In recent times HM Revenue & Customs (HMRC) have introduced a number of ‘disclosure campaigns’ to allow individuals and businesses to register with HMRC of their intention to disclose income which they have earned without suffering tax.
Campaigns in the past have targeted plumbers, electricians and individuals with offshore interests and the most recent press release clearly shows why HMRC favour such campaigns with over £610 million being raised from voluntary disclosures and a further £395 million from follow up activity.
Therefore, in order to encourage taxpayers to take advantage of the disclosure campaigns, HMRC have advised that they will offer them the best possible terms. Fundamentally this means that HMRC will look to reduce any potential penalties. There are, of course, conditions attached to this including ensuring full disclosure is given and all information is provided to HMRC in a timely manner.
Current Campaigns
Currently, HMRC are looking at three separate campaigns which are as follows:
Credit Card Sales Campaign
The Credit Card Sales Campaign gives you an opportunity to bring your tax affairs up to date if you are an individual or business that accepts credit or debit card payments which you have not declared to HMRC or if you have failed to register with them
Second Income Campaign
The Second Income Campaign gives you the chance to bring your tax affairs up to date if you are employed and have additional income that’s not taxed. A second income could come from:
- consultancy fees e.g. for providing training
- organising parties and events
- providing services like taxi driving, hairdressing or fitness training
- making and selling craft items, or
- buying and selling goods e.g. at market stalls or car boot sales
Let Property Campaign
The Let Property Campaign gives you an opportunity to bring your tax affairs up to date if you are an individual landlord letting out residential property in the UK or abroad.
If individuals would like to take advantage of HMRC’s disclosure campaigns they must first register their interest with HMRC. Thereafter, they will be required to complete a disclosure form and provide all relevant information to HMRC.
Enquiries
For those that have not disclosed any untaxed income or gains, HMRC have the ability to open formal enquires. Formal enquiries can take a long time to resolve and in severe cases you could face penalties of up to 100% and possible criminal investigation.
Potentially HMRC could start an enquiry for no reason, however, following the introduction of their computer system called Connect in recent years it is more likely that HMRC already suspect you have untaxed income.
Therefore, if a letter falls through your letter box telling you HMRC are intending to look through your affairs you should consider carefully how to respond. The letter may give some clue as to what HMRC’s concerns are in relation to your tax affairs, perhaps asking for details of your bank interest, or a capital gain. Although it is not unusual for the letter to ask for a great deal of business and personal information, which can mean that the focus of the enquiry is unclear. The most important thing to do is to draw the relevant information together and seek professional advice.
This advice is almost always money well spent as it will often lead to a better result especially on areas of tax where the law is unclear. Securing the services of a professional adviser with a great deal of experience in dealing with such enquiries can help you deal with the exchanges of letters, requests for further information and meetings aimed at bringing the enquiry to a close. If you add into this the need to continue to run your business effectively then all of this can be a drain on your business.
There is no set format for an enquiry to follow as each one will be based around the circumstances of that individual and so with significant sums being raised for the exchequer from these campaigns, HMRC are unlikely to stop. Therefore, anyone who has not declared all their income or gains needs to get the professional advice they need now before any potential enquiry.
