Middle-class taxpayers to be offered partial amnesty if they own up to undeclared income

Middle-class taxpayers to be offered partial amnesty if they own up to undeclared income

By Damien Gayle

PUBLISHED: 06:43 EST, 3 July 2012 | UPDATED: 11:03 EST, 3 July 2012

Middle-class taxpayers are to be offered a partial amnesty if they settle their unpaid bills before October.

Higher-rate taxpayers who have not yet completed their self-assessment forms will be given three months to declare any untaxed income they have earned before 2010.

Any who come forward will face reduced penalties of £200, as well as a fine amounting to 10 per cent of their unpaid tax.

Nothing is certain but death and taxes: Higher rate taxpayers are to be offered a partial amnesty if they own up to any undeclared income before October

Fines are usually up to 100 per cent of unpaid tax, while on the spot fines of more than £1,000 can be levied.

Based on the return from previous amnesty schemes, ministers hope the 'Tax Return Initiative' could help to recoup hundreds of millions in unpaid tax. However, critics told MailOnline the amnesty is ill conceived.

Any taxpayer who refuses the last change offer will face aggressive criminal prosecutions from HM Revenue and Customs. 

HMRC are writing to taxpayers who are on the 40 per cent of 50 per cent rate but who have failed to comply with a request to fill in a self-assessment tax return for 2009-10 or earlier.

The Revenue fears that many will have 'gone to ground' and is determined to hold them to account. Tens of thousands of people could be affected.

More than £500million in tax has already been recovered thanks to campaigns against groups like hospital consultants, home tutors, plumbers and eBay traders.

Payments can be made from today from the HMRC website, and the amnesty has a deadline of October 2.

Robert Oxley, Campaign Manager of the TaxPayers’ Alliance said these kinds of amnesties could be avoided if the Revenue simplified it's unwieldy tax code.

'HMRC spends so much time chasing down unpaid tax because of the overly complex and loophole-ridden tax system it’s trying to administer,' he said

'Reform of our weighty tax code is needed or these same problems will continue to occur at the end of every financial year.

'A simpler system would reduce the need for amnesties and ensure that the taxman collects more of what he expects in the first place without having to hunt down revenue months later.'

John Cassidy, a tax investigation and dispute resolution partner at PKF Accountants, said the offer of the amnesty meant HMRC were 'throwing money away'.

He said: 'HMRC knows who has been asked to submit a tax return, and usually where they live and work. So why offer penalty reductions?

'The only reason can be that the amnesty makes life easier for HMRC â€" presumably because it does not have enough staff to chase up the returns it knows are outstanding.

'HMRC regards its recent tax campaigns and amnesties as successful because they have brought in revenue without the administrative work of traditional enforcement activities.

'But this campaign is a step too far and risks making a mockery of the self-assessment penalty regime.'

Phil Berwick, director at law firm Pinsent Masons, urged caution to any taxpayers looking to take advantage of the amnesty.

He said: 'HMRC’s Tax Return Initiative sounds like a positive idea in principle, but as usual with HMRC, it’s not a great idea in execution. Taxpayers should proceed with caution before using this facility.

'If HMRC wanted the scheme to make a difference, the timing is all wrong. Announcing a window that runs for just three months and starts as summer holidays begin barely gives people a chance to take advantage of the initiative.

'Many of the people targeted by this scheme are hard-working people trying to run their own business in a tough economy. They’ll simply be too busy to be able to use the scheme within the limited time given.

Tax crusade: Margaret Hodge, chairman of the Commons Public Accounts Committee, has called for an investigation into tax loopholes

'Moreover, taxpayers should note that this scheme is not an amnesty. There’s no immunity from prosecution, and penalties will be decided on a case-by-case basis.”

'HMRC is essentially asking people to place themselves at HMRC’s mercy. Going by previous experience, this isn’t always a very comfortable place to be. People need to be very careful before they use this scheme, and be aware that they may be better-off using the Liechtenstein Disclosure Facility.

'To make the scheme work, HMRC has to extend the window, and it needs to offer something concrete in return to those coming forward. Otherwise, this initiative is likely to go the way of other initiatives.'

The new initiative comes as Whitehall's watchdog is being pressed to launch an investigation into tax avoidance by the wealthy.

Margaret Hodge, chairwoman of the Commons Public Accounts Committee, suggested last week that the National Audit Office had agreed to look into how HMRC deals with tax loopholes.

The watchdog told Financial Mail it had not yet decided whether to carry out a study, but Revenue officials are expecting a probe in view of the great interest expressed by MPs.

Separately, it emerged last week that the Revenue's top lawyer, Anthony Inglese, may face prosecution over the evidence he gave on oath to MPs on the Revenue's controversial £1.25 billion tax settlement with Vodafone.

The Public Account Committee questioned Revenue officials last week over whether lawyers had been consulted in connection with the deal.

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