Insights

Since 2008 there have been a lot of changes to the tax system in relation to HMRC enquiries into individuals’ tax affairs and it is important to be aware that we are now entering a new era for tax enquiries.

Over the last 8 years we have seen increases in HMRC’s powers, with changes to the penalty regime and the way in which enquiries are conducted. During the period over which these changes have been introduced, HMRC have offered various taxpayer amnesties, which provided ways for taxpayers – plumbers, lawyers, doctors, high net worth individuals with overseas investments, landlords, construction workers, even people selling on eBay - to declare previously undisclosed income whilst being assured of a fair degree of ‘leniency’ from HMRC.

We are now however seeing an end to the favourable terms; with the Lichtenstein Disclosure Facility (LDF) having come to an end HMRC have no plans to offer any further amnesties; with better information sources and stronger powers in place they have no need to further incentivise taxpayers to make voluntary disclosures.

Through a network of international alliances, HMRC are processing overseas data and risk assessing it. This involves checking whether the information they have agrees with individual tax returns submitted, and where it doesn’t, this will lead to an enquiry;

So, with the era of tax amnesties and favourable terms over and HMRC having stronger powers than previously, what does this mean for taxpayers? Well, there are increased tax-geared penalties, an additional asset-based penalty regime, ‘naming and shaming’ (unless unprompted), and criminal offence measures at the disposal of HMRC. Whilst a new digital disclosure facility is being introduced for individuals to disclose previously undeclared income, this is expected to offer no special terms and no comfort as to how the information will be dealt with, therefore must be treated with great caution.

So now that the opportunities to secure favourable disclosure terms are at an end, very careful consideration will be needed where previously undeclared income is to be disclosed.

HMRC is currently running the following campaigns, however these are not amnesties; whilst there is a suggestion that there will be lower penalties associated with them and no prosecution, they offer no guarantee of this.

1. Let property – aimed at landlords with previously undisclosed rental income. This is open ended and aimed at any individual with undisclosed rental income;
2. Second incomes – aimed at people with undeclared second income streams e.g. car boot/second hand goods sellers and those using e-commerce marketplaces;
3. Credit card sales – aimed at those having the facility to take credit card payments but who are not currently disclosing transactions.

HMRC do now have sources to find this income themselves and over time, will match non-disclosure of income to tax returns. Therefore, if you do have undisclosed income and have not taken the opportunity to disclose it under one of the previous amnesties, it is highly recommended that you voluntarily disclose now.

If you have any concerns about your tax disclosures and want to discuss your situation in confidence for impartial advice about how to approach HMRC, please contact Lesley Stalker by emailing las@rjp.co.uk.