HMRC’s tax return campaign
HMRC has announced its latest tax campaign. This time, rather than being aimed at an industry specific group, it is a more general opportunity aimed at higher rate taxpayers helping them bring their tax affairs up to date, called the ‘tax return initiative’.
Previous campaigns targeted offshore investments, medical professionals, private tutors and coaches, plumbers, electricians, VAT defaulters and online traders. According to HMRC, these campaigns have so far yielded nearly £510m from voluntary disclosures and over £120m from non-compliance follow-up from a large number of civil interventions, including over 18,000 completed investigations. HMRC said: ‘There are also 23 criminal cases underway, and one man, a plumber, was recently sentenced to jail.’
This campaign again adopts a ‘carrot and stick’ approach, with the carrot of reduced penalties if the taxpayer makes a disclosure and payment by 2 October and a stick of the full weight of the penalty provisions and the possibility of criminal prosecution if it is not taken up.
Who is the campaign aimed at?
The main target is higher rate taxpayers in employment or self-employment, who should have returned other forms of income, such as taxed bank interest or dividends and paid higher rate tax accordingly through self assessment, but who have not done so.
It applies for tax years up to and including 2009/10. The campaign targets both taxpayers who have been asked to submit returns and those who have not. It is interesting to note that the scheme applies to non-submission of returns already issued to the taxpayer for submission. This is a new feature which we have not seen in previous campaigns.
To take part in the tax return initiative, taxpayers will need to notify HMRC by completing an online form and sending it to HMRC either electronically or by post. The outstanding returns, together with any outstanding amounts due, need to be submitted to HMRC by 2 October 2012. If a taxpayer cannot pay the full amount due, they are encouraged to call a special helpline on 0845 601 8818 to enter into a ‘time to pay’ arrangement.
Advantages of the scheme
The main advantage of the scheme is that it offers a degree of protection from tax-geared penalties. HMRC is advising that:
- the fixed filing penalties of £100 which become due if the return is return is more than six months late, plus any interest and late payment surcharges will remain due;
- with regard to tax-geared penalties, which can be as high as 100% of the unpaid tax due, HMRC will offer ‘the best terms on offer and HMRC expects that most will not have to pay this penalty’. Interestingly, previous campaigns offered a guaranteed level of penalties, whereas this one simply offers the ‘best terms on offer’.
What are the consequences of not taking up the opportunity?
HMRC advises that it is reviewing its records and identifying individuals who have failed to comply with their obligations to submit their tax returns and that:
- HMRC will use its powers to issue best judgement determinations and seek payment of the determined tax through tax demands, telephone calls, personal visits and ultimately using the courts;
- HMRC will also seek tax geared penalties of up to 100% of the tax due for late returns where individuals do not take advantage of this opportunity;
- HMRC may also consider a criminal investigation, in line with its criminal investigation policy.