No source, but let's tax it anyhow

Tucked away in the Home Office consultation document on criminal asset recovery seems to be another ill judged attempt to broaden the taxing powers of HM Revenue & Customs.

It has, forever, been a principle of revenue law that a profit can only be subjected to tax if there is a law which permits the profit (or, strictly, the profiteer) to be taxed; the corollary being that an expense is not tax relieved unless permitted by law.

This principle manifests itself in the Revenue authorities and the taxpayer having to establish the nature of a profit, or expense, in order to determine the applicable law which may charge, or relieve, the item in question.

It is stated in the consultation document that, where the source of profit is illegal or unknown, the Revenue are unable to determine the applicable taxing statute, and there should, therefore, be a new head of charge introduced; a tax on income with a miscellaneous source, or, indeed, simply no source.

One can see this causing a stink. If it known that monies are illegal, the nature of the illegaility must already have been proven and the nature of the monies must logically also be known. If the source is unknown, that must surely mean nothing is proven.

Those experienced in civil tax investigations will know the Revenue has no problems in establishing the source, or possible source, of hitherto unidentified profits, and with sufficent certainty to allow for a tax assessment to be made. So why, when bolstered with the additional knowledge afforded by the criminal enforcement process, should the Revenue find it such a struggle ?