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 Proceeds of Crime 

The Proceeds of Crime Act 2002 is soon to be extended to advisors. You're not a drug smuggler or terrorist, so why should this concern you?

Tax fraud. 

The Proceeds of Crime Act, 2002 requires those in the "regulated sector" to report where they know or suspect that another person is engaged in laundering the proceeds of crime. New legislation for 2003 concerns the proceeds of all crime, which includes all acts of tax fraud. There is no minimum limit, so tax fraud could include "knowingly" leaving interest on a bank account (even if it's only £1!) off your tax return or omitting something from the annual P11D.

Reports. 

Professional advisors (tax advisors, accountants, auditors and legal advisors) will be required to report their suspicions to the National Criminal Intelligence Service (NCIS). Reports that relate to tax fraud will be referred within NCIS to an Inland Revenue team who will analyse and evaluate them. Where the only criminality is to do with tax, the reports will be forwarded by NCIS to the Taxman or VAT man.

Tipping off. 

Your advisor can't even tell you if he has sent in a report, as this is a criminal offence under the Act. This sounds like a recipe for disaster in terms of relations between tax advisors and clients. The only good news is that the start date for all of this (which was going to be October) has been delayed till early 2004. This gives you a window of opportunity.

Advice.

Your 2002/03 personal tax return is due in by January 31, 2004. If you can get it in before the new regulations come into force, then tipping off is not a problem. However, be prepared to hear your advisor remark (behind closed doors) that, "You do realise this is the last year you will be able to do this!".

Approaching the Taxman to make a disclosure (on behalf of a client) about unpaid tax liabilities, after the report has been sent to NCIS, does not constitute tipping off. So with future tax returns we suggest that you pay careful attention when your advisor says, "I really think you should disclose this." He's probably trying to tell you that he's duty-bound to make a report. Of course, no one really knows how this will work in practice, so when we find a way, well let you know.

Advisors will have to report proceeds of crime, including knowingly leaving items off a tax return. However, this might not apply to your 2002/03 return.

If you require additional information on how this affects you please contact:-

W Accountancy Limited who can at this time advise you on the correct course of action.