Tax Amnesty for Plumbers (and others)
If you have under-declared tax in earlier years, HMRC would like you to tell them. To encourage you, they are now offering a special tax deal to plumbers and others in the heating industry (called the Plumbers Tax Safe Plan “PTSP”), which reduces the penalties. Even if you are not involved in the plumbing or heating industry, they say very similar terms are available if you make a voluntary disclosure to them.
The terms include:
Penalties will be a maximum of 20%, and may be lower. The maximum 20% will apply if you deliberately understated your tax. However if the understatement was a careless error, the penalty will be 10% and if the error occurred despite taking appropriate care, there should be no penalty.
Most people will only have to pay tax for 4 or 6 earlier years, though if you have deliberately understated your earnings, you could have to pay tax for up to 20 years (also depending of course on when you started your business).
Interest will be payable for the period from the date the tax should have been paid.
If you can’t afford to pay all the outstanding tax, interest and penalties by 31 August 2011, you may be able to arrange to pay in instalments.
The procedure is that you (or your tax agent) register under the PTSP by 31 May 2011. You then calculate the full amount of tax, interest and penalties you think you need to pay and submit this by 31 August 2011. As this can be complex, it is recommended you get professional assistance. Full payment is also due by 31 August 2011, unless you agree otherwise with HMRC in advance.
It is important to remember that any disclosure may also affect VAT, tax credits and other means tested benefits.
If you don’t take advantage of the PTSP and HMRC later discover you have under-declared tax, their enquiries will be far more intrusive and the terms for any settlement will be far less favourable, for example HMRC may seek tax for up to 20 earlier years and penalties of up to 100%. HMRC say they are actively gathering data to identify under declaration of tax by plumbers and similar workers.
Don’t delay if you want to make a disclosure under the PTSP. Remember you need to register by 31 May 2011 and then calculate all outstanding tax liabilities and make a full disclosure by 31 August 2011.
Details are available on the HMRC website http://www.hmrc.gov.uk/trades-disclosure/index.htm
You are welcome to contact us if you want to discuss this further.