Time for a general tax amnesty? - Crowe Horwath International


Time for a general tax amnesty? - Crowe Horwath International

Crowe Clark Whitehill LLP is aleading national firm offering audit,tax and advisory services.‘‘Ninety-six percent of accountants believethere is a need for HMRC to launch a GeneralDisclosure Mechanism.”Contents01 Introduction02 Executive summary05 Research commentary15 Summary and recommendations17 Appendix: survey results24 Contact details

Time for a general tax amnesty?Introduction01Crowe ClarkWhitehill LLPOver 500 staffMore than 70 partners8 officesFinancial Directors’Excellence Award20092010Mid-tier Auditorof the YearAccountancyAge Finance Survey2010No. 1 fortransparencyand fair billingCrowe Clark Whitehill’s Tax Investigations group conducted its third annual surveyof accountants. The survey looked at the current focus of HMRC amnesties and taskforces, the level of support from accountants for a General Disclosure Mechanism(or domestic tax amnesty) and the UK/Swiss tax agreement.The purposes of the survey were:f fto measure perceptions and opinions of HMRC’s current amnesties and taskforces launched so farf fto gauge opinions on the viability and usefulness of a possibleGeneral Disclosure Mechanismf fto test awareness and knowledge of the UK/Swiss tax agreement.The results of the survey will be shared with HMRC and the Treasury.We hope that the findings will help to shape the department’s policy and encouragean open, honest dialogue between HMRC and the accountancy profession.About Crowe Clark WhitehillCrowe Clark Whitehill is a leading UK tax, audit and advisory firm, with over 500 staffand 70 partners in eight offices across the UK. The firm offers pragmatic, insightfuladvice and support to businesses, not for profit organisations and private clients.We are a member of Crowe Horwath International, a global independent network of167 firms spanning 109 countries.WINNERSOur Tax Investigations group werenamed Best Tax InvestigationsTeam at the 2012 Lexis NexisTaxation Awards.

Crowe Clark Whitehill LLPExecutive summaryThe survey, based on responses from morethan 100 accountants, measured whether theaccountancy profession think now is the timefor HMRC to launch a General DisclosureMechanism (GDM).We also sought accountants’ opinions on whichfeatures should be included in a GDM in orderto maximise its potential success for HMRC,be attractive to those with a disclosure to makeand be acceptable to the general public.The survey also took in the UK/Swiss taxagreement for the second year, and addressedHMRC’s current focus on task forces and whetherthose launched to date have been successful.Summary findingsAn overwhelming majority of those polled(96%) feel that HMRC should launch a GDM.94% believe that the terms of the GDM shouldbe at least as beneficial as the LiechtensteinDisclosure Facility (LDF).Accountants clearly believe that if a GDM is tosucceed, it must offer incentives for people tocome forward and, in particular, remove thethreat of criminal prosecution. HMRC’s currentamnesties are seen to benefit sophisticated,wealthy tax avoiders to the detriment of the ‘manin the street’ that may have a disclosure to make.Last year’s survey results showed that almosthalf (49%) of accountants polled had notmentioned the UK/Swiss agreement to anyclients. One year on and this has risen totwo‐thirds (66%). This appears to be becauseof a lack of understanding regarding the subjectmatter, with 65% admitting that they had eithera limited understanding of the agreement or noknowledge at all and only 4% claiming that theyhad a comprehensive understanding.An encouraging 91% of those polled were awarethat HMRC had launched a number of taskforces aimed at specific trades or professions.However, more than half (54%) had mentionedthem to five clients or less, and only 15% hadmentioned task forces to their entire client base.The main findings from the five focus areas areas follows.Need for a General Disclosure Mechanismf96% f of accountants believe there is a needfor HMRC to launch a GDM. This is a dramaticincrease from last year where 78% believedthat the time was right for such a facility.fIf f HMRC were to launch a GDM, 67% ofaccountants would mention it to all of theirclients. This is a small increase from 63% lastyear but a huge difference when comparedto the 7% who last year said that they hadmentioned the LDF to all of their clients.f85% f of accountants agreed that if a GDMoffered a final opportunity to come forward,it would focus the minds of noncompliantpeople and encourage disclosure.Terms and time limits of any GDMf94% f of accountants believe that the terms ofa GDM should be at least as beneficial as theterms of the LDF.fThe f most popular deadline (35%) amongstaccountants for registering an intention todisclose is 5 April 2016, in line with the LDF.fAccountants ffelt that the most importantbenefit of any GDM should be guaranteedimmunity from prosecution, followed by lowfixed penalties and then a limit on the numberof years to be included.96%of accountantssurveyed believethere is a need forHMRC to launch aGeneral DisclosureMechanism; adramatic increasefrom last year.94%of accountantssurveyed believethat the terms of aGeneral DisclosureMechanism shouldbe at least asbeneficial as theterms of theLiechtensteinDisclosure Facility.

