Key Information - Tax Investigations - Internet Trading

In this ever developing internet dominated world, e-trading of some description has become second nature to most of us.

So when does a perceived innocent "hobby" become a taxable source of income and thus of interest to our friends at HMRC?

In this article Admiral Tax Investigations offer our own take. Providing some useful information and guidance to enable you to consider carefully the implications of e- trading and how this may impact on your income tax affairs.

Firstly let us look at the definition of trade within the tax legislation

What principles do HMRC apply when deciding whether or not:-

1. tax may have been lost to the exchequer
   and as a consequence
2. a tax investigation should be launched

Definition of Trade, Profession or Vocation

Strictly there is no statutory definition of trade, profession or vocation. The Taxes Act is quite specific about this. This means that as far as HMRC are concerned the terms take on the every day meaning.

Common sense you may think? But this is not necessarily the case. As with the interpretation of any piece of legislation, particularly tax legislation, the lines are often blurred by ambiguity.

When considering the term trade the legislation says this -

A taxable source of income will normally arise when a

"commercial operation is conducted by a trader who provides goods or services to his or her customers in exchange for a reward"

Should I be registered with HMRC?

In short, if you are engaged in activity which results in the exchange of goods or services for any type of remuneration (regardless of size or scale) then you should be registered with HMRC.

Am I likely to get caught if I do not register with HMRC?

As with any type of compliance initiative the governing authorities often track some way behind the realities of every day life.

However, there is mounting evidence that HMRC are beginning to catch up. We have recently seen a huge increase in the number of tax investigations being launched against internet traders who are operating in the black economy.

HMRC have dedicated investigators within their Hidden Economy Teams who are specifically tasked with targeting those who trade on the internet.

This is a logical development. After all why would HMRC not be interested in those individuals, however innocently, are operating outside the tax system. Where there is an identifiable tax loss there is invariably an investigation.

HMRC are supported in their efforts by ever improving access and interrogation of third party information. Indeed aside from that, much of the information they need is in the public domain anyway. After all the very nature of the internet means that we leave electronic foot prints every where we tread.

Quite simply, if you are operating in the hidden economy it is increasingly likely that HMRC will catch up with you eventually.

What should I do now?

Firstly do not panic. Although HMRC make clear that ignorance of the tax system is no excuse, it is never too late to take control.

Positive and proactive action in the form of a voluntary disclosure invariably ensures that HMRC deal with you in wholly more sympathetic fashion than if they discover a hidden source of taxable income by other means.

A voluntary disclosure will invariably prevent any form of criminal proceedings being instigated against you and will always result in a more lenient financial penalty.

What will happen if HMRC discover that I have evaded income tax?

If HMRC discover that you have evaded income tax it is almost certain then you become the subject of a formal tax investigation. In most cases you will be dealt with using HMRCs civil powers. This means that HMRC will look to reach a financial settlement with you. The settlement will include recovering any tax evaded, late payment interest and a punitive penalty of up to 100% of the overall tax lost.

In the most serious cases HMRC reserve the right to instigate criminal proceedings.

Obtain professional representation

Any form of compliance contact with or from HMRC should be dealt with by an experienced professional. It is absolute critical that you seek experienced advice immediately.

Admiral Tax Investigations are vastly experienced in dealing with all types of tax investigations and voluntary disclosures.

We will:-

• Be totally non judgemental
• Take positive and proactive control
• Always put you, our client, first
• Create a buffer between you and HMRC, allowing you to focus on those things that really matter - your business and/or family life.
• Rigorously present or defend your position within the parameters of published legislation.
• Minimise the risk of any criminal proceedings being launched
• Ensure that any voluntary disclosure is submitted to HMRC in the correct and most efficient way.
• Handle all aspects of the tax investigation or voluntary disclosure through to settlement.
• Seek resolution and closure to any investigation in the most cost effective and timely manner possible.
• Ensure that the best possible financial settlement is achieved – by computing the tax loss and negotiating the lowest possible penalty
• Be open and transparent with you, both in terms of our approach and in terms of our fees

What about my Tax Credits claim?

If you are currently claiming tax credits and are in receipt of undisclosed source of taxable income, then your award has likely either been overpaid or awarded incorrectly.

HMRC are responsible for the administration and investigation of all tax credit awards.

The same principles apply as in any tax investigation and the matter should be dealt with as outlined above.

However, it should be noted that in cases of deliberate, aggravated fraud HMRC will consider a criminal prosecution at a much lower level of tax loss than would be the case during a conventional income tax investigation (ie when the tax credit loss may be considered less that significant)

If you have any concerns regarding your tax credit award then please contact Admiral Tax Investigations without delay.

A dedicated tax credit specialist will be on hand to take your call.

Contact Admiral Tax Investigations

If you have any questions or concerns regarding any aspect of your income tax affairs, then please call Admiral Tax Investigations immediately on 0845 519 2206.

Alternatively you can email Admiral Tax Investigations at info@admiraltax.co.uk

A specialist tax investigation consultant is on hand to take your call 24 hours, 7 days.

We are the company that cares and understands entirely the value of integrity and the personal touch.

Put simply you could not be in safer more experienced hands.

Admiral Tax Investigations have decades of tax investigation experience between our various consultants, ensuring that you receive the very best tax investigation advice possible.

At Admiral Tax Investigations we take great pride in customer service and for that reason we will be on hand to deal with your telephone enquiry 24/7. Admiral Tax Investigations endeavour to respond to all enquiries on the day of receipt and generally within one working hour.

Admiral Tax Investigations guarantee all fees up front, so you our client can plan appropriately and worst of all avoid any unexpected billing surprises.

For a no commitment, confidential discussion about how we can resolve your tax investigation and save you money, contact Admiral Tax Investigations day or night:

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