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Tax penalties may double April 6

 
Created on 11/02/2011 @ 11:04
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HMRC has announced that deliberate tax defaulters could face penalties of up to 200% of their concealed tax from April 6.
 
A 200% penalty means having to pay three times the tax that would have been due (and it could be more as there will also be an interest charge on the tax).
 
At present, penalties of up to 100% can be charged where there is a “deliberate and concealed” inaccuracy. These increased penalties are linked to the “tax transparency” of the territory in which income or capital gains arise and HMRC have categorised territories for this purpose.
 
“HMRC’s penalty regime is more lenient where a person makes an unprompted disclosure of an inaccuracy. Once HMRC make a discovery, it becomes much harder to avoid the higher penalty levels,” said David Walker (right), Director of Tax at local accountants Turner Peachey.
 
Category 1 territories include EU countries, the US, Canada, Japan, Australia and New Zealand. Maximum penalties for undeclared income or gains in these territories remain at 100%. Perhaps surprisingly, the Category 1 list also includes established tax havens such as the Isle of Man, Jersey, Guernsey, Montserrat and the Cayman Islands.
 
Category 3 territories are those deemed least tax transparent and to which the 200% penalty limit will apply. These include several Caribbean, Latin American and African territories, a number in the Middle East (including the UAE, Iraq and Iran) and some closer to home (Monaco and Andorra).
 
Any territory not on either list will be in Category 2, where the penalty can be up to 150%. This would include, for example, South Africa, Saudi Arabia, Israel, India, Pakistan and Russia.
 
Tax evaders already face the possibility of their name being published if their inaccuracy involves tax of more than £25,000. Given the drive towards cutting public expenditure and increasing tax revenues, it’s no surprise that the government wants to be seen to be clamping down on tax evasion.
 
Anyone concerned that they haven’t disclosed all of their taxable income or capital gains should speak to their tax adviser or David Walker, Director of Tax at Turner Peachey.
 
Email: davidwalker@turner-peachey.co.uk Telephone: 01743 273 999    
 
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