Money Matters - Summer 2011

Another tax amnesty in the pipeline

Tax amnesties offer a quick and cost efficient way for the government to raise revenue. The first amnesty raised some £400 million at a cost of around £6 million. Subsequently, there has been the New Disclosure Opportunity (NDO), the Liechtenstein Disclosure Facility (aimed at people with accounts or other assets held in Liechtenstein) and the Tax Health Plan (aimed at medical professionals).

Waterskier emerging from a pipe-water-shoot Now we have the Plumbers Tax Safe Plan (PTSP), focused on people working in the plumbing, heating and gas installation trades. However, unlike some previous initiatives, the PTSP is actually open to anybody who wishes to bring their tax affairs up to date.

It is interesting that HMRC has also said that people not wanting to use the PTSP can voluntarily put their tax affairs in order and expect very similar terms to those offered by the plan, provided that they follow the guidelines.

People have until 31 May to notify HMRC of an intention to disclose, and disclosure must then be made by 31 August. The attraction is the usual reduction in penalties but, unlike previous tax amnesties, the penalty depends on the behaviour that led to the underpayment.

For careless behaviour, no penalty at all will be due for 2008/09 and 2009/10. The number of years of disclosure also depends on behaviour, although HMRC expects most people to have to pay for a maximum of six years.

The Liechtenstein Disclosure Facility remains available until 31 March 2015, and for some people this might be the more favourable disclosure route.

For those taxpayers who have still not disclosed their overseas income and gains, the penalties may now be substantially higher. Since 6 April, the amount of penalty has depended on the category of the country in which the income or gains arise.

There is no change in respect of category 1 countries (those that automatically exchange information with the UK on savings income), but penalties are 150% of the normal amount for category 2 countries (information is exchanged but not automatically) and double for category 3 countries (no exchange of information).

Please get in touch if you wish to discuss options regarding undisclosed income. Given the possible routes currently available, the choice is not an easy one.