Plumbers in the firing line for taxmen

Plumbers in the firing line for taxmen

A new amnesty for plumbers looks generous but experts say such offers should be used more widely

THE PLUMBERStax safe plan (PTSP), revealed by Accountancy Age, signals a change in HMRC policy concerning disclosure agreements. Unlike previous amnesties for medical professionals and those with offshore accounts, this scheme is not based on information unearthed about plumbers’ accounts. Whereas the carrot is just as sweet as previous agreements, the stick is not quite as scary.

The terms offered to plumbers compare favourably to the agreement’s predecessors. Like the Tax Health Plan (THP) and the Liechtenstein Disclosure Facility (LDF), there is a 10% penalty for most plumbers who come forward. In common with the THP, the PTSP only goes back five years – compared with ten years for the LDF.

But the stick hovering over Liechtenstein account holders and doctors and dentists was more real – information about extra income streams in the case of the THP and stolen data from Liechtenstein. It was this intelligence that acted as the trigger for the agreements.

This time round, the trigger has been information from HMRC’s own inspectors on the ground that plumbers (though, the revenue is keen to stress, only a minority) do not fully declare their taxes. From a logical angle, there is great opportunity for people to under-declare tax in any profession where a lot of the work is cash-in-hand.

Alongside this, the taxman has obtained information from Gas Safe – the regulatory body for the profession, previously known as Corgi – on the identities of the 200,000 plumbers operating in the UK. It has also highlighted the benefits of the “Connect” system, which allows it to cross match a billion items of its own and third party data to “uncover hidden relationships” between people, organisations and data that it could not previously identify. This has already discovered fraud worth £330m.

There are bound to be cries of discrimination that this applies to one profession. The Chartered Institute of Taxation has called for a general amnesty to apply to anyone, and John Cassidy, tax investigations partner at PKF, among others, criticised the THP for not applying more widely.

But these criticisms might be wide of the mark. For one, the tax-evading lawyer who is jealous of his neighbour the plumber will not get much sympathy from the wider taxpaying public, as he is evading tax in the first place. HMRC has said repeatedly that anyone who comes forward would be treated favourably, and has hinted this would be even more the case during this disclosure agreement period.

The taxman would also stress that the cash-in-hand plumber who is determined to evade tax should consider this an unfortunate announcement as the department will target suspect plumbers that have not entered the agreement before the 31 May deadline. They would likekly get higher penalties than even their lawyer neighbour for having passed up the opportunity given to them.

But herein lies the problem. For the determined tax evader, the size of the penalty is not the issue – the chance of getting caught is the biggest deterrent. Without specific information regarding specific accounts – as was the case for Liechtenstein account holders and doctors & dentists – the stick might look big, but it is harder to wield.

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