Time for a general tax amnesty?02|0365%of accountantssurveyed haveeither a limitedunderstanding orno knowledge atall of the optionsavailable to UKresident individualswho hold Swissbank accounts.Knowledge of the UK/Swiss tax agreementf65% f of accountants have either a limitedunderstanding or no knowledge at all of theoptions available to UK resident individualswho hold Swiss bank accounts. Only 4% ofaccountants claim that they have acomprehensive understanding.f fTwo-thirds of accountants have notmentioned the UK/Swiss tax agreement toany of their clients. This seems to be becauseeither they do not feel the agreement isrelevant to their clients or they do not knowenough about the agreement to passinformation on.fOver f a third of accountants do not know thatunless action is taken before 31 May 2013, UKresidents with a Swiss bank account will paya levy of between 21% and 41% of the readilyconvertibleassets held at 31 December 2010.Opinion on HMRC’s current focusf71% f of accountants feel that HMRC’scurrent amnesties favour wealthier taxpayersand discriminate against ‘blue collar’ taxoffenders. This appears to be further strongevidence that a significant majority ofaccountants feel that the time is now rightfor HMRC to launch a facility whereby anyonewith a disclosure to make can come forward,and importantly receive beneficial termsregardless of their financial circumstancesor the location of their assets.fSuch f a disclosure mechanism will only besuccessful if accompanied by significantamounts of publicity and/or well placed,senior comment in the national media,going beyond broadsheet newspaperswhich have much smaller circulation lists.15%of accountantssurveyed havementioned the taskforces to all oftheir clients.Knowledge and understanding oftask forcesfAn f impressive 91% of accountants are awarethat HMRC have launched task forces aimedat specifically targeted trades and professionsin defined geographical areas. This showsthat HMRC’s efforts in advertising andpromoting its work in this area have beenextremely successful.f fHowever, more than one in two accountantshave only mentioned the task forces to fiveor fewer clients and only 15% have mentionedthe task forces to all of their clients. It appearsthat the majority of accountants either donot feel their clients are being targeted, arenot comfortable discussing the issue ofnoncompliance with them or do not have thetime to invest in such best practice given thenumber and range of task forces.‘‘accompanied by significantamounts of publicity.”A disclosure mechanismwill only be successful if

‘‘Those with onshore irregularitiesshould not face a higher risk ofprosecution than those who havehidden their money abroad.”

Time for a general tax amnesty?Research CommentaryQuestions 1 to 1004|05General Disclosure MechanismQuestion 1Would you like to see HMRC declare adomestic General Disclosure Mechanism(GDM) or general tax amnesty wherebyanybody can come forward to disclose anytax irregularities and receive beneficial termswithout needing to have offshore assets?96% of accountants believe there is a need forHMRC to launch a GDM. This is a dramaticincrease from last year where 78% believed thatthe time was right to launch such a facility.Question 2If HMRC were to launch a GDM, how shouldthe beneficial terms offered to those makinga disclosure compare to those who disclosevia the Liechtenstein Disclosure Facility?94% of accountants believe that the terms of aGDM should be at least as beneficial as or morebeneficial than the terms of the LDF. If HMRClaunch a GDM, accountants surveyed believethat they must ensure that the mechanism doesnot discriminate against those that do notqualify for the LDF and indeed ‘reward’ peoplefor coming forward. The results of this surveysuggest that the fairest way to approach this isto offer identical or better terms.Question 3If HMRC were to launch a domestic taxamnesty, to how many clients would youmention it?If HMRC were to launch a GDM, 66% ofaccountants would mention it to all of theirclients. This is a small increase from the 63%recorded last year. However, compared to the7% who last year said that they had mentionedthe LDF to their entire client base, it would seemthat accountants are much more willing tomention a general tax amnesty to their clients.It may also be inferred that many accountantsfeel that mentioning the LDF or UK/Swiss taxagreement to their clients may be seen asaccusatory. Holding money offshore is viewedby many as synonymous with tax evasion andaccountants are reluctant to put an offshoredisclosure proposition to clients with whom theyhave built a working relationship over manyyears. It may be that accountants would find iteasier to promote a disclosure facility in generalterms. Alternatively, accountants may genuinelybelieve that there is little point in discussingnon-UK focused facilities with clients whom theybelieve do not have any assets based offshore.Question 4Please rank from 1 to 5, the possiblebenefits of a GDM in order of importance toclients (most important being 1)?The results show accountants feel that the mostimportant benefit to those making a disclosureunder a GDM would be guaranteed immunityfrom prosecution. Immunity from prosecution isoffered as a beneficial term of disclosing via theLDF. Accountants surveyed feel that those withonshore irregularities should not face a higherrisk of prosecution than those who have hiddentheir money abroad.The second and third ranked possible benefitswere a ‘fixed penalty’ and a ‘limited number ofyears to be included in the disclosure’. Again,these incentives mirror the beneficial terms ofthe LDF and offer yet more evidence that theaccountancy profession feels the time is rightto offer a general tax amnesty with beneficialterms available to all and not just those withassets held outside of the UK.Q1: Would you like to seeHMRC declare a domesticGDM or general tax amnestywhereby anybody can comeforward to disclose any taxirregularities and receivebeneficial terms withoutneeding to haveoffshore assets?• Yes 96%• No 4%Q3: If HMRC were to launch adomestic tax amnesty, to howmany clients would youmention it?• None 8%• 1–5 6%• 6–20 11%• More than 20 6%• All 66%• Not answered 3%

