Insights

This year we have covered many of the tax amnesty initiatives launched by HMRC to recoup missing revenues from taxpayers. So far these initiatives, whereby people who voluntarily declare they have underpaid tax in return for receiving reduced penalties, have raised an additional £497m in revenues, with a further £3bn expected as a result of the Lichtenstein Disclosure Facility. Given the number of different taskforces and schemes ongoing, it is clear this is now a very important element of HMRC’s work.

HMRC’s latest scheme, the Self-Assessment Tax Amnesty, is aimed at higher rate taxpayers in the 40-50% tax bracket and has been the topic of much debate in the media over whether it is fair to everyone else. We will come to this later on, after explaining what the Self Assessment Amnesty is.

What is the Self Assessment Amnesty?

Designed to appeal to the conscience of higher rate taxpayers who have failed to submit a tax return for the 2009/2010 tax year or earlier, the Self Assessment Amnesty will run until 2^nd October 2012. It is open to anyone required to pay 40 to 50% tax on income earned and who wishes to disclose to HMRC any previously undisclosed liability they may have. This includes submitting missing tax returns and paying outstanding tax and national insurance contributions.

In return for their honesty, taxpayers using the Amnesty will pay far less in penalties than if HMRC tracks them down directly. The window to come clean is quite small. After 2^nd October, if HMRC has evidence that tax or national insurance has been underpaid or if a tax return is outstanding, individuals could face penalties of up to 100% of the tax due, plus a criminal record.

Is it fair to all?

The wider question this latest Amnesty has raised is whether it is actually very fair for the rest of the taxpaying public? Shouldn’t everyone get the chance to come clean through an Amnesty; not only higher rate taxpayers? And shouldn’t we just have a General Tax Amnesty rather than target specific professional areas, like medics, plumbers or offshore investors for instance?

Whilst it would be fairer to publically announce a general Amnesty, in reality any taxpayer who has underpaid tax is able to volunteer their information and a lower penalty will be applicable than if they had owned up as the result of an HMRC enquiry. And strictly speaking, anyone could come forward and take advantage of the terms of any Amnesty to make a voluntary declaration, even though the initiative might be publicised as being targeted at specific professions.

From HMRC’s perspective, they will continue to promote the tightly targeted amnesties because that way they can more easily demonstrate the presence of additional evidence to substantiate suspected underpayments. This is because data of this nature is often obtained through trade associations as well as banks.

Overall then, whilst this new Amnesty is running, if you are a higher rate taxpayer (or even if you’re not) and you suspect you might have underpaid tax, please contact us to discuss the next steps to take. RJP’s specialists in handling personal tax enquiries are Anne Eager (ae@rjp.co.uk) and Lesley Stalker (las@rjp.co.uk).

www.rjp.co.uk