HMRC Crackdown on Tax Evasion

HMRC is presently pursuing a number of campaigns designed to target taxpayers who have been less than forthcoming in declaring their taxable income and gains.

This update summarises these campaigns.

Liechtenstein Disclosure Facility (LDF)
A new penalty regime was introduced allowing for a higher penalty for taxpayers who fail to provide a full account of their income tax or capital gains tax liabilities, where the failure is linked to an offshore matter. The penalties came into force for tax periods commencing on or after 1 April 2011. The new penalty regime is linked to the tax transparency of the territory in which the income or gain arises and penalties can be as high as 200% of the tax due. The only remaining HMRC offer to encourage disclosure is the Liechtenstein Disclosure Facility (LDF) that allows penalties on unpaid tax to be capped at 10% of tax evaded over the last ten years. The LDF commenced on 1 September 2009 and will run until 31 March 2015.

Restaurant Sector
The targeting of restaurants is not an amnesty and unlike some other initiatives, which seek to tempt taxpayers to come forward under favourable terms, there is no formal disclosure facility on offer. HMRC inspectors will therefore have the full range of civil and criminal sanctions at their disposal. This includes the likelihood of restaurants having to repay any unpaid tax, interest and penalties. The worst offenders could face criminal investigation and prison. Any restaurant business that has deliberately evaded tax should take urgent action to make a pre-emptive voluntary disclosure to HMRC.

The VAT Initiative campaign offers businesses the opportunity to inform HMRC that they should have been registered for VAT. The last day to notify HMRC of an intention to take part in the VAT Initiative is 30 September 2011. The deadline for returning the completed VAT registration form (VAT1) to HMRC is 31 December 2011.

Other Forthcoming Campaigns
New campaigns which are expected to begin later this year and next year will target the following areas:
• Individuals who provide private tuition and coaching without declaring their income.
• Individuals and businesses that buy and sell goods online as a trade and who fail to pay the tax due.
• Other business sectors where there is evidence of tax evasion. This campaign will be based on HMRC's campaign to target plumbers and give an opportunity to other groups of trades people to come forward and declare unpaid tax.
Any individual or business that has deliberately evaded tax should take immediate action to make a pre-emptive voluntary disclosure to HMRC. Please contact us if you feel you may be affected by the issues raised in this update.

Disclaimer – Please note: The ideas shared with you in this article are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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