HMRC warns tax dodgers of fresh VAT crackdown

HM Revenue & Customs (HMRC) will follow its probe into plumbers with a crackdown on VAT dodgers. The tax authorities have sent a warning to individuals and businesses that trade above the £71,000 VAT threshold to come forward and register before facing fines.

"We encourage anyone who has unpaid tax to come forward and make a voluntary disclosure; it will always be less expensive if customers come to HMRC voluntarily rather than wait until we catch up with them," an HMRC spokesman said.

Plumbers and heating engineers have until tomorrow to pay back any tax they owe under the HMRC's Plumbers Safe Tax Plan. Once the leniency period has ended, the tax authorities have promised to get tough on anyone they catch who still owes back tax.

VAT has been identified as the next clean-up campaign with special squads being set up to search out people who are not registering for the tax. Previous tax-collection campaigns have targeted offshore investments, medical professionals and, currently, people working in the plumbing industry.

HMRC says its campaigns have raised more than £500m from voluntary disclosures and a further £100m so far from follow-up activity. "Our campaigns are aimed at reducing the tax gap by focusing on areas where a significant underpayment has been identified," said the HMRC spokesman.

The Revenue said its VAT crackdown would hit later on in the summer, giving those who are wrongly unregistered for VAT to get their affairs in order.

Alan Pearce, a VAT partner at London chartered accountants Blick Rothenberg, said: "The country is losing millions of pounds in unregistered VAT payments and it is right and proper for them to go after people who have not registered."

But he warned that HMRC task forces could use a variety of tactics to gain information, including local knowledge of businesses in a given area, and will visit them if they can't find a VAT registration number. In other words, VAT dodgers can expect a heavy knock on their door.

"Officers who have special powers can simply go to an establishment and ask to see confirmation of their VAT registration," Mr Pearce pointed out. "They can also go to registered traders and look for any invoices where VAT is not being charged," he added. "They will also be analysing accounts and tax returns submitted by businesses and then cross-match these to the VAT register."