HM Revenue & Customs (HMRC) launches campaigns to prompt a targeted group of individuals, traders or professionals to do something voluntarily. That something might be to make a declaration of undeclared income and / or over claimed expenses, or it may be a campaign designed to encourage the submission of outstanding Tax or VAT Returns.
Campaigns can sometimes be misleadingly described as ‘amnesties’. However, campaigns are not an opportunity to avoid, evade or pay less tax or VAT as the term amnesty suggests. They are an opportunity to achieve a lower penalty on any additional tax or VAT resulting from a disclosure or submission.
During an enquiry or other compliance check outside a campaign, the penalty chargeable would be based on the behaviour of the entity involved (the individual or business), the quality of the disclosure and whether the disclosure was completely unprompted or prompted by HMRC action. The maximum penalty chargeable under these conditions can be up to 100% of the additional tax, so in simple terms, if £10,000 is owed in tax, HMRC can charge a £10,000 penalty.
In practice, beneficial penalty terms are offered during campaign activity to encourage the voluntary action desired, with the terms on offer varying from one campaign to another.
HMRC’s Business Plan 2012-15 includes a commitment to begin 4 national campaigns every tax year.
Author: Guy Smith, Senior Tax Consultant on the ReSource Tax and VAT Consultancy Team.