Insights

As part of RJP's ongoing analysis of new HMRC tax initiatives, we discuss the latest to potentially affect our clients. Two new HMRC anti-fraud campaigns are underway to collect additional revenues from taxpayers who have under-declared their income levels.

1. Mortgage Verification Scheme.

Have you ever thought about over-egging your income to get that dream property? Apart from possibly getting into hot water because of long-term affordability, a declaration like this could result in a tax enquiry. This is due to the new Mortgage Verification Scheme, the result of an association between HMRC, the Council of Mortgage Lenders and Building Societies Association. RJP has often been asked whether HMRC has a relationship with lenders as this has always been something of a grey area, but now we can categorically say they do!

Under the terms of the Mortgage Verification Scheme, mortgage lenders are providing HMRC with details of mortgage applications where they have inadequate evidence of declared income and suspect fraud. Potential offenders are being investigated using a secure electronic platform, which verifies income details declared to lenders against information provided on income tax and employment returns. If the two sources of information do not correspond, HMRC advises the lender of potential fraud and makes direct content with the taxpayer to delve deeper.

This scheme is a win-win for all parties (except the individual concerned of course!). It will help to reduce mortgage fraud, which is estimated at £1 billion each year and also reduces the risks for lenders by having independent verification of an applicant’s credentials and income levels.

2. Self assessment amnesty

If you are a higher rate taxpayer and think you may have under-declared your income in previous tax years, you have an opportunity to come clean without incurring high penalties. RJP covered this topic – the Self Assessment Amnesty - in August and returns to the subject because the deadline is looming.

The Self Assessment Initiative is primarily aimed at taxpayers at the 40% level or above and who have been told to submit a Self Assessment tax return for 2009/10 or earlier, but have not done so. The amnesty is also available to anyone who has tax returns to submit for these years.

If you would like to use this opportunity, you have until 2^nd October to inform HMRC of your intentions, submit a completed return and pay any tax and National Insurance Contributions (NICs) outstanding. In return you will be liable to pay lower penalties than if you are approached by HMRC first. HMRC has warned that anyone caught after the 2^nd October will have to pay 100% of tax due as a penalty plus all outstanding tax owed and may face a criminal prosecution. Added to this, HMRC declared that any tax offenders will have their affairs closely scrutinised for at least five years after they have been convicted of an offence.

So far, HMRC’s proactive campaigns have been very successful in netting over £500 million from voluntary disclosures and another 120 from investigations.   Last month they took the unprecedented step of publishing photographs of their most wanted list of ‘tax evaders’ on the BBC News website, illustrating how they have stepped up their efforts to catch tax evaders. It is not totally one sided however, these initiatives come at a time when increasingly generous tax rebate schemes like R&D tax credits are being launched for entrepreneurs, to help them reduce their tax bills and instead invest in innovation.

If you would like to discuss your tax affairs in more detail please contact Lesley Stalker at las@rjp.co.uk.