Under the Plumbers Tax Safe Plan, plumbers who have not declared all their taxable earnings in the past can come forward by 31 May to tell HMRC that they intend to confess. If they subsequently make a full disclosure, most face a low penalty rate of 10 to 20 per cent.
This offer is open not only to plumbers but also to gas fitters, heating engineers and members of associated trades.
Problems with HMRC’s approach
Complexity
If plumbers have a tax agent acting for them, they should have been paying the correct amount of tax year by year. If they do not have an agent and now they want to wipe the slate clean, then HMRC have presented them with a dilemma.
The disclosure process that HMRC have devised is suitable for University Challenge contestants. Pages and pages of detailed notes to read, calculations to do, jargon to understand and difficult judgement calls to be made.
We have reviewed it all and decided that we cannot advise unrepresented plumbers to try and do it for themselves.
There is just too much risk of getting it wrong and the hours that will have to be spent poring over the detail might just be better spent earning some fees to pay for the tax agent’s bill.
So the advice is, if you want to put your tax affairs in order, go and employ a professional tax adviser.
Risk
If one part of HMRC (dealing with the main taxes) offers you a special deal does this apply to other parts of HMRC or the Department for Work & Pensions or local authorities?
The answer is a clear “no” so if you have been claiming too much in means-tested benefits such as council tax benefit or housing benefit, or in tax credits such as working tax credit, then the promise that HMRC make not to prosecute or levy a greater penalty does not bind those other parts of government, even if they are part of HMRC. You can disclose safely to one part of HMRC but still get prosecuted by another part of HMRC, or another government agency, for the same offence.
Scope
If you read the small print of HMRC’s offer it is not really at all special for plumbers. Anyone approaching HMRC voluntarily should expect to get a similar deal; but the threat to plumbers is rather greater as HMRC have spent the last year or so scouring through the internet or your local papers for evidence of plumber activity. So they may know something about you.
That being so, it is advisable not to delay to take advantage of this offer, as it is entirely possible that HMRC will launch an enquiry into your tax affairs in the meantime.
Conclusion
It will be interesting to see if the significant investment by HMRC in this initiative produces equivalent yields. It is ironic that this is actually an offer to everyone, but HMRC are reluctant to tell you that.
Next time HMRC do this we would like to be able to applaud them for designing something simple that achieves the objective of bringing in large numbers of people from the informal economy.
(01-03-2011)
Contact: John Andrews (please use form at http://www.litrg.org.uk/ContactUs)
