HMRC "raking in" revenue with their new approach

HMRC "raking in" revenue with their new approach aimed at sector-based crackdowns

HMRC has recouped an extra £850 million from their new strategy of industry-sector crackdowns and "voluntary" declarations of unpaid tax, and over £283 million from a large number of in-depth follow up investigations.

We’ve blogged around and about this issue several times recently: in April 2014 we warned you about Benchmarking; in May 2014 we highlighted the strength of HMRC’s tax army, deployed to catch those who are earning income that they fail to declare.

While we the public might point to the sophisticated tax saving/avoidance measures taken by the likes of Starbucks or Google, HMRC meanwhile has deployed its army of sophisticated tax-avoidance personnel using strategies to catch out a variety of UK small businesses sectors in its bid to recoup extra tax.

HMRC it would seem are bent on meeting all of its targets. Takling offshore bank accounts apart, the tax authorities have, since 2007, focused their sites on doctors and dentists, plumbers, electricians and other tradespeople; then taxi drivers and online businesses were targeted, as were people who regularly sell goods at bootsales, markets and trades fairs.

Encouraging voluntary compliance from small businesses at first, HMRC then began to investigate those who were reluctant to come forward. Forget the image of some fuddy-duddy tax inspector pouring over ledgers: government awarded HMRC huge funding to assist them in their new campaign. That meant HMRC was obliged to show (ironically) that this funding offered the tax payer value for their money. The funding was spent on additional HMRC personnel, among whom are highly trained technicians, analysts and detective-sorts who know how to read data and then use it.

A whole suite of investigative methods are used:

• Spying through Google Street View;
• Monitoring sales on eBay, Etsy, Amazon, and other online marketplaces;
• Watching posts on social media, such as Facebook, Utube, twitter;
• Monitoring industry-sector trends and matching your income declarations with them (Benchmarking);
• Keeping an eye on transactions by credit and debit cards (Merchant Aquirers)

And many, many more strategies of which we may have no idea ... yet.

Past campaigns

The single highest yielding campaign aimed at small businesses is, apparently, the "Medics Tax Health Plan", which so far has raised £57 million. This campaign invited doctors and dentists running small practices to disclose unpaid tax, the sweetner: a fixed penalty. When the amnesty ended in 2010, HMRC urged medics to come forward or face severe penalties if they are found to owe tax.

Then the "Plumbers Tax Safe" campaign yielded a further £19 million, targeting plumbers, gas fitters, electricians and other tradespeople. This window for voluntary disclosure closed in 2011, but since then six plumbers have been convicted of tax evasion, with more expected to follow after further extensive investigations.

Present campaigns

HMRC's recent "e-Marketplaces" campaign has so far successfully collected over £5 million. Targeting online traders using websites such as eBay and Etsy, those who fail to come forward now face the risk of HMRC coming to them: the aforementioned analysts, technicians and detective-sorts are actively building cases against those it suspects of not disclosing tax.

Future campaigns

An increase in campaigns of this sort is inevitable and HMRC will continue to put pressure on sectors they have already targeted.

What you should do

Always declare all your income, allow DNS to employ its expertise to save you tax legally.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.