From 1 April 2010 HMRC can now publish the names and details of individuals/companies who have been penalised for deliberate tax ‘defaults’ (errors or failures). HMRC hopes this will further encourage people to bring their tax affairs up to date. If not, then they will potentially face the ‘shame’ of being publicly named as a ‘tax offender’.
HMRC can publish details of those who have been penalised for deliberate tax defaults where the Potential Lost Revenue (PLR) exceeds £25,000. The defaults include:
· submitting incorrect returns;
· failing to notify chargeability; and
· certain VAT and Excise Duty offences.
HMRC cannot, however, publish the names of those penalised for either filing their tax returns late or not paying their tax on time. Details of offences committed before 1 April 2010 will also not be published.
The PLR, upon which the penalty is based, does not just relate to physical underpayments of tax. It can also include losses that have been incorrectly claimed (even if the losses have not yet been utilised against other profits!).
Whilst HMRC has said that the details it will publish will be the minimum necessary to correctly identify the person and the default involved, this will still likely include:
· name (including trading name, previous name or pseudonym);
· address (or registered office);
· nature/type of business;
· penalty (and the PLR on which the penalty is charged);
· periods involved; and
· any other information that is appropriate to identify the person(s) involved
HMRC is actually allowed to publish the details by ‘any manner that the Commissioners consider appropriate’, but the likelihood is that this will be by way of a quarterly list on its website and accompanying press releases/notices.
A person can avoid being ‘named ‘named and shamed’ by making a full disclosure of any errors/irregularities to HMRC. The disclosure does not even have to be voluntary (‘unprompted’). Even if it is ‘prompted’ by a challenge from HMRC, they can still avoid their details being published by coming clean – irrespective of what they have done wrong or the amounts involved!
HMRC can only publish details after the penalties charged have become final (i.e. after all avenues for appeal have been exhausted). Publication must be made within a year of the penalties becoming final and the details must be removed no later than a year after publication.
The potential damage to a person’s or business’ reputation of being ‘named and shamed’ by HMRC is immense. The Irish Revenue has been publishing a ‘defaulters list’ for many years and it almost always attracts local and/or national press coverage. Personal embarrassment could be the least of your worries. How will your potential customers, suppliers or even banks react? What might it do to your credit rating?
Anyone who knows that they have under-declared their tax/NIC or not notified HMRC of their full income or gains should make a full disclosure now. Specialist advice to complete this process is essential and will help mitigate financial penalties and the potential risks of being ‘named and shamed’ in the future.