On 8 February 2012 HM Revenue & Customs (HMRC) announced their intention to target electricians and e-marketplace traders. In recent years HMRC have launched a number of "campaigns" against certain trades and professions to clamp down on what they perceive as a high level of tax evasion within those industries. To date these have included plumbers, doctors, dentists and private tutors and coaches.
The focus on electricians is a continuation of the HMRC "Trades Campaigns" which are moving from trade to trade within the home improvement sector encouraging full disclosure and tax compliance. Previously plumbers have been targeted and now the electrician trade is under the spotlight with 50,000 letters being dispatched to encourage voluntary disclosure. Overall, HMRC estimate this trade by trade approach will encompass several hundred thousand people covering electricians and the additional trades of roofing, window fittings, bricklaying, carpentry and joinery.The benignly entitled "Electrician’s Tax Safe Plan" launched on 14 February 2012 and focuses on "anyone who installs, maintains and tests electrical systems, equipment and appliances under stringent safety regulations". Those wishing to avail themselves of this disclosure facility will need to notify HMRC of their intent by 15 May 2012, but will then have until 14 August 2012 to fully disclose the relevant details and pay the additional tax due.
The e-marketplace traders/businesses campaign launched on 14 March 2012, with an initial notification period running until 14 June 2012, and disclosure and payment due before 14 September 2012. The disclosure facility will be open to those who receive income from buying and selling goods direct to others or are paid commission related to this as a business. HMRC do stress that those individuals who only sell a few items online and who are not deemed to be "traders" are not likely to be liable to additional tax and will not be targeted.
As with previous campaigns, HMRC have adopted their traditional approach of offering a period of amnesty in which qualifying individuals can voluntarily disclose untaxed income they have received and not declared. Those who do disclose will bring their tax return filing up to date and receive a reduction in the penalties HMRC would otherwise apply (10-20% on the untaxed sum rather than up to 100%).
HMRC state that more than £500 million has been raised via the previous voluntary disclosure facilities and a further £105 million from HMRC’s follow‑up activities. They state that the plumbers’ campaign alone has generated nearly £4 million in unpaid tax with ten individuals having been arrested and additional arrests to follow, and over 1,000 civil cases are pending.It is also worth noting the tone which HMRC adopt following the closure of such facilities. "For those who did not take advantage of the disclosure opportunity, we will be using our tracing technology, together with intelligence gathered from many different sources, to find them." Given the tone HMRC have chosen to adopt, it is likely they will seek to levy interest and penalties climbing as high as 100% of the unpaid tax. They will also seek criminal convictions in cases of where there is strong evidence of tax evasion. However, all is not lost if an individual missed their relevant trades’ disclosure facility, as should they still voluntarily disclose prior to a HMRC investigation being opened, the penalty on any unpaid tax will still be lower than it would be should HMRC initiate an investigation.
Matthew Biles, Solicitor, Fladgate LLP (firstname.lastname@example.org)