Ever heard of a plumber who wanted paid in cash? Often a sign of income which won’t be declared. So has the tax-man. And he’s about to come knocking.
HMRC has given tax-fiddling plumbers a deadline to come clean, and they have to take the first steps by 31 May 2011.
Does Gas Safe mean Tax Safe? Playing on the name of the new register for CORGI gas fitters (now Gas Safe) this new initiative is called the Plumbers Tax Safe Plan. It applies to all plumbers or those who were plumbers when they made the mistakes, not just those working with gas.
While the Revenue doesn’t call it an amnesty this is the latest in a series of such initiatives intended to get people back on the right side of the law. The plan is to offer a streamlined and cheap way to put your tax affairs in order, and then investigate those people who did not come forward – if HMRC believes they have under-declared their income.
In the last few years these ‘disclosure opportunities’ have been made available to the following groups:
- Those with money or assets abroad
- Those with money in Liechtenstein
- Doctors and dentists, and now
- Plumbers, gas fitters and heating engineers.
This is the second amnesty targeted at a specific business – first the medics, and now plumbers. We can expect similar projects in the future – perhaps carpet fitters, then architects, who knows?
So let’s assume your friend is a plumber, gas fitter or heating engineer. Let’s further assume that they know their taxes are not right – perhaps they have not declared all their business income, or they let out a house and haven’t declared it, or they employed a worker and didn’t pay the right tax and NIC. Could be anything that they owe tax on.
So what should your friend do?
1. Avail of the Plumbers Tax Safe Plan (PTSP). Full details about it are on HMRC’s website at http://tinyurl.com/4zkol3q which also contains the links to the Guidance Pack and from that to the online notification form.
2. Speak to a tax specialist or your accountant if unsure what to do. Accept that your accountant might be miffed if you have kept something from them for years.
3. By 31 May 2011 at the latest tell HMRC you have something to confess. Do this online at www.hmrc.gov.uk/plumberstaxsafeplan or by phone on 0845 600 4507.
4. Once you get your Disclosure Reference Number, submit details on the special forms by 31 August 2011 at the latest.
What will your friend have to pay?
- The tax owed – for up to 20 past years or just 6 years if only careless errors involved.
- A penalty based on the tax owed – either 10% or 20% of the tax owed.
- Interest – from the date the tax should have been paid until now.
- This is to be paid by 31 August 2011 unless there are exceptional circumstances.
What if your friend continues to keep quiet about their tax problem?
HMRC has been drawing together information about the plumbing industry. They have also used their legal powers to obtain information which will help them. This could include details of registered plumbers (e.g Gas Safe) and also details of amounts paid to plumbers by various bodies.
They also have information gleaned from newspaper clippings, anonymous notes, local knowledge and complaints from aggrieved customers. (People do amazing things to get revenge!)
HMRC will start a programme of tax investigations into plumbers or former plumbers who they suspect have been naughty.
If caught owing tax the investigation will go into more depth, and as a result professional fees will probably be higher.
The penalty – as a percentage of the tax owed – will also be much higher – somewhere in the range 30-100% of the tax.
If you think this might apply to you or a friend then do check out the guidance on the HMRC website – http://tinyurl.com/4zkol3q . Plumbers can also have a chat with a tax consultant or their own accountant about how to tidy things up and sleep in their beds at night.
Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co