Plumbers Tax Safe Plan

 

This article from Heating and Plumbing Monthly


How safe is the Plumbers' Tax Safe Plan?


 



Last month, HPM highlighted that HM Revenue & Customs is clamping down on tax evasion by plumbers, gas fitters and heating engineers.  lain Macleod, of EDF Tax, gives more details about the scheme and offers advice...
First of all, most people won't need the Plumbers' Tax Safe Plan (PTSP) as it's only for those who have sent in wrong returns or have never told HM Revenue & Custom (HMRC) they are in business. For those of you that could use it, it's a chance to sort things out before HMRC come after you.


The penalty is a lot less than under a conventional investigation. In nearly all cases, disclosures will be accepted with no further questions. There's no need to meet an inspector, and the strain and cost of a typical investigation is avoided. If you haven't got all or any of the records for omitted profits, HMRC will accept reasonable estimates. These estimates would have to be based on whatever evidence was still available, but it would not be wise to make unrealistic guesses. If a disclosure under the PTSP is seriously wrong, all the benefits will be withdrawn. Get help from your usual accountant or a specialist tax adviser, if you're unsure about what would be accepted as 'reasonable estimates'.


You can register and make your disclosure yourself or an adviser can do it for you. While the PTSP is aimed at income from plumbing and related trades, all tax problems (income tax, PAYE, NIC, corporation tax and even capital gains tax) have to be disclosed so you settle all tax issues at once. HMRC conducts criminal investigations into tax fraud. However, while it does not give a guarantee, it is most unlikely that anyone making a full disclosure under the PTSP will face a criminal investigation.

 

WHY PLUMBERS?


HMRC has improved its information gathering and analysis techniques and over the last year or so, it has been using its powers to gather information about the plumbing industry and the people that work within it.
It must believe it has enough information to justify thousands of investigations and hopes that most people with problems will come forward by making the PTSP attractive enough to give those who disclose now an advantage over those who don't. HMRC wouldn't have introduced this scheme if it wasn't sure it had quality information about lots of wrong returns. Those who don't use the PTSP and are caught later will end up paying a Iot more.
Once the registration deadline of May 31, 2011, has passed (disclosure must be made by August 3I, 20ll), tax inspectors will start Plumbers are among those being targeted by HMRC investigating people about whom they have information. That information could suggest profits have been understated or that people have never registered for tax. If you could have used the PTSP but are investigated, then any penalties due will be a lot more than under the PTSP.


Also, HMRC may decide to take tax for more years and although inspectors are professional and courteous, a detailed investigation is often stressful and can be very expensive in adviser's fees.
HMRC says that when a VAI problem is disclosed it 'will contact you to explain what you need to do to put your VAT affairs in order'. Also, if Class 2 NIC is due, HMRC should be separately informed. If additional income was received, this could impact on any Tax Credits awards so the Tax Credit Office should also be informed.
If you are already being investigated by HMRC or have been involved in serious organised crime, you can't use the PTSP. If someone deliberately completed incorrect tax returns or never disclosed plumbing income at all, then HMRC can go back 20 years.


But, if someone was merely careless then HMRC would just go back to 2005106.If someone tried to make a correct return but, despite reasonable care, still got it wrong, then only tax from 2007108 would be due.
People might want to take advice on this point. If someone decides to use the PTSP but discloses only four years when it should have been more, then he could be worse off. HMRC will check all disclosures made and if the inspector thinks more years should have been disclosed, the benefits of the PTSP will be lost and the penalties will be greater.
Penalties in a standard investigation can be 100% of the tax not paid, but are usually a lot less. The PTSP penalties depend on why things are wrong. If a return was wrong despite reasonable care, then there would be no penalty but you can expect HMRC to be sceptical.


If a return was wrong because of carelessness, it will be 10% of the tax but no penalty at all for 2008/09 and 2009/10. If you didn't tell HMRC you were trading but this was down to carelessness, I0% of the tax will be payable but there will be no penalty for 2009/2010.


If a return was deliberately wrong or you deliberately didn't tell HMRC you were trading, it will be set at 20o/o of the tax. Unfortunately, HMRC says the favourable PTSP penalties don't apply if you deliberately sent in wrong returns and took steps to conceal what you had done.


By comparison, if someone could have used the PTSP but doesn't and is later investigated by HMRC, then the penalties will be a lot more. In some cases, this could be 500/o of the tax. In most cases, HMRC will want all the money by August 3I, 2011, but it may consider instalments. If you need time to pat it's important to speak to HMRC soon.


WHAT NEXT?


If you think the PTSP is for you, there is good information on the HMRC website:
http ://www.hmrc. gov.uk/trades-disclosure/index.htm. You can also ring the
HMRC  on 0845 600 4507.
It is essential that the disclosure is correct and complete so you might want to consult your usual accountant or a specialist tax adviser. EDF Tax, for example, can help new clients with tax due, reasonable estimates, number of years, the right penalty rate, accurate completion of the HMRC forms and advice on instalments.

 

MAY 2011 HEATING & PLUMBING MONTHLY

 


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Plumbing Tax Safe Plan