Time for tax cheats to confess

Crackdown: Gordon Brown is targeting tax and benefits fraud

If you have any dark secrets from the taxman you may now be drinking at the last chance saloon, as this week the government announced tough new measures to tackle the black economy.

From January 1 2001, anyone with untaxed income - from the odd bit of moonlighting to a full-time job paid in cash - could face up to seven years' imprisonment and an unlimited fine.

Legislation has been presented to Parliament in Gordon Brown's mounting drive to clamp down on tax and benefits cheats, although there is a chance to "come clean" in the six months before the new measures take effect.

These moves follow a report by Lord Grabiner QC which concluded that billions of pounds are being lost through dishonesty. The Revenue finds it difficult to prosecute tax evasion under the existing common law, and only a few dozen cases are tried each year.

Normally the taxman must be content with a financial settlement, typically involving payment of six years' tax plus interest and a penalty, which has done little to stem the tide of evasion.

Grabiner ruled out a tax amnesty, saying it would be unfair to those who have paid their taxes and would not necessarily work; thousands might volunteer to benefit from the amnesty, but then go back to their previous bad habits. But he did suggest a "carrot and stick" approach, which is now being implemented.

A new hotline has been set up, offering confidential advice to anyone who would like to put their affairs in order before the new law bites. If you phone 0845-608-6000 (lines are open from 8am-8pm weekdays, 8am-5pm at weekends) and give details of the income you have not reported, you will receive guidance on how much tax and National Insurance contributions you will be expected to pay.

The hotline will also explain how to register with Revenue offices and whether you might qualify for the working families' tax credit; many callers will have failed to claim this generous benefit for fear of a tax investigation.

The hotline can also tell you whether you have been claiming benefits illegally and, if so, what to do about this. There is no blanket immunity from prosecution if you report your offence, but a spokesman says that "consideration will be given to the fact that claimants will have voluntarily let the Benefits Agency know what they have been doing".

The government says that the hotline is completely confidential; you do not have to give your name and calls will not be traced. You will be given a reference number and password, enabling you to call back for further information should you wish to.

And if, having spoken to the hotline, you feel ready to approach your tax office, it will offer to send you a letter confirming the advice given on the phone. We are told that "so long as callers have been frank with the advice line", that advice will be followed by the tax office.

The new hotline offers a welcome new route for anyone wanting to get on to the Revenue's books. However, it cannot offer expert guidance on the financial penalty the Revenue will want to add to the tax and interest due, which can by law be as much as the tax unpaid but is usually mitigated to reflect your disclosure and cooperation.

Also, if you want a letter confirming the advice you have received, you will need to give your name and address. However, this loss of confidentiality may not matter because the draconian powers to be introduced next January should persuade anyone who owes tax that now is the time to come clean.

From January, the Revenue will be deploying an extra 50 officers in the prosecution of cases in the Magistrates' Courts - where you could face a fine of up to £5,000 and six months in prison - while more serious cases will be tried in the Crown Courts, which can impose unlimited fines and up to seven years' imprisonment.

David Brodie is director of TaxAid, the charity which provides free tax advice to people who cannot afford professional fees. Phone 020-7624-3768 between 10am and noon, Mondays to Thursdays, or go to www.taxaid.org.uk.