Plumbers tax amnesty could open floodgates for all

Tuesday, March 15, 2011 | Posted by: Dave Jennings
Categories: Protecting your wealth | Tags: tax, Dave Jennings, disclosure, Protect Your Wealth, investigation, Liechtenstein Disclosure Facility, tax amnesty, Liechtenstein, amnesty, LDF, PTSP, trades, plumbers

In August, tax investigations partner Grant Summers asked whether there should be a tax amnesty open to all. Several months on and HMRC appears to have answered the question with the launch, on 1 March 2011, of a new amnesty called the Plumbers Tax Safe Plan (PTSP). Could this be considered as a general tax amnesty to all?

At first glance this new disclosure opportunity may appear to be targeted solely at the plumbing and heating professions. But a further review of HMRC’s guidance reveals that similar terms to those offered by the PTSP will be available to anyone who comes forward to disclose an undeclared tax liability.

What are the advantages of coming forward under the PTSP?
The PTSP is the latest in a series of amnesties that have been launched by HMRC, such as the Tax Health Plan (THP) for medical professionals, which I discussed in my January 2010 blog, and the Liechtenstein Disclosure Facility (LDF), which continues to run and is open until 2015.

However, the terms of the PTSP are not as clear-cut as those of the LDF, which covers tax years since April 1999, offers a 10% penalty and immunity from prosecution. Instead, the level of penalties and the number of previous years HMRC will be able to look into will depend on the behaviour that has led to the under-declaration of tax.

Broadly, the terms are as follows.

• Where a taxpayer has under-declared their liability due to a mistake, but where reasonable care was taken, there will be no penalty.
• Where the behaviour of the taxpayer has been careless, a penalty of 10% of the undeclared tax will be charged.
• Errors that are deliberate but not concealed will attract a 20% penalty.
• Where a taxpayer has tried to conceal the extent of the undeclared tax, a penalty of up to 100% of the tax due may apply.
• Where reasonable care has been taken, up to four tax years will be included in the disclosure.
• Where there has been a careless error, up to six tax years will be included in the disclosure.
• Where there has been a deliberate error, up to 20 tax years will be included in the disclosure.

HMRC added that there will be opportunity for those taxpayers who are not in a position to pay the full liability upfront to negotiate payment terms.

What are the time limits?
The dates to note are:

• 31 May 2011: Taxpayers wishing to take advantage of the terms of the PTSP must notify HMRC of their intention to disclose by this date.
• 31 August 2011: The disclosure has to be submitted and any liability that arises paid (unless time to pay is negotiated).

As tears go by
As ever, there is a high risk of discovery and, if that happens, it is likely that a full investigation into the taxpayer’s affairs will be opened.

Ultimately, this is far more time-consuming, expensive and intrusive than making a voluntary disclosure under the PTSP. Wild horses might not get some people to come forward but a quick read of my last post – How an HMRC letter about £3,000 of income turned into a £275,000 tax bill – is a stark warning of the dangers of failing to disclose any undeclared tax liability.

Under my thumb
As far as plumbers and heating engineers are concerned, HMRC has acquired information from a number of sources about plumbers trading in the UK from Gas Safe and Corgi and will be looking to investigate, and in some cases prosecute, those who fail to come forward under the PTSP.

I would always recommend that specialist advice is sought if anyone is contemplating making a disclosure to HMRC as the PTSP or LDF may not be the most suitable avenue to take.

I would be interested to read your thoughts about whether or not HMRC should bite the bullet and have an open general amnesty instead of targeting specific trades and professions.

Image: © Jamie Taylor

You might also find these links useful:

* Read our Tax Investigations page for further information on PTSP and other disclosure opportunities.
* Retiring abroad could be more taxing than you think
* Money savers: Ways to cut your tax bill in 2011