Help for the practitioner

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I mentioned earlier today that I felt the combined tax institutes advice to their members on how to deal with HMRC's 'tax amnesty' was 'pathetic'. In particular I thought the letter they suggested be sent a client missed the required target by a mile.

So, in a spirit of goodwill I'll tell you this is what I'm sending my clients:

Dear X

I'm writing to you because my professional institute have advised me to do so. If this letter has no relevance to you, please accept my apologies.

As you may have seen in the press, HM Revenue & Customs announced a scheme last week that allows those who have held offshore bank accounts on which they have not declared interest earned for tax purposes to do so with significantly reduced penalties being due. Somewhat less publicity has been given to the fact that anyone who knows they have made an error on a past tax return which has resulted in less tax being paid than was really due can also make voluntary declaration of that fact at the moment and enjoy the same reduced penalty rate.

I would stress, if you believe that you've either correctly declared all interest you've ever earned on an offshore bank account for tax purposes or you have no other tax issues that you think should be declared now to set your tax record straight, you can safely ignore the rest of this letter and I'm sorry for troubling you.

If however you have had an offshore bank account on which you have not declared the interest or there are other tax issues you wish to declare and have not previously done so then the current 'amnesty' gives you an opportunity to do so relatively straightforwardly, with lower accounting costs being likely than normal and with a much lower rate of penalty being due on any unpaid tax at just 10% compared to 30% - 50% which is likely after the 'amnesty' is over. I should also add that if your offshore account was with Lloyds TSB, Barclays, HSBC, HBOS or RBS / Natwest then it's highly likely that the Revenue already know about it, and they will pursue you if you don't voluntarily declare the tax you owe now.

There are four further things to mention at this stage:

1. The 'amnesty' is only on tax penalties. All tax will still have to be paid, as will interest for the period during which it has been unpaid. If you have not declared any income quite serious overall liabilities might have arisen as a result;
2. You have until 22 June to tell HM Revenue & Customs that you want to take advantage of this disclosure regime and apply for the reduce rate of penalty. If you don't tell them by then the lower rate of penalty will not apply. As such a decision has to be taken very soon;
3. If you have decided a disclosure needs to be made then you have until 26 November to provide all information the Revenue need to ensure that you have paid all tax, national insurance, VAT, interest and penalties due as a result of the previous error. If you do not make full declaration or pay in full by that date then the 'amnesty' does not apply;
4. It is expected that most voluntary declarations made under this scheme will be accepted without further enquiry being made. If, however, your disclosure suggests more serious tax issues have arisen or that another crime has taken place then the Revenue have given no undertaking not to pursue the matter further.

Put simply, these facts mean that time is of the essence because if there is a matter to declare then information has to be located for it over the entire period during which nondisclosure took place and then all the resulting consequences have to be calculated. This will take time, and may require quite a lot of work on your and our part. I would also add that we will need to agree separate terms for this work from those that we normally undertake for you.

I would stress that if you think this matter might be relevant to you then I would hope that you will now declare all income that should have been declared previously. If you do decide to do this I would also add that once I am aware of this need to make declaration that I could not then ignore that fact if, for example, having seen the calculations you decided you did not want to proceed with telling the Revenue. That is an option that the professional ethics and regulations of my profession do not allow. As such this is a serious matter.

In that case if you want to read about this issue before discussing it with me please do at HM Revenue & Customs' web site relating to this matter at https://disclosures.hmrc.gov.uk/oaics/

As mentioned at the outset, if this letter does not relate to any issue about which you have concern, I am pleased and apologise for troubling you. If it is of concern to you, I assure you I will seek to help you to resolve this matter, but I stress again that time is of the essence and to ensure that the first deadline can be met I will need to hear from you by no later than 25 May if I am going to have the necessary time to help you decide how to proceed and meet the Revenue's timescale for disclosure.

Yours sincerely

If this helps, please feel free to use it as you will, although I would add that no liability is accepted if you do.