Nothing to Declare!
Undeclared income is an area of lost revenue that HMRC has been keen to uncover, ploughing sizable resources into its e-marketplace initiative – a clampdown on online traders who don’t declare income – and offering an amnesty for those who wanted to come clean. The campaign has now been wound down, but not before HMRC investigators had brought a conviction against one particular seller on eBay.
You may imagine that the sort of "online trader" who keeps income quiet is turning over a couple of hundred pounds a year or even a month. Pause a moment: remember that failing to declare income is illegal whatever the amount, so a couple of hundred, a few thousand, or even a million, is neither here nor there, not once you get caught, and all your affairs are scrutinised by highly trained forensics teams.
A Big Catch
It’s not surprising that HMRC was keen to hold up the severed head of this particular online-trader character: he had turned over £1.4m in six years and never declared a penny! John Woolfenden from Radcliffe, Manchester, had not registered for VAT, had not paid any VAT on his commercial e-trading, and had not even registered as self-employed.
HMRC: We’re Watching
When Woolfenden’s online business Globalworldentertainments first came to the attention of HMRC during its e-marketplace initiative, the trader’s fraud amounted to unpaid taxes, interest, and money-laundering totalling almost £300,000.
The Brown Envelope on the Doormat
With more than 500,000 listings on eBay and other online trading sites, 52-year-old Woolfenden ignored HMRC’s letters asking him certain difficult questions about, for instance, absence of any tax records. Aware that he had come into the sight of the tax authorities, he had already started routing income through an American bank account in an attempt to disguise and launder the profits of his business.
The Raid and Forensic Evidence
When eventually HMRC inspectors raided his home, all the signs of a busy online trader were evident: huge stocks of DVDs, CDs and games; apparently even the shower was "stacked to the ceiling" with boxes. It didn’t take HMRC’s forensic accounts team too long to identify that payments of nearly £1.4 million had passed through Woolfenden’s online bank accounts over a six-year period.
Guilty As Charged Your Honour
Woolfenden pleaded guilty as charged to offences dating to between 2006 and 2013. He got off lightly in some respects as HMRC had found adverts for his business, Globalworldentertainment, stating that it had been trading for 20 years!
Is it Safe to Trade Online Now and Not Declare the Income?
The last words in this respect go to HMRC’s Sandra Smith: "HMRC is continuing to use the data gathered during the campaign to identify people who should have come forward but chose not to."
So What’s the Moral of this Story?
It’s just not worth not declaring income. DNS has all sorts of legal tax-planning tricks up its sleeve to ensure you pay what you owe but never more than what you owe. Should you be in any doubt that HMRC is still intent on raising revenue from tax evasion and non-compliancy, take a look at some of our recent blogs such as benchmarking merchant acquirer’s dating matching and the blog about the specialist "army" of highly trained individuals to look into HMR’s drive to recoup lost taxes.