HMRC collect an extra £850 million by targeting certain professions

Posted on 2014-07-11, by Montpelier

In 2007 HMRC launched its first campaign where it targeted businesses in a certain sector. Inspectors were briefed prior to the campaign starting so that they understood the issues in that sector and as a result knew where to look for unpaid tax.

As a result of the success of the first campaign, other industries have been targeted resulting in taxpayers voluntarily paying over £580 million. An additional £283 million has been identified and collected by HMRC. Penalties will have been imposed on these taxpayers as they did not come forward voluntarily.

By far the most successful campaigns have been those relating to disclosure of offshore income with revenue of over £600 million being collected. Information on account holders and interest was provided to HMRC by offshore financial institutions. This made it easy for HMRC to cross check the information to Tax Returns which had been submitted.

The Health and Wellbeing Campaign has to date raised over £62 million from medical professionals work across a variety of areas. Plumbers and electricians have contributed a further £35 million and those trading online a further £6 million.

An easy way for HMRC to check business income being reported is to cross check against other related records for example a garage will purchase MOT certificates from the Department for Transport. It would be easy to compare the number of MOT’s test fees recorded in the business records with the purchases of certificates from the Department of Transport to see if the two figures are similar. If the number of certificates purchased exceed the number of fees for MOT tests in the business records it would certainly arouse HMRC’s suspicion. Other sectors are regulated in a similar way so cross checking is often easy.

Current campaigns include the ‘Let Property Campaign’ and the ‘Second Income Campaign.’ The Second Income Campaign is aimed at those in employment who have a second income which they are not declaring. Examples given include consultancy fees, training, organizing parties/ events, taxi driving, hairdressing, making/selling craft items and buying and selling goods at markets or car boot sales.

It is not therefore just large business and high earners which are being targeted. I suspect HMRC could do online searches across some of these areas and then cross check the traders to tax records to see if they are registered. It can be that easy for them.

Voluntarily reporting an error or omission will result in a greater degree of leniency by HMRC than with those who are hunted down by HMRC so this is the best course of action.

As always, individuals should contact us if they believe that they have underpaid tax as we will be able to assist the taxpayer in negotiating the best outcome for them.

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