6 September 2017
HMRC have updated their Card Transaction Programme (CTP) to include other transaction media, such as, erm, cash.
The CTP was launched in March 2017 to encourage businesses who may not have fully disclosed all of their income, especially that generated from credit or debit card transactions, to update their tax affairs to reflect their full earnings. The explicit threat is that HMRC are obtaining increasing amounts of data about card transactions and it will inevitably catch up with those who are not reflecting all of their income in their returns.
The carrot for coming clean is a lower level of penalties than would be the case if HMRC were to contact the trader first. As the HMRC website says, ‘The Card Transaction Programme offers the best possible terms available to get your tax affairs in order.’ I’m sure anyone who does make a disclosure to HMRC and suffers any level of penalty would consider that this did not constitute the ‘best possible terms available’! Suffice to say, businesses are better off coming clean than not and are likely to benefit from the second of the ‘Higher! Lower!’ options!
Whilst HMRC campaigns are useful to highlight and focus upon certain areas of tax non-compliance, they can be somewhat narrowing. For instance, if a taxpayer, or, probably more particularly, non-taxpayer, does not meet a particular campaign’s criteria, then that taxpayer, in wishing to make a clean breast, has to fit within the requirements for the Consequential Disclosure Facility or throw himself on the mercies of HMRC more generally. In such circumstances HMRC are still likely to be more lenient on the penalty front than if it makes a discovery of a taxpayer aberration. It would be interesting to compare the level of penalties charged within a campaign against those charged to taxpayers who make admissions outside of a campaign, but it would be hard to achieve as every case is different. I suspect that the campaigns benefit/suffer from a more standardised approach, in some cases dictated by statutory provisions, whereas the non-campaign discloser would have a more variable outcome. In either case, taxpayers would benefit from professional support in making a disclosure to help argue their case and lessen the penalties charged.
Anyway, it’s good to see a widening of the CTP criteria, as it seems that more under-declarations in respect of cash transactions are likely to have occurred than in the case of card transactions. Although with cash transactions, HMRC have less chance of finding out about them and, perhaps, non-reporting of such transactions may have a greater degree of deliberation than with oversights in recording card transactions.
The principle that taxpayers can correct the reporting of their tax affairs with reduced sanctions and, indeed, none, where the error is innocent, is a good one. This needs to be balanced with a sufficiently tough penalty regime for those who fail to come clean or are deliberately evading tax and where HMRC have to utilise a lot of their resources in bringing the miscreants to book.
There is a natural desire for HMRC to maximise their tax take (my colleague touched on their use of ‘nudge letters’ in a recent blog), especially with the ongoing financial pressures on government, so anyone looking to make a disclosure should consider taking professional advice before approaching HMRC. If you have any concerns of this nature please contact me or your usual UHY adviser.