Having previously targeted white-collar professionals such as doctors and dentists, HM Revenue & Customs (HMRC) have this month announced a ‘tax amnesty’ for plumbers and those in associated trades. As with the previous industry-specific deals there are various inducements for those who come clean regarding income that they have not declared to the taxman. On this occasion, however, there is also a clear statement from HMRC that anyone (ie. not just plumbers) can use the standard forms to make a disclosure. In addition, all those who voluntarily come forward with an offer to put right their tax position, whether or not they use the forms, can expect very similar terms to apply.

What is on offer?

The Plumbers Tax Safe Plan (PTSP) is designed to facilitate easy disclosure of previously concealed income in return for slightly unusual but generally favourable terms. In particular:

• If you have taken care to make sure that your tax affairs are correct but made an error you will have to pay HMRC what you owe only in respect of the last 3 tax years (2007/8, 2008/9 & 2009/10); no penalty will apply.
• If you have paid too little tax because you have been careless you will have to pay HMRC what you owe only in respect of the last 5 tax years (2005/6 to 2009/10 inclusive); a 10% penalty will apply but not in respect of 2009/10.
• If, however, you have deliberately understated your income, or have not told HMRC about it at all, you may need to pay tax for up to 20 years; a 20% penalty will apply provided you make a complete and unprompted disclosure.
• Interest is chargeable by reference to the normal due date for the tax.
• Disclosures can be made in respect of individuals or on behalf of a company or by those acting as trustees or personal representatives.

If you are intending to use the PTSP you must notify HMRC of your intention to do so by 31 May, and you must make your disclosure by 31 August 2011.

The terms of the PTSP are not available to you if your affairs are already the subject of an HMRC check. Those who were eligible for any previous disclosure opportunity, including those in respect of offshore assets, are likely to be treated as having deliberately evaded tax.

Is this a good deal?

For plumbers and those in similar occupations this does indeed look to be a good deal if you want to achieve a clean slate going forward. If you have other undeclared liabilities that relate wholly to UK matters you should consider whether it is worth making a direct disclosure and claiming the benefit of the PTSP terms. If, however, your undeclared liabilities have an offshore dimension it is likely that disclosure under the Liechtenstein Disclosure Facility (which, despite its name, caters for almost all offshore-related liabilities) will be beneficial. We would advise speaking to your usual UHY contact, or a member of our tax advisory team, in respect of your personal circumstances.

Why are HMRC doing this?

HMRC offer ‘amnesties’ as a carrot for those with undeclared liabilities to come forward to save them the effort of tracking you down. Generally, they have information in their possession (in the case of plumbers, obtained from trade directories and internet research) that will lead them to you eventually but they are conscious that sifting through this information may take them several years.

What do I need to do?

The PTSP forms essentially require you to ‘self assess’ your tax liabilities and interest charges and to apply the appropriate penalty. Most of those who accept the opportunity to disclose will need professional assistance to do so. More importantly, however, if you have substantial liabilities (probably non-plumbers on the whole) you will need to take advice on whether to use the PTSP, whether it is better to make a separate disclosure or whether, if there is an offshore element, you might be able to take advantage of the LDF. More information about the LDF can be found on our website at www.uhy-uk.com/ldf. If you fall into this group, the right advice can make a significant difference to your liabilities and to the question of whether your disclosure is accepted or rejected.

If you – or a family member, whether living or recently deceased - have an undisclosed tax liability you can discuss your situation on a no-names basis with a tax specialist at your local UHY office.