From late tax return fines to eBay sellers, what is the taxman up to?
HMRC is very visible at the moment, but it's not just cracking down on avoiders and evaders.
The taxman has had a busy time of it over the last couple of weeks, popping up frequently in news reports on everything from tax returns to eBay sellers.
Let’s take a look at just what HM Revenue & Customs (HMRC) is up to, and whether you should be worried.
Tax returns
Over the weekend newspaper reports revealed that the taxman is to waive £100 fines for hundreds of thousands of people who failed to file their tax return on time.
The deadline fell on the 31st January, and according to the rules those who missed that deadline would face a £100 fine, even if they did not owe any tax.
However it now appears the taxman will waive the penalty charge without investigation if the taxpayer has a reasonable excuse. Until now, if you appealed the fine you faced an investigation into your tax situation before HMRC decided whether your excuse was valid.
Instead the taxman has said that it wants to use its resources to target more significant tax avoidance and evasion, rather than penalising ordinary people.
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Getting tough on defaulters
The taxman’s more relaxed position on tax returns is in contrast to its approach to using its Managing Serious Defaulters (MSD) programme.
If a taxpayer is referred to the programme, HMRC can make unannounced inspection visits to business premises to check records and carry out compliance checks. These powers extend to any business that a known defaulter is involved with.
What’s more, there is no right of appeal against inclusion in the programme, and the taxman can monitor you until it is satisfied you are meeting all tax obligations. According to accountants Baker Tilly, this can last for anything from two to five years.
And it was Baker Tilly that discovered, via a Freedom of Information request, that more than 6,000 defaulters were signed up to the monitoring unit in 2014/15, a 30% jump on the year before.
Serious defaulters include those who have been hit with a penalty for deliberately under-declaring income in their tax returns. The number of penalties for this almost trebled last year, from £5,162 in 2012/13 to £14,401 in 2013/14.
Mike Down, head of tax investigations at Baker Tilly, warned there is likely more to come. He said: “There will be immense pressure on HMRC to clamp down on defaulters in an attempt to reduce the tax gap, so it’s likely that we’ll see more people referred into the MSD programme in this financial year.”
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Targeting online sellers
HMRC is also setting its sights on people that sell goods online through sites like eBay, Etsy and Gumtree.
These websites are being forced to hand over customer account details as part of the new powers that the taxman received last year. As a result, HMRC has been able to target around 14,000 people it believes have failed to declare profits from online selling. According to the Telegraph, some of those targeted have made just £100 in profit.
This crackdown is aimed at people that are essentially running a business via these sites. According to Chas Roy-Chowdhury, head of tax at ACCA, to be classed as a trader you would need to be selling goods on a reasonably frequent basis with the intention of realising a profit.
He said: “Most people however, tend to only sell unwanted items which are sold at a price below that at which they originally bought. Even if they undertake frequent sales they would not, or least should not, be considered to be undertaking a trading activity as this would clock up ongoing losses.
“If people are contacted by HMRC who fall into this category, they should not in any way be caught for tax or be required to make a tax return filing to account for this type of activity.”
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More on tax:
Tax Freedom Day: what you can do to get there quicker
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