HMRC have introduced a number of disclosure facilities over the last few years, incentivising individuals to come forward on a voluntary basis and make a full disclose of their tax misdemeanours. The most recent of these is the historic Swiss-UK agreement which will come into force in 2013 and symbolises a significant shift in the way in which perceived tax evasion is being tackled globally.
The quid pro-quo for making a voluntary disclosure is much more preferential terms of settlement than if HMRC undertake their own investigation which would lead to a much higher penalty charge, and at worst a criminal investigation with a view to prosecution.
HMRC have made clear their harsher stance and more focused approach on tax evasion, and official statistics suggest that the number of criminal prosecutions undertaken by HMRC have increased by a significant proportion over the last year. HMRC have received criticism that in order to meet with this new policy line they will need to recruit more specialist tax investigators. A view HMRC have recognised and are apparently set to re-deploying in the region of 2,000 staff to anti-evasion units across the UK.
HMRC also appear to be going to great lengths to publicise recent prosecutions. One such case recently highlighted by HMRC involved a financial adviser jailed for three years for evading tax of over £1.9 million. In the immediate aftermath of the case, HMRC said:
“HMRC will not tolerate this type of blatant fraud and will investigate and prosecute those found to be involved in stealing from the public purse. If you have any information about tax fraud please contact our 24 hour hotline on 0800 50 5000”
This is the clearest message to date of HMRC’s tough new approach.
VAT Disclosure Facility
The VAT disclosure facility, which is aimed at businesses trading above the VAT registration threshold and who have failed to register for VAT, have until 30 September 2011 to register and pay what they owe to HMRC.
Any disclosure made under this facility, assuming a full disclosure is made, will face a much lower penalty rate of 10% on VAT that has been paid late. Failure to take advantage of this disclosure facility, who are later investigated by HMRC for this failure, will incur substantial penalties of up to 100% and even criminal prosecution.
Disclosures, whether voluntary or otherwise, are often a complex and difficult process, and we would recommend expert advice if you or one of your clients may be affected by any of the issues we have raised. Mazars Tax Investigations Team includes former HMRC investigators with extensive experience of HMRC practice and advice on best practice if a client wishes to make a voluntary disclosure of irregularities to HMRC.
If you would like to talk to one of the team on voluntary disclosures or any other area you think you or your client may be affected, please contact one of the team as follows;
Jon Claypole (Partner) – 07794 031 354 or firstname.lastname@example.org
Gary Brothers (Director) – 07794 031 487 or email@example.com
Stephen Outhwaite (Senior Manager) – 07794 031 401 or Stephen.firstname.lastname@example.org
Sarah Stenton (Assistant Manager) – 07794 031 450 or email@example.com