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Contractual Disclosure Facility: too taxing (or too late) to work?

All but 1% of accountants claim to want HMRC to offer a generic tax disclosure system. A report by Crowe Clark Whitehill hints that such a facility may already exist, at least in part. One question that report goes on to raise is: are all parties making full use of the (sort of) Amnesty?

Reading between the lines of the report (and the HMRC web page about CDF), that 'sort of' is the problem. Yes, the taxman is willing to hold out an olive branch to anyone who's knowingly committed tax fraud.

But that branch is poked through a tiny hole in the wall. Anyone who accepts the token is gambling that the hand holding it, out of site beyond the bricks, isn't attached to some kind of monster.

Providing the offender accepts the CDF contract within 60 days of HMRC offering it, the tax man promises not to pursue criminal prosecution. But what the website doesn't categorically state is what punitive measures do lie in store for offenders. That's the invisible monster many may be backing away from.

Catch 22 for Accountants?

The problem doesn't end there. Eight in ten clients of High Street accountants are conceivably in the dark about the opportunity the tax man is giving to disclose your wrongdoings. Yep, 19% of the 102 accountants Crowe Clark Whitehill surveyed had failed to avail their clients of the opportunity.

In a way, is that any surprise?

We've got the government saying, "Look, we know some people don't declare everything. Let's talk about it." But do accountants want their work under such an intense forensic microscope?

Think about it from the accountant's perspective for a second. They've perhaps looked after a client's books for years. They're not going to admit to a client that they may have put their livelihood at risk by cutting corners they weren't supposed to.

I'm not saying that accountants mean to do it. But one thing is pretty certain: the accounts they've prepared will be under HMRC scrutiny during the term of the CDF Contract.

To add fuel to the fire, another interesting point came out in the report. 63% of the accountants were either oblivious to or didn't understand other disclosure. So much for the 99% calling for such measures.

Calling time early

Despite adoption of the facility rising 7% since last year, the government has brought forward the deadline for this 'tax amnesty', of sorts. It cannot be a true amnesty, as there are punitive measures, which we've already mentioned aren't fully disclosed.

The limited time offer, launched in 2012, was set to come to its natural end in September 2016. The government announced that they're chopping nine months off that date. Any voluntary disclosure now needs to be recorded by December this year.

John Cassidy, of the national audit firm who carried out the survey, reflects that this may be a missed opportunity by all stakeholders. Only 19% of the survey's respondents reported seeing a tax fraud case since CDF opened. Moreover, HMRC seem reluctant to open the cases that the scheme was aimed at.

In Cassidy's opinion, the tax man seems to be throwing manpower at 'low-level, negligent and accidental tax cases' instead of going for bigger fish.

You can download the Crowe Clark Whitehill pdf that details the government's disclosure facilities. It's entitled "The door is closing". The question is, will anyone notice?


image: ponsuwan, freedigitalphotos.net