Tax Amnesty for Electricians Offers Chance to Pay before HM Revenue & Customs Investigates

A deal offered by HM Revenue & Customs (HMRC) for traders working in the electrical industry to come clean about undisclosed income, the Electricians Tax Safe Plan (ETSP), has scope for anyone in the industry to put their tax affairs in order with minimum hassle, says Iain Macleod at EDF Tax.

“Although the scheme is not a general tax amnesty, HMRC’s guidance on the ETSP indicates that the terms are pretty reasonable and similar to those offered to plumbers last year,” says Iain, a former tax inspector for 26 years and now head of Tax Investigations at EDF Tax.  “The deal, which ensures users avoid a hefty penalty that would otherwise be imposed if they were caught evading tax, either intentionally or in error, is available to both businesses and individuals.”

The ETSP builds on previous amnesties for plumbers, doctors and dentists, as well as those relating to offshore bank accounts and use of the Liechtenstein tax haven.  Anyone using the scheme can typically secure a modest penalty addition of just 10% of the tax underpaid in the past five years, as opposed to the maximum of up to 100% penalties which HMRC could usually seek.  Iain comments: “Is it a good deal? Yes and it’s a chance to sort things out before HMRC comes after them.

“HMRC has improved its information gathering and analysis techniques over the last few years, and wouldn’t have introduced this scheme if it wasn’t sure it had quality information about lots of incorrect returns for workers in the electrical sector.  If disclosures are not made by the deadline of 14 August 2012, HMRC will engage in targeted investigations into all traders identified through its research. If people are identified as evaders who have failed to offer a voluntary disclosure the penalties then will be much higher and tax for more years could be demanded.”

HMRC has stated that a maximum ETSP penalty of 20% will only apply in cases where more serious and deliberate irregularities have occurred and in such circumstances, payment of tax arrears over 20 years could be required.  A word of caution, if the ETSP disclosure is seriously wrong, however, then all the benefits could be withdrawn.

It is worth noting that after the similar arrangement for plumbers closed last year there were thousands of investigations into those who hadn’t disclosed, several arrests and at least one plumber has been imprisoned for tax fraud.

Individuals with the intention to disclose under the ETSP had to have been registered with HMRC by 15 May 2012 and full details of the undeclared income together with payment of the outstanding tax, interest and any amnesty penalties due will have to be made by 14 August 2012.

HMRC will consider instalments for those that can’t pay on time but Iain advises it’s important to speak to HMRC soon.

Explaining how to disclose under the scheme, Iain says: “You calculate the amount of tax, interest and penalties, fill in some HMRC forms and make payment. There is no need to meet an inspector and while HMRC will check the figures, in nearly all cases no questions will be asked.  You can do it all yourself or an adviser can do it for you.

“HMRC realise that some people may know they didn’t disclose all their profits but aren’t sure how much.  In such cases, reasonable estimates will be accepted but full records must be kept for the future.”

Iain also says,” But even if you missed the deadline for registration it still makes sense to make a disclosure to HMRC of any tax problems.”

Disclosure using ETSP could include liabilities for income tax, PAYE, NIC, corporation tax and capital gains tax.  When a VAT problem is disclosed, people will be contacted and told what they need to do to put their VAT affairs in order.  If Class 2 NIC is due for the self-employed, HMRC should be separately informed and as Tax Credits awards could be affected, the Tax Credit Office should also be advised.

Advice on calculating tax due, reasonable estimates, number of years, the right penalty rate, accurate completion of the HMRC forms and instalments can be obtained from Iain Macleod by calling 0115 983 5580 or by emailing him at This email address is being protected from spambots. You need JavaScript enabled to view it..  More information on EDF Tax’s services can be obtained at www.edftax.co.uk

EDF Tax,electrical contractors,electrical industry,e-lec.org,