Beware - the taxman is on your tail!

HMRC is clamping down on yet more areas where it believes we aren't paying enough tax.

Be careful out there, the taxman is getting tough. He’s developed a taste for catching tax cheats - his words, not mine – and he’s hungry to gobble up more.

In recent months, HM Revenue & Customs has been busy flushing out plumbers who have failed to do their duty by the taxman, and calling out gas fitters, heating engineers and members of associated trades.

Like the US Marshall in an old cowboy movie, the taxman has been offering offenders an amnesty. Anyone who fully discloses their income and tax arrears should escape with a reduced penalty rate of only 10% of unpaid tax, or possibly 20%. You still have to pay all the tax you owe, so it’s not really a full amnesty, but it is better than the alternative.

If you don’t freely confess, you could face tax penalty of up to 100% of the unpaid amount, and a possible criminal investigation. Some offshore tax cheats have been hit with a 200% penalty.

The bad news for tax cheat plumbers is that the amnesty expired on 31 May. Now the Revenue is gunning for them. What's more, it has plenty of other tax cheats in its sights, and you might be surprised to discover you could be one of them.

Taxing times

The latest tax cheat campaign, launched last week, is targeting VAT defaulters, private tutors and e-marketplaces. That last one could prove particularly worrisome if you’ve been running an online sideline, or have been a bit too active on eBay recently.

If you’re a teacher with an undeclared earner tutoring children or marking exams, the Revenue may want to teach you a tax lesson. Personal trainers, dance instructors and lifestyle coaches may also be sweating.

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Trading without telling

I’ve been using cowboy analogies, but the Revenue is more of a spy than a sheriff, and it’s got technology on its side. Or to be more precise, robots. Web robots.

These electronic critters can search the internet for data about your personal and business finances. The nosey little ‘bots will be looking for things such as undeclared bank interest or property income, or evidence of a lavish lifestyle on a lowly income, and will pass the data to the Revenue’s Connect self-assessment computer system.

So we’re all under electronic surveillance, it’s legal, and the taxman wants us to know it. Some of this stuff about robots may be bluster, designed to scare people into coming out with their hands up. The Revenue refuses to discuss its data collection methods, so I can’t tell you exactly what information they will be scraping up on you.

Tax not fair!

Previous amnesties, which have targeted offshore investors and medics, have netted £500m from voluntary disclosures, plus a further £100m from follow-up activity. The taxman removed more than £1m from one doctor’s bank account, and extracted another £300,000 from a dentist.

I’m happy for the Revenue to round up hardened tax cheats. There’s no excuse for fiddling your return. Yes, I know it’s your hard-earned money. Yes, the UK tax burden is arguably too high. Yes, our MPs have been caught fiddling their own taxes. Yes, the state does squander billions on wars, scroungers, foreign aid, etc, etc. And yes, yes, yes, Vodafone and TopShop boss Sir Philip Green should be paying their fair share as well.

But that’s still no excuse for ducking your fiscal duty, because if you don’t pay your whack, the rest of us have to pay it for you.

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Tax in your attic

The people I do have some sympathy for are those who find themselves in a grey area. At what point does selling a few bits and bobs on eBay suddenly become a business? The Revenue isn’t explicit on this point, although it has said that people selling a few bits of crockery from their loft should be fine, so don’t panic.

What if your business earnings are hovering around the VAT threshold, and a big remittance suddenly pushes you over?

And what if your private tuition or personal training started off as just the odd session, and gradually developed without you seriously thinking about the tax implications?

It is easy to get in an innocent mess with your tax return. As the Revenue gets tough, people who would never consider themselves a tax cheat might suddenly find they’ve got ‘bots on their ass.

Get the big guns

If in doubt, speak to the Revenue sooner rather than later. It can’t be much fun ‘fessing up to the taxman, but it could take a weight off your mind, not to mention a ‘bot off your backside.

Now let’s just hope the taxman is as pushy when sorting out major corporate tax dodgers. Of the estimated £25bn lost to tax avoidance each year, £13bn is down to individuals, the remaining £12bn is down to the 700 largest corporations. As so often when it comes to lawbreakers, it is the small fry who get rounded up, and the Mr Bigs who get clean away.

If everybody pays their fair share, we can all feel better about the tax we do pay (Memo to Revenue: it would help if there was slightly less of it as well...).

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