During our Tax Investigations Update webinar last March, I warned that HMRC were looking closely at dog breeders. My warning followed the news that an information notice had been served on an insurance company to provide a full list of dog breeders offering pet insurance with each sale. The insurance company provided HMRC with a list of 18,000 breeders covering a four year period.
In the meantime, it appears HMRC has been working through the data provided and identified which dog breeders are registered to pay tax and those who are not.
This assumption is based on a series of letters issued by HMRC’s Hidden Economy team, to dog breeders, advising them they are under enquiry and inviting them to a meeting.
Here is an extract of such a letter:
I am aware that you have been in receipt of income from the sale of dogs that has not been declared to HMRC. I have therefore opened an enquiry into your tax affairs.
Please attend an interview to discuss this matter.
Please find enclosed Factsheet CC/FS1a for your attention. Please take time to read and understand its importance.
The number of years HMRC will go back and assess undeclared income depends not just on the particular facts of each case, but also on the behaviour of the person or persons in question.
For example, if a dog breeder has been in business for 10 years but failed to disclose their income because of their careless behaviour, HMRC will probably only go back a maximum of 6 years. However, if the dog breeder has deliberately, knowingly and intentionally failed to disclose their income, HMRC will usually look to assess all 10 years.
HMRC can assess up to a maximum of 20 years for deliberate behaviour, if someone has been in business for that length of time and failed to declare their income at all.
Author: Guy Smith, Head of Technical Research