HMRC has recently announced a new amnesty campaign to target businesses that are trading above the VAT threshold but are not registered.
The campaign is set to start later on in the year and will give the opportunity for those businesses affected to ensure that their affairs are in order. As with other recently released campaigns, the crackdown plus penalties will commence soon after and target any business still defying the VAT legislation.
This is just another in a long line of ‘crackdowns” by HMRC targeted at small business with recent others that have looked at plumbers, restaurant owners, general bookkeeping and debt enforcement to name a few.
Although we welcome this initiative, we do find it surprising that HMRC have not already been checking and comparing records within their tax & vat departments already. Even in the old days of the Inland Revenue and Customs & Excise, it should only have been a simple check to see if a business with turnover higher than the VAT threshold was registered or not?
Business owners are in a quandary
The problem with any amnesty is the level of liability or punishment incurred by the business if declaring any wrong doing. If a business has persistently avoided paying additional taxes where they are due, such as VAT if above the threshold, I guarantee that no business would have set aside that money ‘just in case’.
Therefore, the business is in a quandary; do they risk their business to voluntarily declare or keep quiet, preserve their business and hope they are not caught.
There are many businesses operating without an accountant and I fear that these businesses will verge on the side of protecting their business and keep quiet.
Maybe, HMRC need to look at a new approach and offer businesses a ‘carrot on a stick’ approach to coming clean. One way, would be to significantly reduce the liability and penalty that could be due, say on a means tested percentage basis. This percentage could be calculated using parameters such as length of time of offence, the level of liability or whether they were oblivious or knowingly evaded taxes.
Sure, they may lose revenue in lost tax and penalties, but would they actually have got this anyway? However, it might make it easier for a business that has been operating without paying sufficient taxes a better way out to become legitimate and start paying the taxes owed…..food for thought?