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Time to declare
Page 37
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Tax dodgers who come forward and pay what they owe are being let off with a fixed 10% penalty. Andrew Watt reports.
H. .. M Revenue and Customs (HMRC) has taken UK taxpayers by surprise with its recent announcement of a partial amnesty — the missing tax still has to be paid — for all tax evasion including VAT, Income and Corporation Tax, Inheritance fax and PAYE.
The move is born out HMRC's need to cope with an anticipated surge in the numbers of investigations, This follows a successful 18month campaign involving five high-street hanks— they released details of UK individuals and companies with addresses in the UK and offshore bank accounts.
HM RC will now serve similar 'information notices' on all banks trading in the UK,including the branches and subsidiaries of foreign banks. It is estimated that this will yield almost a million pieces of information., The amnesty, it is hoped, will clear the decks by encouraging evaders to come forward in large numbers and make a clean breast of previous tax irregularities, leaving HMRC free to target the hard core who choose not to make a disclosure.
Tax evaders who have never held offshore bank accounts are also entitled to make disclosures on the same basis, and to receive the same treatment as those who owe money to HMRC hut do have offshore accounts.
Amnesty time limit
The amnesty stays in place until 22 June 2007. Firms must notify HMRC of their intention to make a disclosure of all irregularities —not just of those connected with an offshore account. In doing so they can, with limited exceptions, be certain of receiving a fixed penalty of 10% of the tax/duties to be paid (and no penalty at all on disclosures of untaxed amounts less than 12,500).The tax/duties to be disclosed are those underpaid for the years 1987/88-2005/6. However, for the years 2000/1 and earlier, undeclared income and gains which were "trivial" need not be disclosed.
Those who have notified will have until 26 November 2007 to quantify their disclosure. This must be sent to HMRC along with a statement of offshore bank accounts open at 5 April 2006, a statement of offshore assets held at 5 April 2006, a formal letter offering to pay. a declaration that the disclosure is correct and complete, and payment of the full amount disclosed, including interest and penaltyWhere the full amount cannot be paid by 26 November 2007, HMRC must he notified immediately and sent a statement of assets and liabilities, as well as proposals for clearing the debt.
No notification action 11M RC says it will not act on notifications which are not followed up by a disclosure, adding that such notifications will be expunged from the taxpayer's computer records.
Those who do not have an offshore account, but who have a disclosure to make, may make that disclosure and payment directly to their normal tax office within the time limits set out above. If they do so they can expect to receive the same benefits as those who hold an offshore account, but they will probably have to provide evidence that the disclosure is complete as HMRC will not have information from a bank to help with the verification process.
HMRC will check disclosures where its risk assessment highlights a significant possibility of under-declaration, but the majority of disclosures will be accepted. Immediately after the initial phase ends HMRC investigators will move to target those who have, or have had, offshore accounts who have not notified their intention to make a disclosure and whose accounts and/or tax returns suggest tax may have been underpaid.
Disclosure under amnesty
Those who decline to disclose under the amnesty can expect to he charged significantly higher penalties-30% or more— and some may face criminal prosecution.
It is believed that the banks which have already complied with information notices will be writing to customers whose details they have been obliged to hand over to HMRC. Customers of hanks which have not yet been served with disclosure notices should not be lulled into a false sense of security They must assume that all banks will, in due course, be approached by HMRC for information so they too, if appropriate, must act urgently The opportunity to make a clean breast of all past tax irregularities, the certainty of a 10% penalty and the slim chance of any detailed enquiry make this an extremely attractive proposition for most tax evaders. • II/Andrew Watt is director of tax investigations at Chiltern. watta@chiliernplacoin