What’s in the public domain?

HMRC trawl the Internet for workers not declaring their income.

HMRC for many years have begun projects into people selling via eBay but have become much more proficient at it in recent years. Two large cases I’ve dealt with recently were into companies selling via the Amazon platform.
They differed slightly as one related to the incorrect treatment for VAT initially and the other related to large undeclared takings. Either way HMRC is reviews of your feedback or likely sales provides them with the foot in the door to embark upon a full investigation into your business and private circumstances.

Amazon

The first case related to a wonderful company selling home furnishings online, which had become very successful for the family business. It was launched by the VAT officers who could see that VAT was not being applied properly to the Amazon sales. In a nutshell they were receiving payments into their bank from Amazon each month from all their sales through this portal.

They were paying VAT on this. However, some firms take Amazon business loans and pay charges to Amazon also for storage and advertising. The net payments into the bank were after deduction of these loans and charges and therefore VAT was underpaid. Full enquiry ensued and a very affordable settlement resulted for the clients who were delighted.

This also served to put them on the right basis for the future and to ensure this mistake never happened again.

Amazon and Web Sales

Amazon pay their customers their net sales income into their banks each week or month. And in all cases, I’ve seen the funds go into the customers business bank account. In the case of a manufacturer in the north of England they also sold their very niche products through their own website. