Is this a dilemma you or someone you know might face?..

This is a situation that I am increasingly coming across and unfortunately it’s one of those where perhaps there is no consistent right answer.

(Before people start to lay into me or pass judgement, remember that everyone does things for their own reasons and no one should assume they are any better or any worse than others. Again, as is standard practice when professionals post on the public web – I do not condone tax evasion of any kind; tax avoidance is a different matter and is the perfectly legal way of organising your affairs to minimise your tax)

The situation:

Approached by a new client who when we start talking (either on the phone or face to face) admits that they have been working doing whatever it is they do for the past [x] number of years and they haven't been declaring it to the nice people at HMRC [if you have read all my website then you will realise I can be sarcastic at times].

They ask me what I think they should do – my standard answer is that it is down to them and their circumstances.

I advise them that they have basically two options –

1. Keep their fingers (and perhaps legs – excuse the pun) crossed and hope that HMRC never have reason to go looking back into their past nor some pissed off punter decides to makes noises and causes trouble for them.
2.  
3. Contact HMRC and do a voluntary disclosure for the prior years. Yes this will result in having to pay tax and interest and you may get a little red flag against your name for a few years. As long as you keep filing your returns and paying on time this should not be a major issue.

There is never a right answer in the clients mind as it depends upon a number of factors; the amounts involved, the length of time and the clients own sanity. Some people just hate worrying about what the next brown letter that lands on the doormat is about.

Some people take the first option – with perhaps the viewpoint that there are shed loads of taxpayers in the UK (approx. 30million for income tax) so what are the chances of them as an individual being selected?

Others may decide to come clean and do a voluntary disclosure.

The one thing for sure is that if your name is selected (for whatever reason) for an investigation in future and HMRC find that you have been a naughty person, the penalties that will be imposed then will be much more harsher and potentially damaging to you as an individual than they would be if you had declared it voluntarily.

HMRC have over the last 18 months targeted plumbers and electricians giving them an amnesty to declare undeclared income. Once the amnesty was up, then HMRC hit them hard!

What would you do? As a television presenter sometimes says – Phone a friend, ask the audience or 50/50?