Crowe Clark Whitehill LLPResearch CommentaryQuestions 5 to 11Question 5If HMRC were to launch a GDM, how longwould it take to familiarise yourself with theterms, pass the message to your clientsand meet with them to discuss anypotential issues?77% of accountants stated that they would needbetween one and six months to familiarisethemselves with the terms of a new GDM, passthe message to their clients and meet with themto discuss any potential issues. What is perhapsimportantly not addressed by this question ishow long it subsequently takes the client toactually to commit himself to making a disclosure;in our experience this can reasonably beassumed to be another six months. As this is thecase, there is little point in HMRC announcing aGDM and giving ‘customers’ a timeframe ofless than 12 months to come forward, registertheir intent to disclose and to actually makea disclosure.Question 6If a GDM is launched by HMRC, how longshould people be given to come forward andmake a disclosure?One in two accountants believe that if a GDMwas launched, people should be given at leasttwo years to come forward, with one in threebelieving that the deadline to disclose shouldbe the same as the LDF. In the past, HMRC’sdisclosure facilities aimed at specific tradesor sectors have offered a very short windowin which to register an intention to make adisclosure. It could reasonably be argued thatmore money would have been raised hadpeople been offered a more realistic timeframe.Question 7Do you agree that HMRC’s current amnestiesfavour wealthier taxpayers and discriminateagainst ‘blue collar’ tax offenders?71% of accountants believe that HMRC’scurrent amnesties favour wealthier taxpayerswith more sophisticated tax avoidance orevasion structures in place. If individual ‘A’ hastaken the extra step of opening an offshorebank account or setting up an overseastrust specifically for the purpose of hidingundeclared income, it could be argued thathe is even more culpable than individual ‘B’who has simply ‘pocketed’ income from cashin-handwork or deposited it in a UK bank.It is also likely that individual ‘A’ is relativelywealthy as many financial institutions in taxhavens have historically required large sums toopen accounts. At the moment, as a result ofbeneficial terms of the LDF, if both individualsmake a disclosure, individual ‘A’ will get tokeep more of the undeclared money thanindividual ‘B’; this cannot be fair or equitable.Question 8‘A one-off final chance to make a disclosurevia a GDM would focus the minds of thenoncompliant, encouraging disclosure’.To what extent do you agree withthis statement?85% of accountants agreed that if a GDMoffered a final opportunity to come forward itwould focus the minds of noncompliant peopleand encourage disclosure. It may be that manyaccountants feel that some noncompliantindividuals are failing to come forward as theperception is that they will be offered a furtheropportunity to disclose via the ‘next’ facility andthus hold on to as much of their money as theycan for as long as possible.In addition, and despite the best efforts of manyin the accountancy profession, it appears somepeople still believe that HMRC’s focus onoffshore matters means that those withoutforeign bank accounts or assets are not beingtargeted and therefore do not have to make adisclosure of UK-based irregularities.Q6: If a GDM is launched byHMRC, how long shouldpeople be given to comeforward and makea disclosure?• Less than 3 months 2%• 3–6 months 21%• 6–12 months 28%• Up to 2 years 14%• Until 05.04.16(LDF deadline) 35%Q8: ‘A one-off final chanceto make a disclosure via aGDM would focus the mindsof the noncompliant,encouraging disclosure’.To what extent do you agreewith this statement?• Strongly agree 15%• Agree 70%• Disagree 12%• Strongly disagree 1%• Strongly disagree 2%

Time for a general tax amnesty?06|07‘‘There is little point in HMRC announcing a GeneralDisclosure Mechanism and giving ‘customers’ a timeframeof less than 12 months to come forward, register their intentto disclose and to actually make a disclosure.Q11: What is the extent ofyour understanding of theoptions available to UKresident individuals who holdSwiss accounts?• Comprehensiveunderstanding 4%• Good understanding 28%• Limited understanding 52%• No knowledge 13%• Not answered 3%Question 9Do you believe that the general public wouldsee a GDM as vindicated if the future taxraising benefits as well as the more negativecollection of the historic tax debt wereproperly explained?One of the possible reasons for HMRC’sreluctance to launch a GDM is that the generalpublic may perceive a ‘blanket’ amnesty asallowing noncompliant, tax evading or evencriminal individuals ‘off the hook’; a move thatcould be considered by some to be immoral orjust generally wrong. However, 78% ofaccountants believe that this risk could besignificantly reduced if a clear explanation ofthe rationale was advanced.Question 10If any of your clients needed to make adisclosure, which of these statements wouldbe most accurate?Two in three accountants feel that they havethe necessary expertise and experience tohandle a domestic disclosure to HMRC onbehalf of their clients. Of those that do not,a further 18% have existing expert contacts towhom they would refer the work. It appearsthat HMRC should take some comforttherefore, that the vast majority of disclosuresthey receive from accountants will be robustand of a high standard.”UK/Swiss tax agreementQuestion 11What is the extent of your understandingof the options available to UK residentindividuals who hold Swiss accounts?Almost two-thirds of accountants described theirknowledge of the options available to UK residentindividuals with Swiss accounts as limited ornonexistent with only one in 25 claiming to have acomprehensive understanding. This is particularlyworrying as the agreement was signed over a yearand a half ago and so should not yet have become‘old news’. It appears that a certain amount ofapathy or ambivalence towards the subject maybe responsible for the lack of knowledge.Many accountants are of the opinion that theUK/Swiss tax agreement is of no relevance totheir clients as they do not have accounts inSwitzerland. This opinion appears to bemisguided. If a Swiss account is being used tohide undeclared income, it is unlikely that theholder will have told their accountant of itsexistence. If as stated by the Chartered Instituteof Taxation, HMRC believe that four in five UKresidents with a Swiss account are using it to‘tax dodge’, it follows that accountants are onlyaware of one in five of the Swiss accounts heldby their clients. This may be encouraging newsfor HMRC as without input from their accountant,many UK resident individuals with Swissaccounts may simply leave their money inSwitzerland and suffer the withholding levy ofbetween 21% and 41% of the readily convertibleassets held as at 31 December 2010.Alternatively, there is every indication to believethat the ‘serial’ tax evader will merely closetheir account to escape the levy net. It wouldseem, therefore, in HMRC’s and the Exchequer’sbest interests to continue to press the messageto accountants that disclosure if the best routefor their clients rather than the perpetual flightof monies.

