Watson Buckle Blog
Politicians go on the attack over tax
At a time when the nation’s finances are under unprecedented strain, it is easy for a politician to score a few points by attacking the antics of those wealthy individuals who they claim do not pay their fare share of tax.
Indeed chief Secretary to the Treasury Danny Alexander was doing just that at the Lib Dem party conference, telling delegates that tax avoidance and evasion were ‘morally unacceptable’ in the current climate and said that the government would pursue wealthy individuals who did not pay tax with the same rigour as it chased benefit cheats.
Mr Alexander seemed to have fallen into the common trap of using the terms ‘tax avoidance’ and ‘tax evasion’ interchangeably. In fact they are very different – avoidance is quite legal and it would be a rare individual who happily paid more tax than they had to, whereas evasion concerns the use of illegal means to avoid tax with, quite rightly, tough penalties from those who are caught.
Nevertheless, with the prevailing mood being as it is, the likelihood is that there will be more tax investigations by HM Revenue and Customs (HMRC) in future, with more high net worth individuals targeted, so anyone in such a position would be well-advised to ensure their affairs are in order. The government has announced an extra £900million to fight tax evasion over the next four years, with the aim of bringing in an additional £7billion per year by 2014-15.
There will be a five-fold increase in funding for criminal prosecutions, a dedicated team of investigators to pursue those hiding money abroad, and increased use of private debt collection agencies.
Holders of accounts with a major international bank in Switzerland are among the latest to be targeted, receiving letters under ‘Code of Practice 9’ – a procedure under which taxpayers can make a full disclosure of any UK tax irregularities dating back 20 years, normally used only in cases of serious tax evasion or fraud.
Those who are currently avoiding tax, for example by holding money abroad, now need to think carefully about what to do next. Anyone who is minded to make a disclosure may be better off doing so on their own initiative than wait for HMRC to track them down.
For example, the current Liechtenstein Disclosure Facility (LDF) offers generous terms to taxpayers who come forward voluntarily, and it is also possible for people with money in other tax havens to use it by transferring the funds to Liechtenstein first. However, the LDF is not generally available to anyone who has already received a Code of Practice 9 letter.
Whatever the rights and wrongs of the debate, the current economic climate and political mood mean there is unlikely to be any letup from HMRC over the coming months, so it is worth everyone considering now how they can avoid falling foul of the department. For more information please contact us.
John Kinsella
Partner
