What if you get caught out by the tax man?
We all have a duty to pay the correct amount of tax however there are a number of people out there who try to avoid doing so. The black economy of those people who under declare their earnings purposely seems to be thriving. It can be argued that these people are helping none of us and if everyone were to pay correctly we would all, in theory, have to pay less.
HM Revenue & Customs have a responsibility to check we are all paying the correct amount of tax and from April 2009 changes are being introduced which should assist them in policing the tax system and help to discourage people from under declaring intentionally.
The new system will bring in line the penalties structure for all of the different taxes as opposed to having a different regime for each tax. Under the new system the level of penalty where there is an under declaration will be determined by: a) the amount of tax involved; b) the nature of the behaviour resulting in the tax loss; and c) the extent of disclosure by the individual and whether it is prompted or unprompted. HMRC do recognise that genuine errors occur and in certain circumstances will not apply the penalty.
The amount of the new penalty will be: between 0% and 30% of the tax for careless action; between 20% and 70% for deliberate actions which are not concealed and between 30% and 100% for deliberate actions which are concealed. There will also be tax related penalties for not advising HMRC of a new source of taxable income.
To accompany the new penalty structure HMRC are to have new powers to investigate personal tax affairs. There are also to be more demanding requirements in respect of record keeping together with a right for the records to be viewed at the business premises. If the person works form home, home visits will be permitted.
The time periods over which HMRC may investigate are also to be standardised across all taxes. For all taxes HMRC will be able to go back four years if there is a discovery of tax loss, six years where there is a failure to take reasonable care and twenty years in cases of deliberate understatement.
There will always be those who will try to evade their tax liabilities and under declare their income but those who do should be warned, if you get caught it will become a whole lot more expensive and you are more likely to be caught. If you consider you may need to make a declaration before you are caught contact us for further advice and we can help you consider your course of action.
Biggleswade Chronicle - 15th August 2008