HMRC’s Hidden Economy Teams (HETs) search for individuals and businesses who illegally evade tax and VAT as ‘ghosts’ and ‘moonlighters’.
Ghosts operate unseen in the hidden economy until HMRC track them down, whilst moonlighters can often be known to HMRC and may be declaring one source of income, but hiding another. HMRC has produced a short video about the hidden economy which is available on YouTube.
If HMRC suspect a business is operating in the hidden economy, initial contact can be via an unannounced visit to the business premises or by the issue of a letter and supporting questionnaire.
The letter the VAT HET typically uses is titled ‘Important – VAT Registration Enquiry‘ and the introductory paragraph will usually state ‘ I understand that you are in business but I am unable to trace a VAT registration number for you.’
The letter continues ‘ If you believe there is no requirement for you to be VAT registered, I will need to establish whether this is correct. To help me consider this, please complete and return the attached questionnaire, ‘About you, your income and your business history’.’
The questionnaire is 4 pages long and broken down into the following sections;
A: About you
B: About your income
C: Self employment
D: Your business details
E: Your trading figures
F: Monthly sales figures
G: Name, Signature, Date and Declaration
HMRC has been very active in the VAT arena over the last six months.
One of the services Abbey Tax offers is fee protection insurance, through our network of accountancy clients. During the first six months of this year we have seen a 17% increase in claims compared to the same period as last year, with 39% of those claims VAT related.
If you require any assistance with a VAT questionnaire or any other VAT related dispute, please contact our VAT Manager – Mark Burke. Mark is an ex HMRC VAT Inspector with extensive experience. His email is firstname.lastname@example.org
Author: Guy Smith, Head of Technical Research