HM Revenue & Customs (HMRC) has announced the official start of its campaign which focuses on businesses trading above the VAT threshold but which have failed to register.

The current turnover threshold is £73,000 but as it increases every year, it will of course have been a lower amount in previous years.

The benefits of using the campaign are:

1. Reduced penalties in the vast majority of cases - although HMRC is still reserving the right to use the full range of sanctions against those who have knowingly but deliberately failed to register in the past.
2. More favourable treatment if requesting "Time to Pay"

Those who may want to benefit from using the Campaign will need to notify HMRC of their 'Intention to Disclose' by 30 September 2011. They will then need to make the Disclosure proper and make arrangements to pay any additional amounts due, by 31 December 2011. (Or have an agreed payment schedule in place by that later date).

It is clear that HMRC already has information on a number of potential 'candidates' for the campaign - it will be sending out over 40,000 letters to those it has identified who might be 'eligible' to use the campaign. And of course it will deal far less favourably with those who fail to take advantage of the campaign.

HMRC says that this campaign is targeting VAT "Cheats" - as in its latest press release VAT Cheats Targeted in Crackdown but this terminology has more serious connotations than some might appreciate. As in (1) above, this campaign has little to offer by way of incentive for those who, demonstrably, have knowingly and deliberately failed to register for VAT.  (See pages 5 & 17 of the detailed guidance referred to below). But then, HMRC might not actually have the authority to refrain from taking serious measures - or might be open to legal challenge if it now did so.

The timing of the VAT campaign also represents a problem: VAT is essentially a turnover tax and, if later 'amnesties' (campaigns) reveal that turnover was in fact higher than estimated, the VAT 'amnesty' will be long gone. People may not have much sympathy for standard businesses who have had several opportunities but  failed to get their affairs in order. But VAT is more pervasive than many appreciate and there will be people with one or more ancillary sources of income, who may find out too late, that the VAT turnover test applies to everything they do - such as a bit of eBay trading. This is why in traditional enquiries, VAT was always considered last when assessing under-declared income.

HMRC has helpfully published a list of past, current and scheduled future campaigns at HMRC Campaigns - note that HMRC does have plans for a campaign targeting people who use 'e-marketplaces' to buy and sell goods on a trading basis, in 2012. Before that - in Autumn 2011 - there will be a campaign to target people who have ancillary sources of income through Private Tuition and Coaching. In fact, both of these activities could easily 'boost' the aggregate taxable turnover of self-employed persons, who may currently believe themselves to be operating below the VAT turnover threshold!

And, having read HMRC Campaigns alongside VAT Cheats Targeted in Crackdown, one might wonder how Mr. Wells, HMRC's Director of Risk and Intelligence, can think that the latest VAT campaign is only the fourth such. Whilst also noting that the Liechtenstein Disclosure Facility doesn't even get a mention. Perhaps the LDF falls without the purview of "Risk and Intelligence".

HMRC has a separate section of its website devoted to the new VAT Campaign at Tell HMRC Now if You Need to Register for VAT.

There is more detailed guidance at HMRC VAT Initiative Campaign - Your Guide to Taking Part - although where it currently advises that you cannot take part in the campaign if you have already made a disclosure under any of the earlier HMRC campaigns, we have pointed out to HMRC that, based on their previous guidance, you won't be able to take part in the campaign if you could have taken part in an earlier campaign. We understand that the latest guidance will be corrected "as soon as possible". The guidance also confirms that businesses which are already registered for VAT may nevertheless benefit from the favourable terms on offer under the VAT Initiative Campaign. But given the broad sweep of VAT, does this mean there will be problems in future - if a VAT-registered business at some point in the future wants to make a disclosure of additional income in a later campaign, will they be denied favourable terms by HMRC on the basis that they could have made a disclosure now on the same amounts but in respect of VAT due?

Finally, for those regular readers of our News section who are wondering if we have forgotten about people who want to be 'pro-active' and not, for instance, to wait until Spring next year to tell HMRC about their eBay activities, (see HMRC extends Tax "Cheats" Campaigns ), we have had a reply from HMRC but we don't think it yet counts as a "guarantee" that people who notify HMRC of an intention to disclose before the notification window officially opens, will be treated on equal terms to those who wait; we shall update readers as soon as we do get something 'concrete'. 

Everybody knows that 6 July is the filing deadline for Employers' Annual Returns of "Benefits in Kind" Forms P11D/P9D. It has been publicised by HM Revenue & Customs in the literature which they send to employers, and on their website, along with warnings of the penalties which will be incurred if the 2010/11 forms P11D (and the summary form P11D(b)) are not submitted by 6 July 2011.

In fact, on 4 July, HMRC helpfully posted a new article on their "What's New" section,

Employers - Send Your Expenses and Benefits Forms Now which re-iterated that penalties might be incurred if returns are received after 6 July 2011.

But some practitioners and employers have long memories - and/or have read HMRC's CWG5 booklet Class 1A National Insurance Contributions on Benefits in Kind - updated for 2011 - which says at Section 25,

"The filing date for the return is 6 July. If the return is not received by 19 July it will attract a penalty of £100 per month of part month of lateness, for every 50 or part-batch of 50 employees provided with benefits."

We could find no mention of this elsewhere, save for a hint on the Class 1A NIC payslip itself, (and not all employers will have a liability or scrutinise a payslip), and worse was anecdotal evidence that the Employers' Helpline was emphatic that failure to file by 6 July would result in a penalty.

In the end, we had to resort to HMRC's Press Office to obtain confirmation that penalties would only be incurred if the P11Ds, etc., were not submitted by 19 July. (But please do note that the penalty 'day' remains 6 July - the second 'month' for 'failure to file' penalties will still commence on 6 August).

We have asked HMRC to lend its weight to publicising the further 13 days' grace available to employers and their agents, before 19 July comes around!