Some might say this is not a difficult question, but in a lesson learnt, the Yorkshire and England cricketer Adil Rashid has experienced a “googly” to rival one of his own from HMRC.
The list!
Every quarter, HMRC publish a list of “Deliberate Tax Defaulters” which gives details of names and addresses together with the tax and penalties charged. It will be no consolation to those “named and shamed” that there is also a statement to the effect that the published person may have changed their “behaviour” towards tax and they may no longer reside at the published address.
So what happened to Adil Rashid? Well HMRC’s scorers marked him up for just over £100,000 in additional tax for the years 2013/14 to 2016/17 and he was hit, some would say for six, with a penalty of just under £40,000. There are some cricketers who would be pleased with a total of 140, but one doubts that applies in this case.
Where did it all go wrong?
Well £100,000 of tax implies undeclared income omitted from his tax returns of around £225,000 using an effective tax rate of 45%. Lesser sums are usually sufficient to get the attention of HMRC. And whilst we cannot know for sure how this tax investigation was handled, the penalty of 40% is indicative of less than full co-operation. Maybe the Cricket World Cup took Adil’s focus away from this tax investigation?
The lesson?
If you have irregularities in your tax affairs, usually the best remedy is to work pro-actively with HMRC to identify and rectify the position by “affording maximum disclosure” to use a term from HMRC’s lexicon. Through openness, providing information and actively working towards prompt settlement, you will usually get a better result.
If your irregularities relate to offshore tax issues, you can expect to be on the list of “Deliberate Tax Defaulters”. And if you qualify for the smallest penalty your name will not be listed and, also, owing less than £25,000 in tax will keep you off this list.
There are two other ways to maintain your privacy. The first is to argue your behaviour was careless rather than deliberate. The second is to get in first with a voluntary disclosure – depending on the circumstances, using Code of Practice 9 may be the best way forward.
If you would like help with your tax affairs, or a tax dispute, please contact us at Ritchie Phillips.