Q. Recently I was attending a business forum and it was mentioned that H M Revenue & Customs (HMRC) has launched an amnesty campaign targeting businesses trading above the VAT threshold but have failed to register. Is this correct and how will this latest amnesty be implemented? What are its effects likely to be?
A. HMRC have announced it is their intention to start a VAT crackdown later in the summer, thus giving those businesses who are unregistered for VAT but trading over the current annual threshold of £73,000 to take the appropriate action to become compliant in advance of the crackdown.
The recently announced campaign is expected to run along the same lines as previous initiatives where HMRC encouraged non-payers to disclose what they owe before taking action against those who failed to come forward. No confirmation of this has yet been forthcoming from HMRC.
Previous amnesty campaigns have targeted offshore investments and medical professionals. Currently they are targeting people working in the plumbing industry. These amnesties have been aimed at reducing the tax loss to the Treasury by focusing on areas where a significant underpayment has been identified. So far HMRC has raised more than £500m from voluntary disclosures and a further £100m from its follow-up activity.
The announcement is designed by HMRC to encourage anyone who has unpaid tax to come forward and make a voluntary disclosure before a compliance visit is made by one of the investigating teams under the announced crackdown.
The current regime of penalties and surcharges for failing to register for VAT are so penal that anyone who fails to act in a compliant manner for a year or more will be facing a huge bill if they do eventually decide to come clean by registering. So, if HMRC does offer some form of low penalty for voluntary disclosure, as it has done previously with its direct tax disclosure facilities it could turn out to be a very good opportunity.
This new process of encouraging taxpayers to become more compliant is part of HMRC continuing change in approach. HMRC have stated that they look forward to being even more open about the compliance activity HMRC is undertaking to ensure they reduce the loss of tax and help customers pay what they owe.
HMRC’s new data analysis driven campaigns have in the view of many professionals been long over due. On the question of VAT, ever since the merger of the Inland Revenue with Customs & Excise the data on self assessment returns has been available across the new department. The data showing those who exceed the annual VAT threshold has therefore been available for comparison with those registered for VAT for many years.
Anyone who has failed to register for VAT when trading over the threshold should take professional advice and consider using the current period to make a voluntary disclosure to HMRC.
If you have any questions or need further advice then you can contact our VAT experts on 01455 852555.