Tax amnesty is for all
PETER HARRUP of PKF explains that the current “plumbers amnesty” is not just for plumbers, and is not a complete amnesty either
IF YOUR tax returns have been less than accurate in the past, now is the best time to put things right.
The tax amnesty announced earlier this month may be called the “Plumbers tax safe plan” (PTSP) but it is open to anyone who has not fully disclosed their income in the past and offers very similar terms to any UK resident who wants to make a full disclosure.
Only individuals who had the opportunity to use a previous amnesty – those who held offshore accounts before January 4, 2010 and doctors and dentists practising before March 31, 2010 – are barred from the PTSP.
However, in many circumstances, offshore account holders may still be able to take advantage of the current Liechtenstein Disclosure Facility, even if they do not currently have a financial presence there.
It is worth remembering that the PTSP is not a total amnesty; it will cost business owners money to use it and bring their tax affairs up to date.
Once individuals have registered for the scheme (by the deadline of May 31) they will need to work out how much tax has been underpaid in past years – possibly as far back as 1991/92 where HM Revenue & Customs (HMRC) has been deliberately misled. The settlement payment covering the tax plus interest and the reduced penalties must be made by August 31, 2011.
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Reduced tax penalties are the best part of the deal for individuals. Where individuals have underpaid tax because of careless mistakes with their tax returns or have forgotten to tell HMRC that they have started up in business, tax penalties will be limited to between zero and 10% of the tax due – cheaper than the 30% penalty that could otherwise be charged in such situations.
Where individuals have deliberately understated their income or not told HMRC that they have started trading, penalties will be limited to 20% – a bit more expensive than previous amnesties but still much cheaper than the penalties of up to 70% that can otherwise be charged if HMRC catches you.
Although, HMRC will accept estimates of past income where paperwork is incomplete, it will expect all estimates to be backed up by some evidence such as bank statements and copies of quotes to customers. It is likely that many people who need to use the amnesty will have to reconstruct records based on limited information and this can be a very time consuming process.
Unfortunately, taking short cuts is not a sensible option. You could end up paying over the odds or just get in more trouble with HMRC, leading to even higher penalties. Just like plumbing, making a full tax disclosure is a job for experts experienced in such work
Any future amnesty is likely to cost more to use. So, if you need to put things right with the tax man, there is no doubt that this offer is a very good deal. If you wait for HMRC to catch you, the final bill will be much higher.