Insights

HMRC has launched a new voluntary disclosure campaign for solicitors, allowing any with undeclared income the chance to come forward and pay the outstanding tax, with the promise of reduced penalties as the disclosure is deemed to be unprompted. A number of sector specific campaigns similar to this have run already and the fact that solicitors have been selected this time around suggests that HMRC have already obtained information from third party sources which identify likely areas of undisclosed income.

The solicitors disclosure campaign started this week and runs for 6 months, from 8th December 2014 to 9th June 2015. Any solicitor wanting to use this facility must notify HMRC of their intention to take part in the campaign by 9th March 2015. Full payment must be submitted together with the official disclosure paperwork by 9th June 2015; it will be possible in certain circumstances to negotiate staged payments.

When using the disclosure facility, it is important to be aware of the level of protection offered to taxpayers. Although reduced penalties will apply for the majority of situations where taxes are owed, i.e. due to errors and carelessness, HMRC are not guaranteeing immunity from a criminal prosecution in instances where income was deliberately withheld or understated.

HMRC have confirmed that if it is agreed the taxpayer made a careless mistake with their tax, they will only pay for a maximum of six years irrespective of how far behind the person is with their tax affairs. However if an individual chooses not to make a disclosure and HMRC subsequently find they have omitted income, they retain the right to investigate the tax payer for up to 20 years and potentially pursue a criminal investigation.

In situations where the tax underpayment occurred as a result of a deliberate attempt to reduce a tax liability, it may be prudent to consider other alternatives to the solicitors’ disclosure agreement. This decision needs to be taken carefully, after discussing the full implications with a tax enquiries specialist who understands voluntary disclosure procedures and has experience of negotiating with HMRC. For example, it may be preferable to use the Lichtenstein Disclosure Facility (LDF) as this guarantees immunity from prosecution and also offers a number of other advantages for taxpayers that have deliberately withheld information.

Anyone who suspects they may have tax to declare, regardless of how much, should take advantage of this opportunity to ‘come clean’. It is always better to voluntarily declare a tax underpayment than wait to be caught by HMRC. These campaigns usually offer more favourable penalty terms; once the disclosure campaign has finished, penalty terms will revert to normal, including the chance of criminal prosecution.

If you think you might have additional taxes to pay, please contact Anne Eager to discuss your circumstances in detail by emailing ae@rjp.co.uk.