Tax office cracks down on unreported credit card revenue
By Marianne Curphey
The Inland Revenue is urging independent merchants and small-business owners to sort out tax affairs as it cracks down on undeclared credit and debit card income. The HMRC campaign is part of an ongoing drive by the tax office to collect unpaid taxes on income that merchants accidentally or deliberately failed to report. If you have unreported credit or debit card revenue, the time to come clean is now, or you may face fines or even prosecution.
The crackdown, which was launched in October 2014, targets individual taxpayers and small- and medium-sized businesses (SMEs); businesses have four months to calculate and pay what they owe.
Under the scheme, you have the opportunity to disclose income and unpaid tax, calculate what you owe and make an offer to the Inland Revenue. You need to tell the tax office if you are not registered with them or if there are gaps in your income declarations. This is called a "voluntary disclosure".
"The Credit Card Sales Campaign is an opportunity to bring your tax affairs up to date if you're an individual or business that accepts credit or debit card payments," an HMRC spokesperson said in a public statement.
Who should take action?
Becki Freeman, senior accountant at Crunch Accounting, which specialises in providing tax services to SMEs, says that the crackdown applies to both sole traders and people running businesses.
You should take action if:
- You are an individual who accepts debit and credit card payments for your work, but have failed to register those payments on your tax form;
- You own a business that accepts card payments but have not declared all of your income;
- You own a business that trades and is not registered with the Inland Revenue, but receives card payments;
- You accept card payments for goods or service and you haven't declared all your UK tax liabilities.
The HMRC can access credit and debit card payment information from the UK's merchant acquirers -- the companies that process card payment transactions. That means it can cross-check the income information businesses and individuals have provided on their self-assessment or company tax forms against the data from card payments.
In other words, yes, the HMRC can identify those who are not declaring parts of their income. HMRC can go back 20 years in an investigation.
You will be treated more leniently if you have made a genuine mistake or if you give details now of all the unpaid tax.
If you fail to disclose unpaid tax and the tax office finds out about it, possible sanctions include paying high penalties, perhaps up to 100% of the unpaid liabilities, or facing criminal prosecution.
The HMRC treats mistakes and oversights more leniently than deliberate attempts to avoid paying taxes, Freeman says. You'll be on better footing if you act now. "To get the best terms, contact HMRC and tell them you want to take part in the campaign," the HMRC spokesperson stated in the public statement.
to take action
You must fill in a notification form to let the tax office know you are taking part in the campaign, then fill in the disclosure form and pay the money you owe. You can get these forms from the HMRC website.
It may be that you need professional help to work out how much you owe and what you should offer to pay."This is a good opportunity to look back and check through your books to ensure that all your income information is up to date," Freeman says. "It is a great time to look at the history of your trading and make sure you have not left anything out."
Crackdown not something to ignore
Inland Revenue campaigns have been very successful in the past.
One campaign targeting doctors and dentists brought in more than £10 million; another, which focussed on plumbers, uncovered £4 million of unpaid taxes. The tax office has also run investigations into unpaid VAT, and undeclared income from tutors, coaches and electricians. Other campaigns and amnesties have focussed on property and selling items online. Some prosecutions are now going ahead as a result.
"You might as well check through and disclose any unpaid income now, rather than face a heavy fine in the future," Freeman says. "The longer you leave it before you tell HMRC, the more serious the situation will become."
Philip Pearson, independent financial adviser with P&P Invest, says the campaign highlights the need for people to keep their financial and business records up to date.
"Tax planning should be part of a wider financial-planning strategy," Pearson says. "You should make sure that you leave enough time to fill in your self-assessment form properly, rather than leaving it to the last minute in January, and that you have an accountant or independent financial adviser to help you with your business and personal financial affairs if they are complicated."
Published: 24 October 2014
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