If you’ve made money from breeding or selling cats, dogs and other animals, HMRC could be on your tail. HMRC thinks there are widespread instances of failure to pay tax on such income, and it’s writing to those it believes are involved.
How does it know?
HMRC actively looks for evidence of undisclosed commercial activity. If it’s on social media, HMRC can find it. Added to that, it has extensive information-gathering powers that mean it can access data from other government departments; online sales platforms; the Land Registry; DVLA — the list goes on.
The cherry on top is its computer system, Connect. Connect has been described as ‘terrifyingly efficient’. It’s said to hold more data than all the thousands of shelves in the British Library put together, and it enables HMRC to process huge amounts of information, identify patterns and highlight the sort of inconsistencies that might point to tax evasion. It’s this background that the current round of letters should be set against.
Where someone has income more than the £1,000 tax free trading allowance — from the sale or breeding of animals, or from any other source — they may need to declare that income to HMRC. There are, of course, other factors to consider, such as whether there is other taxable income.
Anyone receiving a letter like this from HMRC should take action within the time limits set out in the letter. Even where someone believes they have no undeclared income to disclose, it’s important that this is actively communicated to HMRC to avoid the possibility of penalties or further investigation.
In this case, HMRC is sending out two versions of the letter. One invites the recipient to use HMRC’s online voluntary disclosure service if they have income to declare from a previous tax year. The other also refers to HMRC’s Contractual Disclosure Facility (CDF). But using the CDF is only appropriate where someone admits to tax fraud, and great caution is needed.
If you would like to speak with one of our specialist advisers and discuss this further, please email solutions@ellacotts.co.uk or call us on 01295 250401.
* Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
