Make amends with the taxman
Online traders who owe money to the taxman can clean their slates now and avoid prosecution later, says Merryn Somerset Webb.
If you've been paying less tax than perhaps you should have you might want to give HMRC a call and see if you can't make amends. That's partly because it is the right thing to do. But it's also because the organisation is under pressure from the government to clamp down on tax avoidance.
Those who doubt that they are responding to this pressure with enthusiasm need only look to the number of tax disputes waiting to be heard by the tax tribunal system. Ministry of Justice figures show that these rose by more than a third last year: there was a back log of 22,100 cases by the last quarter of 2011.
The tribunal system was reformed in 2009 to introduce two tiers: first-tier tribunals, which hear cases first, and upper-tier tribunals, which hear appeals. Unfortunately, while helpful, this hasn't made being in dispute with the taxman any more pleasant. The system, says Ian Hyde of law firm Pinsent Masons in the FT, is "still one of confrontation rather than consensus".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
To avoid that sort of confrontation you could take part in one of HMRC's amnesties. These allow tax cheats (accidental and deliberate) to come forward, pay what they owe plus a relatively low penalty and avoid prosecution. These work. The now past plumbers amnesty brought in £2.5m in revenue from 429 disclosures; the medical amnesty brought in more than £10m from over 1,500 disclosures, including one payment of more than £1m from one doctor. Clearly, people like the idea of cleaning their slates on the cheap.
Right now there is one underway for online traders. It started on 14 March but runs out in a week (14 June). If you register via the E-markets Disclosure Facility (see www.hmrc.gov.uk), make full disclosure of what you owe and pay up (by 14 September in this case), you could pay no penalty at all. Most people will end up paying no more than 10%. Compare that to the 100% you are likely to pay if you don't come forward but get found out anyway and it looks like a pretty good deal. The recent rise of online trading seems to have left plenty of people in doubt as to whether their dealings are taxable or not. But it really isn't complicated.
If you're selling personal belongings you no longer want (clothes and toys your children have outgrown, for example), you're not trading and aren't liable for tax on the proceeds. If you regularly buy and sell them on online, you are trading and do have to pay tax on the income. I can't see that there is much middle ground here, but if you still aren't certain and you want to be by 14 June, you can check here: www.hmrc.gov.uk/manuals.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
-
A junior ISA could turn your child’s pocket money into thousands of pounds
Persuading your child to put their pocket money in a junior ISA might be difficult, but the pennies could quickly grow into pounds – and teach them a valuable lesson about money
By Katie Williams Published
-
Cost of Christmas dinner jumps 6.5% as grocery price inflation rises again
The average Christmas dinner for four now costs £32.57 as grocery price inflation increases - but what does it mean for interest rates?
By Chris Newlands Published