‘‘Almost two-thirds of accountants described their knowledgeof the options available to UK resident individuals withSwiss accounts as limited or nonexistent.”

Crowe Clark Whitehill LLPResearch CommentaryQuestions 12 to 17Question 12Are you aware that unless action is takenbefore 31 May 2013, UK residents who(directly or indirectly) hold Swiss bankaccounts will, by default, have to pay aone-off levy of between 21% and 41% oftheir Swiss-held readily convertible assetsat 31 December 2010 which will be deductedby the bank on their behalf?Surprisingly, given accountants’ reported lackof knowledge concerning the UK/Swiss taxagreement, 61% of accountants are aware ofthe levy that will be applied if their clients makeno proactive election. However, if they do notfeel this is relevant to their clients, many willnot pass the information on to them.Many Swiss banks have written to their clientsto warn them of the implications of taking noaction before 31 May 2013. It remains to beseen whether or not this will be effective interms of galvanising those with UK Swissaccounts into action, but it is likely that someaccountants who believe their clients are notinvolved in tax evasion and would never keepfunds in Switzerland, will be facing a numberof startling revelations in the months to come.Question 13Which of these is not an option for Swissbank account holders under the UK/Swisstax agreement?Probably the least satisfactory of all the surveyquestions and therefore the results should betreated with some caution. This question wasasked specifically to test accountant’sknowledge of the options available to theirclients with Swiss accounts and also as a‘sanity check’ to the answers given to questions11 and 12. Five options were offered, with onlyone of them being unviable unless accompaniedby an account closure.Less than one in five accountants knew that aUK resident with a Swiss bank account couldnot simply move the assets held into the nameof a nonresident relative and thus avoid thewithholding tax. Four in five accountants wouldtherefore appear to see this as an acceptablepractice and could possibly advise this actionto their clients; although in practice noprofessionally qualified accountant wouldrecommend anything other than full disclosure.Question 14Which of these statements mostaccurately reflects your experiences of theUK/Swiss tax agreement?Only 13% of accountants said that they hadtaken proactive action to ensure that all of theirclients are aware of the terms and conditions ofthe agreement. This appears to be due to a lackof knowledge of the subject matter and the factthat the majority of accountants (66%) do notfeel that the UK/Swiss tax agreement is relevantto their clients. This is further corroborated bythe other answers given to this question. Onequarter of accountants stated specifically thatthey did not feel the agreement affected theirclients and 40% answered that they did not haveadequate knowledge to discuss the issues.14% of accountants say that they have spokento clients whom they know have Swiss bankaccounts but have not mentioned it to others.It would seem likely that those clients (and theiraccounts) which are known to accountants willbe UK tax compliant and therefore this actionmay not be particularly useful. The results herealso cast doubt on the percentage scores atquestion 11 which suggest that 80% ofaccountants have a good (28%) or limited (52%)knowledge of the UK/Swiss tax agreement.Q15: Which of these do youfeel is most responsible formaking people more aware ofthe UK/Swiss tax agreement?• The accountancyprofession 34%• HMRC 32%• Swiss banks 23%• IFAs 1%• Not answered 10%

