstitutional...that the tax laws were being unconstitutionally enforced and that his actions were lawful’ (Cheek v. US (1991) – syllabus)? Apr 18 at 23:16
  • I think your question needs updating to relate to a specific form of tax. 'Cheating the public revenue' doesn't apply to council tax, for instance, Non-payment of Council tax is not a criminal offence but a civil matter. So the "defendants belief the actions were non-criminal" wouldn't apply to the initial non-payment. If, having learned that they DO need to pay council tax (vis-a-vis a court date), they paid promptly, then there would be no need for any criminal proceeding at all.
    – JeffUK
    Apr 22 at 16:07
  • @JeffUK That was just an example of what would likely be considered an unreasonable yet genuinely held misconception about the tax code. If a defendant raised a belief of that character as a defence to a prosecution of cheating the public revenue, would it succeed, or must the incorrect belief about the tax code must be reasonable as well as genuinely held? Apr 23 at 1:08

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Criminal vs Administrative Penalties

All crimes under Commonwealth tax law have dishonesty as an element; which is commonplace in financial crimes. Dishonesty requires an intent to deceive which, among other things, requires knowledge that you are not telling the truth. If you believe the Earth is flat, it’s not dishonest to say so.

Administrative penalties (fines without criminal conviction) are not so difficult to prove. First, the onus is “balance of probabilities” rather than “beyond reasonable doubt”. Second, dishonesty is not an element.

Some, such as failing to lodge or pay on time, are strict liability: proving the fact that it happened proves guilt.

The next step applies where misleading conduct is an element. Misleading the tax office requires proof that the act or omission occurred and also that a reasonable person would be misled, even if the defendant believed they were speaking the truth.

Finally, if the defendant argues a certain interpretation of tax law that the ATO disagrees with, they must prove that the defendant’s interpretation is not reasonable.

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