Accountants' tax “amnesty” - I was joking, you know!

When I wrote about the Tax Health Plan proposed by HMRC, and asked which profession might be next, I was joking when I added accountants to my list; really I was. My idle fantasy might be about to come true as it is reported "Accountants could be next for tax amnesty". Of course the original report was in the Mail, so a pinch of salt may be needed.

Flattered though I am that Dave Hartnett might be one of my loyal readers, I really do not believe that accountants, tax advisers, bookkeepers or any allied profession should have a special deal if they have been fiddling their taxes. All such groups should be treated more harshly if they are on the fiddle in the same way as crooked HMRC employees, bank employee thieves and bent coppers because all are in a position to know more clearly what is right and what is wrong.

We are in a privileged position of trust and if our professions cannot be trusted then “quis custodiet ipsos custodes?"; certainly not our professional bodies or HMRC because any action taken by them in terms of policing would be after the event? Anyway, after any settlement under the Accountants Tax Plan, should an offender be reported to his or her professional body? Presumably not in terms of HMRC confidentiality, but should the transgressor be banned as a tax agent?

HMRC is sending out dreadfully mixed messages to the profession, with the big stick in one hand and the soft soap in the other. Give us a break in terms of working with us as agents, but please don't give any dodgy accountants a way out.

© Jon Stow 2010

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HMRC tackles the medical profession with the Tax Health Plan

We professionals in the tax business are fond of offering tax health checks to prospective clients, but now we should be offering health checks to medical professionals, who are the target of HMRC's latest campaign to collect tax from perceived miscreants. I am sure the Revenue is not suggesting that all in the health business are into dodgy dealing and falsifying their tax returns, but presumably there must be a supposition that “extras” such as giving references to patients, signing passport applications and getting payments from pharmaceutical companies slip through into doctors' pockets unnoticed by their accountants or tax advisers. Those targeted who have something to report must notify their intention to do so by 31st March 2010 and have until 30th June 2010 to have made the disclosure and arranged to pay any tax that is due.

Given that we have had two opportunities for people to disclose their offshore bank accounts and we have the ongoing Liechtenstein Disclosure Facility, the HMRC tactic is simply to concentrate the minds of a particular group of taxpayers. I doubt that doctors are any worse or any better than many other trades or professions. I assume this must be the first of many initiatives targeting various sections of the business community.

Who will be next on the list? Pharmacists? Tyre fitters? Plumbers? Wheel-tappers and shunters? Accountants and allied professions? It is a novel idea to put each sector under the microscope, but it will take an awfully long time to get through the list. I hope HMRC gets some tax dodgers to confess, but doubt the tax take will be significant from each campaign, especially given the disappointing response to the recently closed second campaign on offshore accounts.

© Jon Stow 2010


Details of the HMRC Tax Health Plan

More on catching the tax dodgers

It was announced last month that HMRC's New Disclosure Opportunity deadline for those with undeclared offshore assets to come clean has been extended from 30th November 2009 to 4th January 2010. This is no doubt because rather fewer delinquent “customers” have come forward than Permanent Secretary for Tax Dave Hartnett hoped, despite the prospect of much more serious penalties for those who are caught or come forward later.

HMRC has also revamped its process for receiving anonymous tip-offs concerning tax evaders, details of which are here. To be truly anonymous, one would suppose that many would baulk at filling in an on-line form, given that web masters can generally see the IP address of whoever logs in to a web page; that is if they really want to. Similar identification issues would deter people from sending faxes.

I have a vision of the other choices:

1.Telephoning the 0800 number, remembering to withhold the caller's number, and then speaking in a hoarse whisper to drop the malefactor in it.
2.Sending an anonymous missive either with letters cut out of newspapers and stuck on to another sheet of paper, or longhand notes in purple or green ink, signed “Well-wisher” or “Bystander”.

The mind boggles, or at least mine does, but that may be the effect of Christmas being nearly upon us and my having done far too many Tax Returns for my own good.

© Jon Stow 2009

Dodging the Excise Men – encouraging a tax evasion society

In my business we frown upon tax evasion. It is our duty to uphold the law through helping our clients in their self assessment of their income, profits and their company accounts. We have to tread a firmer line than Joe or Jo Public, though unrepresented taxpayers may make mistakes in the Revenue's favour as well as their own. It is my experience that they do.

This week we have seen further hikes in taxation, principally through National Insurance and more obviously the return to 17.5% VAT. Personal Allowances are frozen for next year, so there will be some increase in the tax take through fiscal drag if there is any inflation in the interim. We will have to see. The Government has to balance the books having borrowed and spent so much on the banks and on the reduction in VAT this past year, the latter with no perceivable effect on the economy as many of us predicted in November 2008. It has to be paid for, and the full horror of the eventual deficit has yet to be revealed, and will only be known after the election next May, when either the Tories will be biting the bullet amidst squeals, or New (Old) Labour will have to come clean.

In the past, the higher the level of taxation, the less actual tax take. The lower the rates, the higher the honesty level and the better the tax take. This was seen notably in the tax-cutting eighties in the UK and especially under Reaganomics in America when the IRS profited greatly from lower rates of taxation.

