Accountancy firm Bentley Jennison is predicting the granting of an early tax amnesty for the voluntarily disclosure of past mistakes and errors.
It says such an amnesty would be a positive move by the Government to tempt those in the grey economy to step out of the shadows and be recognised for future contributions to the tax burden we otherwise all share.
Gary Clarkson, head of tax assurance, said "It looks like now is the time for those who in the past have made innocent mistakes and errors to have a way to remedy that worrying position without facing draconian penalties and inquisitions into their affairs".
Such an amnesty approach would seem to fit in with the trend of HMRC's internal re-organisation and also the way in which they are managing their consultation process over their Modernising Powers, Deterrents and Safeguards initiative, he suggests.
Mr Clarkson warns: "With commitments to reduce costs and therefore headcount by five per cent per annum, there is clear pressure on HMRCs ability to pursue effective investigations into innocent and less innocent miscreants.
"Furthermore, much of the capacity that exists, has been absorbed in fighting the VAT carousel fraudsters – clearly a good use of resource – and has been diverted to challenging proper tax planning arrangements, a questionable use of resource.
"The balance has shifted; HMRCs focus is no longer on tax evaders but on pursuing tax planners.
"The accountancy industry has adjusted accordingly, providing more and more ‘tax assurance’ support to tax planners and to clients. It is essential that tax planning arrangements are not only technically correct and within the spirit and letter of the law but are robust against any other forms of challenge.
"Given that decimation of HMRCs manpower other means are necessary to encourage tax compliance. The consultation progress on Modernising Powers, Deterrents and Safeguards is inextricably moving towards a system where systematic or repetitive 'errors' are even more draconically punished than now.
"To start such a cumulative penalty regime, however, requires a clear start point and it is here for the first time buried in the middle of the consultation report that HMRC have gone into print with the suggestion of a tax amnesty."
Mr Clarkson added: "If such a tax amnesty came into being it would be incumbent upon the innocent and the less innocent to quickly take full advantage of it.
"Many businesses would of course be quick to recognise the tangible commercial benefits of having a tax amnesty agreed with HMRC. No need for potential purchasers or suppliers to investigate a business for tax skeletons and submerged obligations prior to the amnesty date. Those liabilities will be pinned directly to those making the amnesty disclosures.
"For those individuals with any tax worries gnawing away at them the opportunity to make a full disclosure under an amnesty would relieve them of the fear of prosecution and substantial penalties. Any disclosures would of course have to be complete and accurate and due attention would have to be given to any knock-on consequences".
The consultation document suggests that the direct and indirect tax penalty regimes would remain independent; consequently any amnesty that is just for direct tax would not necessarily extend to VAT.
"The format and clarity of explanation will be vital in corralling the scope of any investigation process and not allowing it to spiral into time and cost consuming orbits."
