Pictured above: Iain Macleod

A deal offered by HMRC for traders working in the plumbing, heating and gas installation industry to come clean about undisclosed income, the Plumbers Tax Safe Plan (PTSP) has scope for anyone to put their tax affairs in order, says Iain Macleod at EDF Tax.

"Although the scheme is not a general tax amnesty, a review of HMRC's guidance on the PTSP indicates that similar terms could be available to anyone who comes forward to disclose an undeclared tax liability," says Iain, a former tax inspector for 26 years and now head of Tax Investigations at EDF Tax. "The deal, which ensures users avoid a hefty penalty that would otherwise be imposed if they were caught evading tax, either intentionally or in error, is available to both businesses and individuals.  Even people without a business but have an undeclared investment income, for example, could make a clean breast of it using the PTSP forms."

The PTSP builds on previous amnesties to doctors and dentists, as well as those relating to offshore bank accounts and use of the Liechtenstein tax haven. Anyone using the scheme can typically secure a modest penalty addition of just 10% of the tax underpaid in the past five years, as opposed to the maximum of 100% penalties which HMRC could usually seek. Iain comments: "Is it a good deal? Yes and it's a chance to sort things out before HMRC comes after them.

"HMRC has improved its information gathering and analysis techniques over the last few years, and wouldn't have introduced this scheme if it wasn't sure it had quality information about lots of wrong returns for workers in the plumbing and heating sector. If disclosures are not made by the deadline of 31 May, HMRC will engage in targeted investigations into all traders identified through its research as evaders who have failed to offer a voluntary disclosure. The penalties then will be much higher. Research and investigations into other trades are also likely to follow."

HMRC has stated that a maximum PTSP penalty of 20% will only apply in cases where more serious and deliberate irregularities have occurred and in such circumstances, back taxes over 20 years could be required. If the disclosure is seriously wrong, however, then all the benefits could be withdrawn.

You must register with HMRC before 31 May 2011 and full details of the undeclared income together with payment of the outstanding tax, interest and any amnesty penalties due will have to be provided by 31 August 2011. HMRC will consider instalments for those that can't pay on time but Iain advises it's important to speak to HMRC soon.

Explaining how to disclose under the scheme, Iain says: "You calculate the amount of tax, interest and penalties, fill in some HMRC forms and make payment. There is no need to meet an inspector and while HMRC will check the figures, in nearly all cases no questions will be asked. You can do it all yourself or an adviser can do it for you.

"HMRC realise that some people may know they didn't disclose all their profits but aren't sure how much.  In such cases, reasonable estimates will be accepted but full records must be kept for the future."

Advice on calculating tax due, reasonable estimates, number of years, the right penalty rate, accurate completion of the HMRC forms and instalments can be obtained from specialist tax advisors. 

Iain Macleod at EDF Tax can be contacted by calling 07920 146800 or by emailing him at imacleod@edftax.co.uk.