HM Revenue & Customs have decided to offer a “disclosure opportunity” to those engaged in the plumbing and heating business. I have been asked recently why the government would do this! I could think of a few unprintable answers to this but a number of amnesties have been offered in the past few years to different areas of business and relating to specific areas of income.
The problem HMRC have is that the whole system of Self Assessment is based on the notion that people tell HMRC the truth about their income and work out their own tax liabilities based on that income[private_basic]. The results of previous amnesties and minimal penalties offers though have proved that some of us do not tell the whole truth when filling in our Self Assessment returns. The official HMRC view is that there must still be a lot more “liars” out there still to be uncovered and this is unacceptable to our cash strapped government. They seem to feel that by offering to reduce penalties for a short time they can scoop up some much needed cash from naughty tax payers.
They have specifically targeted plumbers and heating engineers because they are likely to be members of trade bodies that can easily be checked to see if you are registered and therefore if you are trading. They have called this particular amnesty the Plumbers Tax Safe Plan deliberately to sound like the “Gas Safe” register plumbers need to be on.
What niggles me is the broad assumption and inference that all plumbers are not declaring all their income and so need a specially targeted initiative to clamp down on them. Perhaps HMRC employees have been watching “Rouge Traders” on the BBC and assume all tradespeople operate in those ways.
I deal with a number of plumbers and I trust all of them to be telling me the full extant of their income. I trust them because I have spent years probing them for cash income from scrap yards when old, removed pipework etc is weighed in. I have drummed into them that they can never be sure who they are working for so be totally upfront about jobs and VAT, and even if offered cash for a job to put it through the books. This has always been a hot area during tax investigations and so all my clients are prepared for that.
I am sure most other accountants are the same with their clients. So why pick on plumbers especially for this new initiative?
The truth is they are not clamping down on plumbers alone. If you read the small print they are offering this amnesty to anyone in any trade or profession to make a full disclosure of previously undeclared income to HMRC. The full force of HMRC will come down on you after this scheme expires on the 31st August 2011 if you are subsequently found to have undeclared income in a future tax investigation.
I can not see the difference between the detail of this “Plumbers Tax Safe Initiative” and a normal tax investigation – apart from HMRC pricking a few consciences and gaining some extra tax revenue.
The final parts of this initiative detail a serious warning to all taxpayers about the consequences of being “found out” later in a formal tax investigation of having undeclared income, or of salting some money away overseas for your retirement. Again – what is different here to a formal tax investigation – nothing!
HMRC might just as well offer people the chance to make donations to help our government out! Perhaps they should stop making war (but that is a whole different discussion!).
So, if your conscience has been pricked and you feel a need to make a voluntary disclosure under this initiative, let me know by the 31st May 2011 and I will make the necessary application on your behalf. You will then have until the 31st August 2011 to file the documentation, choose your penalty (yes – you choose nil, 10% or 20%) and pay all the tax and penalty to HMRC. But… if you think that will be an end to it you will be in for a rude awakening. Depending on what you voluntarily disclose will depend on what response HMRC give and you could just be opening yourself to a full investigation anyway.
Why would anyone do that voluntarily?? I have absolutely no idea. What I do know is that normal professional fee insurance will not cover investigations that start from a self disclosure under one of these schemes as it is implied that your filed self assessment forms were known to be wrong. However, our office scheme does cover this as long as there was no intent to defraud HMRC.
Still want to disclose – call me asap and I will put the wheels in motion for you.