Questions have been raised about the effectiveness of the various amnesties
being offered by the taxman with advisers suggesting that uptake has been
disappointing and a more constructive approach could be required.
Advisers believe offshore account holders were calling the taxman’s bluff and
holding firm, rather than coming forward voluntarily.
HM Revenue & Customs is hoping to smoke out people with undeclared tax
liabilities by offering tax amnesties, but data reveals barely 2,000 out of tens
of thousands have come forward so far, suggesting that those being targeted do
not fear being discovered.
The taxman gave an opportunity to disclose undeclared income for more than
28,000 doctors and dentists in its Tax Health Plan while the Liechtenstein
Disclosure Facility hopes to bring people with undeclared offshore accounts into
However, the taxman has already decided to water down the Tax Health Plan
amnesty by extending the deadline after only 1,500 came forward, revealing £9m
of undeclared income.
Despite HMRC targeting 308 banks to provide details of clients with offshore
bank accounts in the LDF, only 419 individuals have come forward out of the
several thousands that advisers say the taxman is aiming at.
Gary Ashford, tax partner at RSM Tenon and chairman of the CIoT’s
sub-management committee said he was surprised at the lack of response by
doctors and dentists which showed up the flaws in the policy.
As a result, Ashford believes HMRC will change tack in the future. “This is
the first of HMRC’s sector focussed schemes so we imagine the next one may look
a little different to try to increase its effectiveness,” Ashford said.
Taxpayers could now be hedging their bets and waiting for the taxman to act
first, advisers say.
“There is an element of that in any amnesty, whether it be doctors, dentists
or Liechtenstein,” said John Cassidy, tax investigations partner at PKF.
Cassidy said key legislation becoming active in Liechtenstein in September
could be a trigger point for more people coming forward.
From that date Liechtenstein banks, financial advisers, trustees and other
wealth managers will have three months to notify any of their clients who they
suspect of having undeclared tax income that they must disclose it.
The three-month period begins on the date the financial institution
identifies a client as being, for example, a UK citizen.
However, others have said that continuing uncertainty surrounding the
amnesties is discouraging them from promoting the opportunities to clients.
Phil Berwick, director of tax investigations at law firm McGrigors, said
better promotion of disclosure schemes was required, as a lack of advertising by
HMRC has left advisers worried about promoting them to clients.
“HMRC’s stance has created an atmosphere of rumour and misunderstanding about
the LDF, and meant that some advisers are reluctant to involve their clients in
But the taxman has rejected these suggestions, with one source branding them
“The key legislation doesn’t even take effect in Liechtenstein until 1
September so it’s ridiculous to draw conclusions at this stage,” the source
said. “LDF is going super well, any suggestions otherwise is balderdash.”
HMRC has confirmed it will not deviate from its chosen path, which encourages
people to come forward voluntarily, but warned that those who did not could face
criminal prosecutions in the most serious cases.
“We are very happy with the response to the Tax Health Plan campaign. We
didn’t have a target in mind but nonetheless the campaign has resulted in
millions of pounds of tax that might otherwise have been lost being paid to HMRC
as required by law.”
Since the latest figures to March 2010 were released, the numbers coming
forward in the LDF have increased significantly, according to HMRC.
“We are very pleased with the way the LDF is going and money from previously
untaxed accounts is already coming in. The LDF runs until 2015.”
Advisers and taxpayers will be keeping a close eye on how the situation
develops but the source at HMRC issued a stark ultimatum: “We’re only 50 yards
into a marathon. Those who don’t come forward will face naming and shaming and
in the most extreme cases will be prosecuted.We always win in the end.”
Does Darwin's theory apply to taxation? Colin ponders...
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