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HMRC The dash for cash.

Friday, 18 May 2012
HMRC believes that a tax gap has emerged which HMRC defines as the difference between the amount of tax collected compared to the amount HMRC estimates is due.

HMRC believes the biggest share of the tax gap, 50% of the total, is attributable to the small and medium (SME) sector and has launched a whole series of initiatives aimed at collecting additional revenue and closing the tax gap. 

HMRC has launched various campaigns and sees these as an opportunity for targeted traders and professionals to make voluntary disclosures of undeclared income. These campaigns offer lower financial penalties as an incentive to disclose and most disclosures are accepted without challenge. Those traders and professionals who fail to disclose when they should do face much harsher action, including potential arrest and criminal prosecution.

Previous HMRC campaigns:- 

  • The Medics Tax Health Plan campaign. This was closed in June 2010 but raised £10 million from over 1500 disclosures. The disclosures included one individual payment of over £1 million by a doctor and one of over £300,000 by a dentist. A further £2.2 million has been raised in unpaid tax since the campaign ended and so far more than 1000 civil investigations and 6 criminal investigations have started.
  • The Plumbers Tax Safe Plan campaign. This was closed in August 2011 and resulted in 430 disclosures and has raised £4 million to date. 14 plumbers from across the UK were arrested after HMRC could find no record of them paying tax at all!! One plumber from the West Midlands was jailed recently for 12 months.  
  • The VAT initiative campaign. This was closed in December 2011 and focused on individuals and businesses operating at or above the VAT threshold who had not registered for VAT. This generated in excess of £4 million for HMRC.
  • The Tax Catch Up Plan for tutors and coaches campaign. This campaign only closed on the 31st March 2012 and HMRC has not yet released any initial statistics as yet. It will be interesting to see how much additional tax will be raised.

Current HMRC campaigns:- 

  • The Electricians Tax Safe Plan campaign. HMRC has invited electricians and electrical fitters, who have undeclared income to disclose to register by the 15th May 2012. The full disclosure and payment must be made to HMRC by 14th August 2012. HMRC regards an electrician to be anyone who installs, maintains and tests electrical systems, equipment and appliances under stringent safety regulations as falling within the scope of this campaign. 
  • The e-marketing campaign:- HMRC has invited those businesses, who buy and sell goods as a trade over the internet, to register an intention to disclose any undeclared income by the 14th June 2012. The full disclosure and payment must be made to HMRC by 14th September 2012. HMRC includes ebay, Auto Trader, Amazon, Craigslist and Gumtree in its definition of e marketplace. HMRC has been at pains to stress it is only expecting disclosures from those who trade online as a business, not from individuals who occasionally sell personal items.

Future HMRC campaigns:- 

  • HMRC has already announced the next 3 campaigns which will begin later this year. The campaigns are as follows:-
  • Home improvement campaign:- This is a sweep up of skilled trades such as roofers, carpenters, bricklayers, joiners and window fitters.
  • Direst Selling campaign:- This is aimed at individuals and businesses that sell products to customers usually in the customers own home away from a retail shop.
  • Missing Returns campaign: This is aimed at individuals who have been sent an Income Tax Self-Assessment Return to complete but has failed to do so. The first phase will focus on individuals who have failed to file their self-assessment returns for 2009-2010 and earlier.

HMRC have also formed Task Forces to focus on geographically specific business sectors where HMRC suspects tax evasion.

  • Under task force a multi-disciplined team will make an unannounced visit to the targeted business and ask to see the business records and interview the staff on site. HMRC officers are frequently accompanied by Benefits Agency staff looking for benefit fraudsters and, occasionally by Police and UK Boarder Agency Enforcement Officers too.
  • During 2011-2012 HMRC launched 12 such Task Forces looking at Restaurants , scrap metal dealers and fast food outlets in Scotland, in the North West and North Wales landlords and construction businesses were pursued. In London food outlets were targeted by the Task Forces. 

From these various Task Forces HMRC expects to raise an additional £50 million in tax for the treasury. The Task Forces are going to be extended into 2012-2013 with scrap metal dealers outside Scotland being targeted as well as the motor trade, indoor and outdoor markets and the rag trade in general, including those involved in the import, wholesale, marketing and sale of clothing.

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