People are going to be much less willing to pay their legal dues and HM Revenue & Customs do not have the resources to enforce payment through more investigation. I am not sure they even have enough resources (people) good enough to deal with the Liechtenstein Disclosure Facility. If you want a steady flow of anything including tax, you need a reliable channel. If you hike up tax, especially with HMRC's technical staff pared to the bone it is like trying to collect rainwater in a cup. In a deluge your cup will overflow. Most of it will escape. You need a measured channel and that means a more prosperous economy with a population willing to pay tax rather than driving more people into dishonesty to feed their families.

I think we will inevitably see a return to more dodgy dealing, and it will become popular like the public support for smugglers against the Excise Men in the eighteenth and nineteenth centuries. You will get more questions in shops such as “Do you want a receipt because I will have to charge VAT? Can you give me cash?.” and we know into whose back pocket those notes will go. The trouble is the tax which should have been paid by the trader will be coming out of your and my back pockets instead. How can we have got back to the bad old days?

© Jon Stow 2009


References

Smugglers and Excise Men
Liechtenstein Disclosure Facility

Stirring the pot

I watched with interest the interview on the Accountancy Age website with Dave Hartnett, Permanent Secretary for Tax about the New Disclosure Opportunity (NDO). To quote HMRC,

“the NDO will allow people with unpaid taxes linked to offshore accounts or assets to settle their tax liabilities at a favourable penalty rate. It will run from the 1st Sept 2009 until 12 March 2010.

If you have unpaid tax linked to an offshore account or asset to declare, to benefit from the terms of NDO you will need to notify us AND disclose (tell us the details, calculate the amount due and make a full payment) within a set time limit.”

There will be a specific lowered rate of penalty for those coming forward under the scheme. It is not an amnesty in that tax, interest and penalties will have to be paid; it is simply that the penalty will be fixed at 10% unless people had a letter from HM Revenue & Customs under the original Disclosure Opportunity and passed it up, in which case the penalty will be 20%.

The original opportunity for those with undeclared and taxable offshore income to come forward was in 2007. This followed legal action through which British banks holding their customers' money offshore were effectively obliged to disclose details of the relevant accounts as they have done for many years in respect of UK based accounts. HMRC wrote to the bank customers they thought might have undeclared accounts. This time round, HMRC will write to many more people since they have information from many more banks.

In the interview, Mr. Hartnett admitted that he had no idea of the number of people would come forward or the amount of money which would be recovered. This was an honest reply. We only gleaned that he thought it would be more than under the previous scheme. Pressed on the criticism that the earlier campaign was under-publicised he said that around £1M would probably be spent in advertising and initiatives. I wish HMRC luck with this trawl and will have no sympathy with those continue to evade tax. I will be happy to assist anyone who wishes to come clean.

The NDO is not the only trawl in which HMRC is currently engaged. Many possibly non-tax payers or marginal taxpayers will have received letters in the last couple of weeks asking whether they should still be receiving their bank interest without deduction of tax.

Those recipients I know about actually receive their interest net of tax (and pretty paltry interest it is at current rates), but although some have been happy just to refer the printed note to me, one very elderly lady became convinced HMRC were after her and would take away her pension. That second reaction was extreme, but I cannot help thinking that the distress caused be this second mailshot to people on low incomes will far outweigh the concern of the generally much wealthier recipients of the NDO letter. I am not sure anyone in HMRC will have thought about that and I am sceptical that any significant tax will be raised by this mailshot to the poor and elderly.

© Jon Stow 2009

New tax amnesty and old habits

We are starting to hear a little more about the new tax amnesty in the UK, called by HM Revenue & Customs the “New Disclosure Opportunity (NDO),” which follows on from the 2007 amnesty. Now we know that since the original amnesty, which followed on from HMRC’s victory in the Courts over the UK banks defending unsuccessfully their Channel Island branch customers, HMRC has come by a lot more information. Indeed I can infer from what I have heard on the grapevine that the acquisition of information concerning the Lichtenstein accounts has borne fruit, and will continue to do so. Therefore I think that the NDO is aimed at this particular tranche of (non) taxpayers and may be the reason for the bullish £2Bn tax take punted in the Daily Telegraph report.

I guess my advice to the miscreants would be to grab the 10% fixed penalty (plus interest on late-paid tax) while they can; of course my advice is always to come clean because at least in theory, the more tax the fraudulent evaders have to pay, the less the tax burden for the rest of us (I wish). To my mind, failure to pay thousands or millions in tax which is properly due to the Exchequer is little different from robbing a bank or stealing millions in gold bullion.

There are those who have been caught already between amnesties, which is bad luck or just desserts for not having come forward the first time. There really will be no excuse for lying low in the next amnesty, and to be honest (me, not them) they would be well advised to talk to their tax advisers, accountants or lawyers now in readiness to make complete disclosures. If they do not, or if the disclosures are incomplete then it may well mean jail time (being British and pedantic I would like to say “gaol time”). Still, it might be hard to persuade die-hard evaders to put their hands up.

I am not taking the Revenue’s side so much as the side of truth and honesty. That said, if anyone wants to speak to me with a view to their coming clean on their undeclared income and gains, I will be pleased to represent them in dealing with HMRC as long as I am satisfied they wish to make a full disclosure. Naturally I offer a very discreet and totally confidential service.