Insights

After the fanfare of publicity and stern warnings issued in recent months, HMRC has taken a U turn on its business record checks campaign. Now, rather than making threats of indiscriminate inspections to identify record keeping issues, they have declared any future inspections will be much more targeted.

HMRC has said that they will carry out any planned visits but will postpone any new SME business record checks (BRC) until a new approach has been developed which concentrates on higher risk businesses. New visits will not resume until HMRC announces the detail of a 'revamped' approach, which is expected some time after April 2012.

So far, over 2,000 businesses have had their records checked by HMRC since the pilot scheme first began in April 2011. Of those, 28% of businesses were considered to have “some issues” with their bookkeeping, while an additional 11% had issues "serious enough to warrant a follow-up visit".

Whilst the immediate pressure may have eased slightly over the threat of being visited for a business records check, HMRC’s focus on identifying sources of additional revenue continues unabated.

Contractual Disclosure Facility

Last month, they announced the introduction of tougher procedures for civil fraud investigations and a new Contractual Disclosure Facility. Under the rules of the new facility, HMRC will contact taxpayers, in writing, to inform them that they are suspected of serious tax fraud, and offer them a chance to make a formal disclosure within 60 days. The benefit of making an upfront disclosure is that it is the only way you can admit to a tax fraud without HMRC criminally investigating you. A further benefit is that long as you abide by the terms of the facility this will ensure that any penalties payable are at the lower end of the scale.

Those who choose not to make a voluntary disclosure could face a full investigation by HMRC and in some cases, this will result in a criminal investigation and prosecution. This would also be the case for any taxpayers who sign the contract, but then do not subsequently admit and disclose fraud.

Taxpayers who are not under investigation, but who want to admit to tax fraud, may fill out a form to voluntarily request that HMRC consider their suitability for a CDF contractual arrangement. HMRC still retains the right to decide which cases are dealt with civilly, and which are investigated with a view to criminal prosecution.

What else is new in the world of tax initiatives?

A new campaign is due to be launched by HMRC during the coming year aimed at people who fail to make tax returns and who are liable to pay tax at the highest rates of tax. Added to this will be two further campaigns, targeting trades people working in the home improvement market – roofers, joiners, decorators etc - and people who receive income from buying and selling goods direct to others – sellers on eBay for instance, or who are paid commission. HMRC has confirmed they will be using new technology to search for internet based evidence on potential target cases. Specifically they will be looking to identify people who fail to complete tax returns and who are liable to pay tax at the highest rates. In each case, there will be an opportunity to make a full voluntary disclosure prior to further action being taken.

So far more than £500m has been raised by HMRC from voluntary disclosures and a further £105m from follow-up activity. According to experts, the recent initiative aimed at plumbers raised over £4m in unpaid taxes and saw 10 people arrested.

If you think you might have under-declared your income and owe tax to HMRC we recommend you discuss your circumstances with our specialist, Anne Eager, who can be contacted on ae@rjp.co.uk.