This month, HMRC’s plumber ‘tax amnesty’ will expire.
The amnesty, which is also available to tradespeople, is aimed at encouraging individuals who have not paid enough tax, for example by doing cash in hand work, to settle up now – or face bigger fines in the future.
Plumbers and tradespeople have until 31 May to notify HMRC that they
intend to take part in the scheme, known officially as the Plumbers Tax
Safe Plan (PTSP). But what is it, and should you be worried?
What is the tax amnesty?
The PTSP is a scheme developed to encourage plumbers and tradespeople to settle up with HMRC if they think they have underpaid their tax. The Revenue says it is open to: “people who work (or worked) in the plumbing, heating or as installation trades and this includes anyone who installs or repairs pipes and fixtures for water, drainage or gas systems in a building.”
The scheme follows a similar effort last year in which medical professionals were targeted – but the revenue received settlements from just one in 20 of those it thought had underpaid.
Taxpayers who settle under PTSP will generally be charged a penalty of 10 per cent of the total tax due. In some cases HMRC might charge a 20 per cent penalty or no penalty at all.
But those who fail to take advantage of the scheme, and are later found to have underpaid their tax, will face much stiffer penalties of up to 100 per cent of the total tax due. HMRC has said that it will pursue those with unpaid tax bills more rigorously after the amnesty has expired.
Do I need to worry?
If you think you have underpaid your tax, you need to act now. Aside from your legal obligations, you should understand that failure to take advantage of the PTSP could result in significant financial problems further down the line.
HMRC is selling the PTSP as a ‘clean slate’. If you settle under the scheme, you can be safe in the knowledge that the Revenue will (it says) consider the matter closed, and there will be no further repercussions for those who had failed to properly declare the income during the relevant period. Generally, six tax years is the maximum period for which you will have to pay.
What are the deadlines?
If you want to take advantage of the PTSP, you need to tell HMRC that you intend to do so by 31 May 2011. You can do this online by clicking here.
Having notified HMRC, you will be required to tell them what you think you owe, and make full payment, by 31 August 2011.
What if I can’t pay?
The Revenue recognises that many people may not be able to pay their outstanding tax in one lump sum, particularly if they are settling up to six tax years.
If you cannot settle the whole amount in one go, you will generally be able to negotiate an instalment plan. The details of this plan will depend on factors like your current income, the amount you owe, and any savings you have.
If you fail to stick to the payment plan, or if you simply do not pay your bill, HMRC will pursue the debt through the courts.
What about other professions?
The PTSP is one in a series of amnesties developed by HMRC, and targeted at specific professions. Although the current scheme is aimed at plumbers and tradespeople, HMRC has indicated that it may consider settlements from those in other industries. You may wish to seek independent advice before approaching the Revenue about this.