Time for a general tax amnesty?10|11‘‘Task forces must still be viewed as only a part of an ongoingstrategy against tax evasion which must surely culminate ina general, domestic tax amnesty.Q16: Are you aware thatHMRC have launched anumber of task forces toundertake intensive bursts ofactivity in specific high risktrade or professional sectorsin a range of locations aroundthe UK?• Yes 91%• No 5%• Not answered 4%Question 15Which of these do you feel is mostresponsible for making people moreaware of the UK/Swiss tax agreement?It is a little strange that over one-third ofaccountants feel that they should make theirclients aware of the UK/Swiss agreement whilsttwo-thirds describe their knowledge of its termsas limited or nonexistent with only 4% describingtheir understanding as ‘comprehensive’ and only13% have written to all their clients to outlinethe issues and potential problems. HMRC musttherefore do more to bridge the gap betweenthe theoretical responsibility of accountants tonotify their clients and day-to-day putting thattheory into practice. It is not clear whether the32% that believe HMRC should make peopleaware of the agreement feel that enough isbeing done to effectively meet this obligation.However, it must be remembered that HMRCmay consider it in their best interests not topromote the terms and conditions of theUK/Swiss tax agreement as the defaultposition is the application by the Swiss banksof the withholding levy which is paid over tothe UK authorities. In these cases, HMRC willreceive the money without having to expendany time or resources, an option which mustappear attractive.What is clear is that the only institutionsactively pursuing a policy of writing to allof those involved and informing them ofthe choices and consequences with regardto the agreement are the Swiss banks.The accountancy profession should armthemselves with knowledge and bracethemselves for approaches from their clientsover the forthcoming months. If they do notwish to give advice in this area, they must workwith other specialists in this area.Task forces”Question 16Are you aware that HMRC have launched anumber of task forces to undertake intensivebursts of activity in specific high risk tradeor professional sectors in a range oflocations around the UK?An extremely impressive 91% of accountantsare aware of HMRC’s task forces with only 4%claiming to have no knowledge of theirexistence. The reasons for this would appear tobe two-fold. Firstly, it must be accepted thatHMRC’s advertising and PR in this area havebeen very successful. A huge proportion of thefinancial press carried stories about task forceswhen they were initially launched with emotivequotes from then HMRC Chief Executive, DaveHartnett, Exchequer Secretary to the Treasury,David Gauke and HMRC Director General ofEnforcement and Compliance, Mike Elland, whosaid that, “deliberately evading tax you shouldbe paying can land you with not only a heavyfine but possibly a criminal prosecution as well.This is not an empty threat, HMRC can and willtrack you down if you choose to break therules”. Recent months have also seen a brief buthigh profile publicity campaign involving variousforms of media including billboards and radio.Question 17‘HMRC’s task forces actually encouragenoncompliance by diluting resource andfostering a ‘someone else’s problem’ typereaction’. To what extent do you agree withthis statement?The response to this question must beseen by HMRC as good news and aresounding endorsement of their initiativewith 70% disagreeing that task forcesencourage noncompliance.

Crowe Clark Whitehill LLPResearch CommentaryQuestions 18 to 20What is not clear however is whether this70% feel that task forces actively encouragecompliance within the sectors targeted. It wouldseem logical that if noncompliant individuals areaware that their particular trade is the subjectof scrutiny, they would be more likely to submitaccurate returns to HMRC, fearing theramifications, both financial and legal ofcontinuing to evade tax. Presumably, as timegoes on, HMRC will publish the results of theircampaigns. It would be interesting to seequalitative as well as quantitative results interms of the change in current and futuretaxpayer behaviour as a direct result of a taskforce aimed at a specific trade or profession.However, task forces must still be viewed asonly a part of an ongoing strategy against taxevasion which must surely culminate in ageneral, domestic tax amnesty.Question 18To how many clients have you mentionedHMRC’s task forces?Given that 91% of accountants claim to know ofHMRC’s task forces, it is a little surprising todiscover that almost a third have not mentionedthem to any clients; more than half have madefewer than five clients aware of them and only15% have mentioned them to every client.Given the wide ranging scope of trades andgeographical areas covered by the numeroustask forces launched to date, it is extremelyunlikely that the accountants who respondedhave no clients for whom task forces arewholly irrelevant.If this was the case, there would be little point inflagging up an issue which would cause clientsunnecessary concern. The second explanationis that many accountants do not believe thatHMRC are able to run effective task forcecampaigns and therefore there is little risk oftheir specific clients being looked at. How forexample could HMRC hope to have thenecessary resources to look at every restaurantin South Wales, the South West, the South East,Solent and the Midlands? The third explanationis that busy accountants simply do not have thetime to inform their clients every time HMRC rollout another new policy or working practice.If task forces do prove successful in terms of theamount of money they raise, or the number ofconvictions they secure, more accountants maytell more of their clients about their existence.Question 19‘HMRC’s approach in targeting a wholeclass of individuals (e.g. publicans inScotland) is potentially damaging to itsrelationship with compliant taxpayers’.To what extent do you agree withthis statement?It could be argued that in openly targetingspecific groups and areas they have describedas ‘high risk’, HMRC are ‘tarring everyone withthe same brush’ and potentially damaging theirgood relationship with the compliant elementof each trade. Approximately half of theaccountants polled believe that this is apossibility but still a far from conclusive result.Q18: To how many clientshave you mentioned HMRC’stask forces?• None 30%• 1–5 25%• 6–20 13%• More than 20 13%• All 15%• Not answered 4%There are three possible explanations that couldbe advanced here. The first of these is that themajority of accountants believe their clientscompliantly file accurate tax returns and thereforewould feel uncomfortable about discussing theissue of noncompliance with them.

