Spring cleaning your tax affairs

With HMRC waging war on those who haven't paid what they see as the right amount of tax, could now be the time to spring clean your tax affairs?  

As HMRC's strategy relies on education and persuasion as much as upon prosecution, they have launched several media campaigns encouraging taxpayers to disclose any past irregularities. Various business sectors as well as specific jurisdictions are covered and the offshore facilities are still useful as a low-profile way to regularise affairs for many.

It is still possible to make a full and unprompted disclosure within specified time limits. In return, HMRC generally offers: 

  • Immunity from criminal prosecution
  • Limited penalties
  • Fast track route to resolving the historic position

Of the several disclosure opportunities open relating to specific jurisdictions (Isle of Man, Guernsey, Jersey and Liechtenstein), Liechtenstein remains the most generous offering:

  • 10% fixed penalty on underpaid liabilities
  • No penalty where an innocent error has been made
  • The period for which the outstanding tax liability can be calculated is restricted to liabilities arising after 1 April 1999: the general time limit would be 20 years
  • An option to choose a single composite rate of 40% tax on income to cover all taxes, rather than calculating the actual liability annually. Assurance that the taxpayer will not be subject to criminal prosecution
  • Single point of contact for making a disclosure

If you do not have a Liechtenstein asset to kick-off the process, you will need to acquire one in order to participate in the disclosure facility.  There is therefore a commensurate commitment required and the opportunity is only open for registration for another year. The terms of any future deals are unlikely to be as generous as those available now.

For anyone with past tax irregularities, now is a good time to straighten out your affairs. You will need advice to identify the most appropriate facility to use and we can help you with that which depends upon a number of factors.  The good news is that the Revenue is far more interested in bringing taxpayers into the UK tax system than in launching prosecutions.

If you would like advice on regularising your past tax affairs, please speak to your contact partner or directly to tax partners Clare Munro or Phil Moss

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