HMRC: lower penalties

HM Revenue & Customs (HMRC) is expecting a rush of solicitors owning up to income they have not declared as next Monday’s deadline for the ‘Solicitors Tax Campaign’ draws near.

Solicitors have also been warned that if they do not take part but are later found to have not disclosed income, they could be named and shamed by the Revenue.

The campaign is the latest of what HMRC described as a “voluntary, intelligence-led disclosure opportunity” that has to date raised nearly £1bn from targeting a host of other sectors, from doctors to plumbers.

Solicitors have until 9 March 2015 to tell HMRC that they would like to take part in the campaign, and until 9 June 2015 to disclose the tax they owe and pay it.

An HMRC spokesman declined to say how many solicitors had come forward since the campaign began in December, but said there was always a rush in the last couple of weeks of such exercises.

By by coming forward voluntarily, any penalties solicitors might have to pay will be lower than if the taxman has to approach them first, HMRC has said.

The penalty will depend on why the solicitor failed to disclose income – deliberately keeping information from HMRC will result in a higher penalty than in the case of a simple mistake.

In the case of a careless mistake, solicitors would only pay for a maximum of six years, no matter how many years they are behind with their tax affairs.

Solicitors who do not come forward could face a penalty of 100% or more of the tax due or criminal prosecution.

HMRC said: “However if you don’t come forward and HMRC finds later that you’re behind with your tax, it may be harder to convince HMRC that it was simply a mistake, the law allows HMRC to go back up to 20 years in serious cases or HMRC may carry out a criminal investigation.”

Once the 9 March deadline passes, HMRC said it will review the tax affairs of those customers it believes should have, but did not, come forward, identifying them by comparing the information already in its possession with customers’ UK tax histories, and continuing to use its powers to obtain further information about other payments made.

Pam Sayers, tax partner at accountants Smith & Williamson, said: “It is important that solicitors take tax disclosure seriously and comply with HMRC’s deadlines as the tax authorities are threatening to name and shame those who ignore the facility. This is not an empty threat as HMRC has in the past released details of certain tax offenders to the press.

“Solicitors need to bear in mind that HMRC is equipped with copious detail, including for example, legal aid payments, which it can compare with solicitors’ self-assessment tax records to consider whether individuals have made complete tax returns.

“My advice is simple. If you have undeclared income of any origin, it’s better to come forward than wait for HMRC to reach you.”