A crackdown by HMRC that has caught some clients unaware has gathered pace with the expected recruitment of 5,000 additional compliance officers.
So called 'nudge' letters have been received by an animal breeder and another deemed a person with significant control (PSC).
In both, HMRC invites the recipients to voluntarily disclose within a tight deadline all sources of income and gains.
They are invited to amend tax returns should there be any errors. Any payments due must be settled within 90 days of the disclosure being made.
HMRC makes it clear failure to do so may result in a penalty and interest being owed on late payments.
Associate Partner Sinéad Catchpole said the letters evidenced another crackdown and the recruitment announcement made in the Budget confirms as such. The first 200 of the 5,000 start this month.
There is also a plan to recruit 1,800 debt management officers, expected to raise £2.7 billion in additional revenue per year by 2029/30.
Significant financial investment to improve HMRC's use of IT has been announced.
“HMRC seems increasingly determined to ensure people pay appropriate levels of tax,” Sinéad said.
“It appears to be getting data from different sources helping it crackdown in certain sectors.
“With the animal breeder, we wonder if information has been shared by pet insurers, for example.
“However HMRC is getting the details, this is of little concern to those in receipt of the letters if they don't adhere to the requests.
“HMRC may decide to undertake a compliance check and investigate the matter. This can be very costly for the person targeted and, obviously, there is also potential for reputational damage should the case become public.
“If you do receive a nudge letter from HMRC, the best and most immediate course of action is to contact your manager or partner at RNS.
“If annual gross trading income is £1,000 or more from one or more trades, HMRC must be informed.”
Sinéad said HMRC will be tasked with commencing more criminal investigations.
“The strategy to close the 'tax gap' appears to be threefold: recruit more HMRC officers, significant investment in IT and a more targeted approach to enquiry work.
“None of the ideas are new, but if the Government sticks to its plan, then it will undoubtedly lead to more tax investigations,” said Sinéad.
Break out:
The PSC rules require a company to identify the people who can control it and to report this information to Companies House.
HMRC has reviewed this information and is writing to the PSC where it believes that person may need to act.
This may be because they have not filed a tax return or may not have declared all their income.
Where a return has not been submitted, HMRC has the option of raising a determination. This allows it to estimate the amount of tax due and to collect that amount.