Keep your name off the list of shame
The Government's disclosure initiative in 2007, which encouraged taxpayers to own up to undisclosed bank accounts, raised £400m for the Treasury. Further measures could mean stiffer penalties and redder faces.
From April 2009 the Government introduced a new regime with penalties of up to 100% of the tax in question for those who knowingly make incorrect returns. In a sliding scale, no penalty applies for simple mistakes. Those who are deemed careless are likely to be fined up to 30% of the tax. But deliberately understating income will incur penalties of up to 100%. The penalty percentage will also depend on 'taxpayer behaviour' and discounts can be earned for voluntary disclosure.
Lateness penalised
New penalties for late filing of returns and late payment of tax are also in the pipeline. These will include a daily £10 fine where returns are more than three months late and a further 5% late payment surcharge after one year. Where payment is more than 12 months late and the taxpayer has deliberately withheld information needed by HMRC to assess the tax due, a substantially higher penalty of between 70% and 100% of the tax due will also apply. The new penalties will be charged across the range of taxes, including employers' PAYE and NIC payments.
Naming culprits
The Chancellor announced in the Budget the Government's plans to publish names and details of individuals and companies who are penalised for deliberate defaults which lead to a loss of tax of more than £25,000 - unless they have made a full disclosure within a given time limit. Appearing on the 'list of shame' could damage the reputation of high profile companies and individuals and those who operate in regulated industries. All those who incur a tax penalty of £5,000 or more will be required to submit more detailed tax returns for up to five years.
Offshore accounts
Since the 2007 disclosure initiative, when HMRC obtained information from five major banks, it has extended its research into offshore accounts to around 30 other banks and financial institutions and is seeking information from hundreds more. With its New Disclosure Opportunity, running from September 2009 to March 2010, HMRC expects that those with still undisclosed foreign bank accounts will now come forward. Penalties are expected to be limited to 10% for taxpayers who are not with the 'big five' banks, and a higher rate for those who are. Though this higher rate is still to be announced, it is likely to be lower than under normal rules. HMRC says it will pursue rigorously those who fail to disclose under this new initiative.
Disclosure best
Anyone with undisclosed tax liabilities not linked to offshore accounts is still advised to make a voluntary disclosure, rather than face the prospect of discovery, higher penalties, extended monitoring by HMRC and a place on the list of shame.
If you wish to discuss your tax affairs in the light of the New Disclosure Opportunity, please contact your usual Littlejohn tax adviser or email tax@littlejohnllp.com