Time for a general tax amnesty?12|13GeneralQuestion 20Why do you think HMRC has, thus far,refused to launch a general tax amnesty?Two answers were equally popular, with onethird of accountants believing that HMRC’sreluctance was down to a lack of resourcesand another third believing that a GDM wouldbe viewed as politically unpopular. It appearsthat accountants believe that HMRC simplydoes not have enough staff to manage ageneral amnesty, although amnesties generallyplace the burden of work on the client andthe professional adviser rather than HMRC.Once a disclosure facility is launched, themajority of HMRC’s work is actually done.The disclosure is formulated and submittedby the individual and his accountant. It isconsiderably less labour intensive for HMRC totest a sample of disclosures than to increaserevenue yields via enquiries and investigations.‘‘irregularities and pay the‘missing’ tax voluntarily,HMRC would be receivingfunds that may otherwiseelude them.”In causing people tocome forward to discloseIt is true that some view disclosure facilities thatoffer immunity from prosecution as politicallyunpopular as they allow ‘offenders’ to ‘escape’.However, if the past and future tax raisingpowers of such mechanisms are adequatelyexplained (see question 9 analysis), more peoplemay be more able to see the wider benefits.In causing people to come forward to discloseirregularities and pay the ‘missing’ taxvoluntarily, HMRC would be receiving fundsthat may otherwise elude them. In a time ofrecession many would argue that this is muchmore important than securing a number ofexpensive prosecutions which might onlyserve to drive tax evasion underground. Inpolitical terms and against a backdrop ofcuts and enforced austerity, a governmentthat implements methods of bringing in moreincome from tax evaders may actually appearmore popular than one that simply reducespublic spending to balance its books.

‘‘In political terms and against a backdrop of cuts and enforcedausterity, a government that implements methods of bringingin more income from tax evaders may actually appear morepopular than one that simply reduces public spending tobalance its books.”

Time for a general tax amnesty?Summary and recommendations14|15SummaryThree important themes emerge from this survey.Firstly, an overwhelming majority of accountants feel thatHMRC should launch a GDM allowing anyone to comeforward and to make a disclosure and to receive the sameor similar beneficial terms as those disclosing via theLDF. It is also clear that the accountancy profession are of theopinion that HMRC’s current offshore focused ‘amnesties’ andpolicies favour sophisticated, wealthier tax-payers anddiscriminate against the average ‘man in the street’. On thewhole, accountants would feel far more comfortable inpromoting a GDM amongst their clients than talking to themabout the LDF or the UK/Swiss tax agreement.Secondly, very few accountants are conversant with theterms of the UK/Swiss tax agreement. This appears to bebecause they believe (whether misguidedly or not) that itdoes not affect their clients to any great degree and is nottherefore relevant to the work they do, which puts greaterresponsibility on HMRC to encourage tax evaders to comeforward and make a clean breast. This would have shortterm as well as long term financial benefits rather than theshort-sighted monies set to flow from the Swiss levy forthose who choose by intention or default to keep theiranonymity and secrecy.Thirdly, the message that HMRC’s task forces havearrived and are focused at specific trades in definedgeographical areas has reached nearly all accountants.It appears that HMRC, via the press and advertising, havedone an excellent job in achieving their objectives in thisarea. However, very few accountants are passing thisinformation on to their clients and this is an issue thatneeds to be addressed if task forces are to continue to besuccessful. HMRC must also not be fooled into thinking thattask forces are a total solution but rather an important partof a developed and evolving strategy which ultimately mustinclude a general tax amnesty as its cornerstone.RecommendationsBased on the results of the 2012 Accountants’ Survey,we recommend the following actions to HMRC.General Disclosure Mechanism1. Launch of a General Disclosure MechanismLast year we stated that the results from our 2011Accountants’ Survey ‘would appear to provide HMRCwith compelling evidence to justify a single, uniformand well thought out domestic tax amnesty’.If the evidence based on last year’s results was‘compelling’ this year’s responses, with 96% ofrespondents in favour, suggests that should HMRClaunch an effectively planned and administeredmechanism, it would have the unequivocal backing of anoverwhelming majority of the accountancy profession.The results of this survey suggest if HMRC launched adisclosure mechanism aimed at all noncompliant individualsand made it clear from the outset that there would be nofurther opportunity to obtain beneficial terms once thedisclosure window had closed, more noncompliantindividuals would come forward. A focussed prosecutionpolicy must also accompany any disclosure mechanism.2. GDM to offer identical or better terms than the LDF andremove threat of prosecution for voluntary disclosureAccountants surveyed believe that HMRC must ensure thatthe mechanism does not discriminate against those that donot qualify for the LDF and indeed ‘reward’ people forcoming forward. The results of this survey suggest that thefairest way to approach this is to offer identical or betterterms than the LDF.In addition, those disclosing voluntarily should be rewardedfor doing so and therefore the threat of prosecution shouldbe removed. For the majority of people with a disclosure tomake, prosecution is a more worrying prospect than thepossible financial loss. If HMRC are serious in their statedintention to close the tax gap, they must offer real incentivesto encourage people to come forward.

