Electronic sales suppression – last chance to disclose undeclared sales

HMRC is writing to individuals and businesses they suspect are suppressing electronic sales by misusing their till systems to reduce the number of recorded sales, hence not declaring the amount of tax they owe.

HMRC’s letter states that “this is your final opportunity to make a complete, accurate and honest disclosure before we [HMRC] calculate what we think you owe and charge penalties on top.”

The letter advises the recipient that HMRC can levy 100% penalties if they discover a false disclosure has been submitted. Disclosures relating to offshore matters may attract higher penalties.

30-day deadline

HMRC has given people 30 days from the date of the letter on electronic sales suppression to complete HMRC’s online form to make either a:

• Nil disclosure, the person is certain all sales have been correctly reported to HMRC and all appropriate taxes paid; or
• Disclosure detailing the unreported sales.

What will HMRC do?

On receiving the disclosure, HMRC critically analyses the electronic sales information and checks that it reconciles with the information they hold. If everything is correct, HMRC will discuss payment of the tax, late payment interest and any penalties that may be due. HMRC will also register the taxpayer for any appropriate taxes, e.g. VAT.

If HMRC suspects the disclosure to be incomplete and not correct, they will request additional information to clarify the position.

What happens if no action is taken within the 30 days?

The purpose of the letter is to encourage the recipient to check whether they need to bring their tax affairs up to date. HMRC makes it clear that anyone ignoring the letter faces a compliance check or investigation to ascertain whether their affairs are in order. HMRC has a range of powers to recover the tax that they suspect is due. This includes:

• issuing assessments to recover the tax, late payment interest and penalties due; or
• opening an investigation into the business for suspected tax fraud.

What other options are available?

If you have received a letter from HMRC, you must respond, even if you believe that your tax affairs are up to date. Before you respond to HMRC, seek professional tax advice on how best to proceed. There are several options, depending on the circumstances surrounding the suppression of sales.

In more serious cases, it might be necessary to use the contractual disclosure facility (CDF) to bring your tax affairs up to date. The CDF is only suitable for taxpayers who want to admit to tax evasion, i.e. deliberately and knowingly misleading HMRC, resulting in a loss of tax. If you are accepted into the CDF, HMRC undertakes not to criminally investigate anything that is included in the outline disclosure that they accept as attributable to deliberate conduct.

How far back can HMRC go?

A common question is how far back HMRC can go to recover unpaid tax. This depends on why sales were suppressed and what happened to the funds. The UK tax code is complex and the time limits that apply depend on the type of behaviour, the location of the sales and whether tax returns were filed in the years in question.

In summary, there are three types of behaviour: genuine mistakes; a failure to take reasonable care; and deliberate conduct. In some cases, HMRC can go back up to 20 years to recover the tax owed. The type of behaviour also affects whether there is a penalty to pay on the tax paid late. To ensure that the penalty is kept to a minimum, you should cooperate fully with HMRC. In the most serious cases, the penalty can be up to 200% of the tax owed where the assets are held or transferred overseas.

How can Moore Kingston Smith help?

We specialise in helping clients bring their tax affairs up to date and have a proven track record of successfully representing people wishing to make a voluntary disclosure to HMRC. We assist with all aspects of the disclosure and communicate with HMRC on your behalf. As well as ensuring that the tax owed is kept to a minimum, we minimise any penalty that may be due on the tax paid late.

Getting this right first time minimises the risk of HMRC asking further questions. We understand how disruptive this can be and work with you to ensure that the best route is taken to resolve the issue as quickly as possible.

For further information, please complete the inquiry form or call John Hood on 020 4582 1440 for a confidential discussion about how we can help.