5th July 2011
HM Revenue and Customs (HMRC) is in the process of sending out some 40,000 letters to businesses that may have failed to register for VAT when the law requires them to have done so.
HMRC announced back in May that it would be embarking on a campaign to track down businesses that are not complying with the VAT laws.
Any business that has had an annual turnover of £73,000 or more for the previous 12 months, or that expects to breach the threshold in the next 30 days, must register for VAT payments.
The campaign is aimed at firms that have exceeded the threshold but have not contacted HMRC informing them of the fact.
But it is offering businesses that should have registered a partial amnesty.
Under the terms of the VAT Initiative, those that have not registered to pay VAT can come forward any time up to 30 September to tell HMRC that they want to take part. If they make a full disclosure, most will face a reduced penalty rate of 10 per cent on VAT that has been paid late.
However, HMRC has reserved the right to impose fines of up to 100 per cent in those cases where a business was aware of the fact that it should have registered but had failed to notify the tax authorities.
They will also be invited to disclose any other tax arrears. Where they have to pay a penalty on undeclared tax other than VAT, this will be lower than the customary penalty of up to 100 per cent.
After 30 September, HMRC have promised to investigate those who have failed to come forward. Substantial penalties or even criminal prosecution could follow.
Mike Wells, HMRC's director of risk and intelligence, said: "Our campaigns are designed to ensure tax is paid so that the money is available to spend on public services used by everyone.
"The aim is to make it easy for individuals and businesses to contact us, make a full disclosure of their income and face a reduced penalty on any tax owed.
"I urge people who have not registered their businesses for VAT to get in touch with HMRC and get their tax affairs in order simply and on the best available terms."
To use the VAT initiative businesses must register with HMRC by 30 September to notify that they plan to make a voluntary VAT disclosure and to tell the tax authorities about the VAT due and make arrangements to pay it, along with any penalties due, by 31 December.
The VAT threshold is currently £73,000 turnover on a rolling annual basis. In previous years it was: 2006/07 - £61,000; 2007/08 - £64,000; 2008/09 - £67,000; 2009/10 - £68,000; 2010/11 - £70,000.