Crowe Clark Whitehill LLPSummary and recommendations3. GDM to allow for a reasonable time period forvoluntary disclosureIf a GDM is to be as effective and successful as possible,it must offer a realistic and an achievable timescale of atleast two years for disclosures, to allow accountants toroll out the details to their client base, for clients to makeconsidered decisions and for competent and completedisclosures to be submitted.4. GDM to offer same terms regardless of where moneyis heldThe majority of surveyed accountants believe that currentdisclosure mechanisms favour wealthy taxpayers. Whenformulating a GDM, to ensure that the process is fair, and tofacilitate more disclosures, HMRC will need to ensure thatthe same or essentially similar beneficial terms are availableto all regardless of where money is held.5. HMRC to widely promote a GDM to facilitate betterpublic understandingThe results of question 9 suggest that HMRC need toactively promote and advertise a GDM in order for it tobe a success. They should also ensure that the significantbenefits in terms of the money raised for the Exchequer indifficult financial times is explained and the general publicbetter educated in order that this obstacle becomes lessof a ‘political hot potato’.UK/Swiss tax agreement6. HMRC to promote benefits of disclosure under theUK/Swiss tax agreement prior to 31 May 2013The results of questions 10 to 16 show that more work needsto be done to promote disclosure under the UK/Swiss taxagreement, and to educate both accountants and the publicon the options available under the agreement.HMRC should work with the accountancy professionto advance as many disclosures as possible before31 May 2013, rather than taking the ‘easy option’ of shortterm money (through the tax levies under the agreement)which will lead to unsatisfactory and short term partialsolutions for many individuals.Task forces7. HMRC to review the current approach to task forcesaimed at specific groups and areasThe current approach to task forces aimed at specificgroups and areas risks ‘tarring with the same brush’all people working in certain professions and trades.David Gauke, the Exchequer Secretary to the Treasury,has stated the aim of task forces is to catch the ‘smallminority who try to dodge their responsibilities’. Thisstatement must mean that HMRC believe the majority oftaxpayers to be honest, compliant and law abiding.If task forces are to achieve their stated aim and avoiddisillusioning and alienating most compliant taxpayerswithin a specific trade group, HMRC will need to look athow best to combat this risk. Solutions could include betterrisk profiling, measured approaches to business and costeffective working practices to keep professional costs down.‘‘Should HMRC launch an effectivelyplanned and administered mechanism,it would have the unequivocal backingof an overwhelming majority of theaccountancy profession.”


Crowe Clark Whitehill LLPAppendixSurvey Results Questions 1 to 10General Disclosure Mechanism (GDM)Question 1Would you like to see HMRC declare a domestic GeneralDisclosure Mechanism (GDM) or general tax amnestywhereby anybody can come forward to disclose any taxirregularities and receive beneficial terms without needing tohave offshore assets?Responses %Yes 96No 4Total 100Question 2If HMRC were to launch a GDM, how should the beneficialterms offered to those making a disclosure compare to thosewho disclose via the Liechtenstein Disclosure Facility (LDF)?Responses %GDM terms should be less5beneficial than LDF termsGDM Terms should be more22beneficial than LDF termsTerms should be72equally beneficialNo answer given 1Total 100Question 3If HMRC were to launch a domestic tax amnesty, to howmany clients would you mention it?Responses %None 81–5 66–20 11More than 20 6All 66Not answered 3Total 100Question 4Please rank from 1 to 5, the possible benefits of a GDM inorder of importance to clients (most important being 1)?Responses %Percentages of first ranked benefits given.Fixed penalties 17Fast track disclosure facility 10Extended time to pay 11Limited number of yearsincluded in the disclosure17Guaranteed immunityfrom prosecution41Not answered 4Total 100Percentages of second ranked benefits given.Responses %Fixed penalties 30Fast track disclosure facility 7Extended time to pay 13Limited number of yearsincluded in the disclosure28Guaranteed immunityfrom prosecution8Not answered 14Total 100Question 5If HMRC were to launch a GDM, how long would it take tofamiliarise yourself with the terms, pass the message to yourclients and meet with them to discuss any potential issues?Responses %Less than 1 month 181–3 months 603–6 months 17More than 6 months 4Not answered 1Total 100

Time for a general tax amnesty?18|19Question 6If a GDM is launched by HMRC, how long should people begiven to come forward and make a disclosure?Responses %Less than 3 months 23–6 months 216–12 months 28Up to 2 years 14Until 05/04/2016 (LDF deadline) 35Total 100Question 7Do you agree that HMRC’s current amnesties favourwealthier taxpayers and discriminate against ‘blue collar’tax offenders?Responses %Yes 71No 25Not answered 4Total 100Question 8‘A one-off final chance to make a disclosure via a GDM wouldfocus the minds of the noncompliant, encouragingdisclosure’. To what extent do you agree with this statement?Responses %Strongly agree 15Agree 70Disagree 12Strongly disagree 1Not answered 2Total 100Question 9Do you believe that the general public would see a GDM asvindicated if the future tax raising benefits as well as themore negative collection of the historic tax debt wereproperly explained?Responses %Yes 78No 18Not answered 4Total 100Question 10If any of your clients needed to make a disclosure, which ofthese statements would be most accurate?Responses %I have extensive experience andexpertise in this area and32therefore would handle it myself.I have some experience andexpertise in this area and wouldhandle it myself after seeking35support and advice from anexpert in this area.I would not feel comfortablehandling this work myself but18have contacts in the area whomI would seek to engage.I would not feel comfortablehandling the work myself and do1not have existing contacts inthis area.Not answered 14Total 100

