Commentary

By Ben Hart,

HMRC’s war on British small businesses looks set to continue

A partner at the tax and accounting advisory firm Blick Rothenberg has warned that HMRC are likely to resume aggressive recovery action against tax avoiders after the lockdown ends, including against sellers on eBay or Gumtree who HMRC deem to be ‘trading’ rather than ‘selling a few second-hand items.’

In an article in i news, tax risk and dispute resolution partner Fiona Fernie warned that “HMRC are watching sites very carefully and if they consider that anyone is ‘trading’ and not just getting rid of the odd household item then those individuals could get a substantial tax bill,” adding that “the Government needs to find a way of repaying the substantial amount of debt incurred to support us through the pandemic in respect of schemes like the Coronavirus Job Retention Scheme.”

She went on to describe some of the methods that HMRC may use to attempt to claw back lost revenue, including using its Orwellian Connect IT system to cross-check against the information they already hold on a person, using the information to determine whether a person’s lifestyle is in keeping with the income they have reported in their previous tax returns.

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By closely watching auction websites like eBay or Gumtree, cross-referencing with their own data, and looking at the types and amount of items being sold, HMRC can single out people selling items without having paid the government their dues, making a determination on whether the individual is just a personal seller flogging some unwanted gift, or somebody who is actually trading and as such, liable to taxation. HMRC also uses legal notices to check people’s bank accounts, even using their powers to take money directly out of a person’s account. For people who might have been selling off some of their unneeded possessions to help with the financial strain caused by the Coronavirus pandemic and subsequent economic crisis, falling foul of HMRC’s apparatchiks and being categorised as a trader could mean a heavy penalty in the form of extra taxes.

Indeed, the government will need to fill the hole in its budget; the economy has been massively damaged by Covid19, with The Telegraph reporting that a confidential Treasury document estimates the crisis will cost the government £300 billion this year, and website Property Wire reporting a few days ago that property transactions had fallen by 53.4%, and were at the lowest levels since records began. Just last week, chancellor Rishi Sunak, speaking to the Lords Economic Affairs Committee, warned that there was no guarantee of a quick economic recovery; “It takes time for people to get back to the habits that they had, there are still restrictions in place,” he said.

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On top of the furlough scheme, new claims for Universal Credit hit a record high according to BBC News, with 1.5 million claims being made between 13 March and 9th April, reaching a weekly high of nearly 600,000, up from 52,000 on an average week, further adding to the government’s deficit.

But should the government be attempting to recover this money by going after the very people who suffered the most from this economic downturn, the very same people that the Coronavirus Job Retention and Self Employment Income Support Schemes were ostensibly meant to help in the first place? Perhaps the government would be better served by encouraging small, private enterprise as a way for individuals to look after their own economic health, as something positive and to be applauded, rather than relying on government hand outs. Instead it seeks to put the frighteners on people, thus increasing their dependency and the nation’s economic problems.

Do get in touch with us if you are worried about HMRC’s snooping. We can probably put your mind at rest or, if necessary, help you to get compliant with all the legal requirements so that you are not at risk. Equally, if you are thinking of setting up a new business but have been put off by HMRC’s scaremongering tactics, we can help explain what you need to do. The paperwork is not too difficult, and we will give you a helping hand to get going with it. We are on a mission to grow the successful small business community and often support start-ups with free initial advice.

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