As published on accountancydaily.co, Monday 17 August, 2020.
The amount of extra tax collected by HMRC through plea bargain agreements with taxpayers increased 25% last year to £119.4m, year-end March 31, up from £95.8m in 2018/19, said law firm Pinsent Masons.
As part of a plea bargain agreement, a taxpayer is given immunity from criminal investigations in return for admitting tax evasion and paying back any money that is owed.
HMRC can contact a taxpayer directly with the offer of a plea bargain agreement if it already suspects them of tax evasion. Alternatively, a taxpayer that wants to come clean on tax evasion they have previously undertaken can apply to HMRC for a plea bargain through what is called a ‘Contractual Disclosure Facility’.
Pinsent Masons said these agreements have been popular with taxpayers as a way of ‘coming in from the cold’ and avoiding much tougher sanctions from HMRC or the courts if they are caught before they contact HMRC.
The firm adds that a wide range of taxpayers can use these agreements, from ultra-high net worths with complex offshore tax affairs through to individuals on average incomes who only owe small amounts of tax.
Entering into plea bargain agreements can be a cost-effective way for HMRC to raise additional revenue without having to launch an expensive and time-consuming tax investigations.
Steven Porter, partner at Pinsent Masons, said: ‘As HMRC gathers more UK and overseas data on suspected tax evaders the net is being tightened. This is a route out that can avoid a possible prison sentence.
‘Entering into a Contractual Disclosure Facility has benefits to both sides – taxpayers avoid prosecution and HMRC saves time and money.’
HMRC investigations are expected to pick as the government seeks more tax revenue to pay for the cost of coronavirus related economic assistance.
Porter added: ‘If a taxpayer meets their side of the deal in a Contractual Disclosure Facility and makes a full disclosure, then they will also face significantly lower penalties than if they waited to get caught. Taxpayers may also avoid being publicly “named and shamed” as a tax evader.
‘HMRC requires a huge amount of information from a taxpayer when entering into a Contractual Disclosure Facility; for example, detailed descriptions of what you did, how you did it and who else may have facilitated that tax evasion. It is important taxpayers seek advice before answering any questions.’