Taxman in major crackdown on failure to disclose details

A NEW crackdown targeting middle and high income earners who failed to declare tax through the self-assessment  system has been launched by under-fire HM Revenue & Customs.

It is offering favourable penalties for people coming forward voluntarily, with those failing to do so facing possible  conviction.

Experts claim the new campaign is a waste of money and warn that it could undermine the self-assessment system, with some people facing fines even if they have paid the right amount of tax.

It comes just days after the National Audit Office revealed that HM Revenue & Customs (HMRC) wrote off around £5.2 billion in tax last year.

It failed to chase up some £756m worth of income tax in the 2011/12 financial year. Yet the campaign launched this week is the latest of several aimed at  people who may have failed to disclose their tax affairs.

Dentists, doctors, plumbers, internet traders, self-employed tutors, electricians and restaurant staff have all been targeted in a flurry of HMRC crackdowns over the past two years.

The campaigns have raised some £500m so far as the revenue comes under growing pressure to boost government coffers. Now it is looking to track down 40 and 50 per cent taxpayers who failed to submit self-assessment tax returns for the 2009/10 tax year, or earlier.

The latest amnesty – the Tax Return Initiative – offers those who come forward voluntarily the chance to avoid the normal fine of up to 100 per cent of the tax due.

Anyone with income from before 2010 that they haven’t declared through self-assessment or paid tax on has until 2 October to do so. In return, they will only have to pay that tax, plus a fixed late payment penalty of £200 and 10 per cent of the unpaid tax.

HMRC has warned that higher rate taxpayers it believes owe money and who fail to come forward will be pursued aggressively and possibly face legal action.

Marian Wilson, head of HMRC Campaigns, said: “Penalties will be higher if we come and find people after the opportunity and some could face a criminal investigation.

“I urge people to come forward and disclose unpaid tax voluntarily”.

But the deal has been attacked by experts as unnecessarily lenient. George Bull, of accountants Baker Tilly, said: “People who sign up for the 2009-10 (and earlier) amnesty may be treated more leniently than those who have already filed late for any of those years and were charged interest and penalties.”

And Neil Whyte, tax partner at PKF in Edinburgh, claimed HMRC was wasting money by offering favourable penalties.

“Experienced advisers can often negotiate a tax-geared penalty of less than 100 per cent, so offering a widespread amnesty like this seems like throwing away money. HMRC knows who has been asked to submit a tax return, and usually where they live and work. So why offer reductions?”

One reason could be a lack of resources to chase up unpaid tax, with HMRC staff numbers set to fall to 55,000 by 2015, almost half the level of 2005.

If you believe the latest amnesty applies to you, let HMRC know. You will then have until 2 October to complete a self-assessment return and pay the tax due.

• For more information, call HMRC on 0845 601 8818.