Crowe Clark Whitehill LLPAppendixSurvey Results Questions 11 to 20UK/Swiss tax agreementQuestion 11What is the extent of your understanding of the optionsavailable to UK resident individuals who hold Swiss accounts?Responses %Comprehensive understanding 4Good understanding 28Limited understanding 52No knowledge 13Not answered 3Total 100Question 12Are you aware that unless action is taken before 31 May 2013,UK residents who (directly or indirectly) hold Swiss bankaccounts will, by default, have to pay a one-off levy ofbetween 21% and 41% of their Swiss-held readily convertibleassets at 31 December 2010 which will be deducted by thebank on their behalf?Responses %Yes 61No 37Not answered 2Total 100Question 13Which of these is not an option for Swiss bank accountholders under the UK/Swiss tax agreement?Responses %Let the bank(s) discloseyour bank details to the13UK authorities.Close the account and movethe monies elsewhere to18‘escape the net’ .Move the assets into the nameof a nonresident relative with the19same bank.Make a disclosure of unpaidtaxes under the Liechtenstein15Disclosure Facility.Pay a levy of up to 41% topreserve the account7holder’s anonymity.Not answered. 28Total 100Question 14Which of these statements most accurately reflects yourexperiences of the UK/Swiss tax agreement?Responses %I have taken action to ensurethat all of my clients are aware13of the terms and conditions ofthe agreement.I have spoken to those clientswhom I know have Swiss bankaccounts and made them aware14of the agreement but have notmentioned it to others.I do not feel the agreementaffects any of my clients and25therefore I have not mentioned itto any of them.I do not know enough about theagreement to talk to my clients41about it.Not answered 7Total 100Question 15Which of these do you feel is most responsible for makingpeople more aware of the UK/Swiss tax agreement?Responses %The accountancy profession 34HMRC 32Swiss banks 23IFAs 1Not answered 10Total 100

Time for a general tax amnesty?20|21Task forcesQuestion 16Are you aware that HMRC have launched a number of taskforces to undertake intensive bursts of activity in specifichigh risk trade or professional sectors in a range of locationsaround the UK?Responses %Yes 91No 5Not answered 4Total 100Question 17‘HMRC’s task forces actually encourage noncompliance bydiluting resource and fostering a ‘someone else’s problem’type reaction’. To what extent do you agree with thisstatement?Responses %Strongly agree 4Agree 22Disagree 63Strongly disagree 7Not answered 4Total 100Question 18To how many clients have you mentioned HMRC’stask forces?Responses %None 301–5 256–20 13More than 20 13All 15Not answered 4Total 100Question 19‘HMRC’s approach in targeting a whole class of individuals(e.g. publicans in Scotland) is potentially damaging to itsrelationship with compliant taxpayers’. To what extent do youagree with this statement?Responses %Strongly agree 12Agree 36Disagree 34Strongly disagree 15Not answered 3Total 100GeneralQuestion 20Why do you think HMRC has, thus far, refused to launch ageneral tax amnesty?A GDM would be tooresource intensive.HMRC believe other overseasamnesties do not work.A GDM would be viewed as‘politically unpopular’.Responses %Other reasons* 22Not answered. 11Total 100* The most popular “other reason” was that HMRC prefers campaigns and amnestieswhere it can obtain third party information to test disclosures and identify thosewho do not.32332

Crowe Clark Whitehill LLP‘‘HMRC must not be fooled into thinking that task forces area total solution but rather an important part of a developedand evolving strategy which ultimately must include ageneral tax amnesty as its cornerstone.”

Crowe Clark Whitehill LLPStart the conversationTo begin theconversation,please contacta member of our TaxInvestigations group.David Dalydavid.daly@crowecw.co.ukPartner, London020 7842 7364Sean Wakemansean.wakeman@crowecw.co.ukPartner, London020 7842 7285Martin O’Kanemartin.okane@crowecw.co.ukDirector, Manchester0161 214 7535Ian Shirleyian.shirley@crowecw.co.ukManager, Birmingham0121 543 1989Find out more about us atwww.croweclarkwhitehill.co.uk

www.croweclarkwhitehill.co.ukCrowe Clark Whitehill LLP is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate andindependent legal entity. Crowe Clark Whitehill LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member ofCrowe Horwath and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member. This material isfor informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisors in yourjurisdiction. © 2013 Crowe Clark Whitehill LLP | 0014Crowe Clark Whitehill LLP is registered to carry on audit work by the Institute of Chartered Accountants in England and Wales and is authorised and regulated by theFinancial Services Authority.

More magazines by this user
Similar magazines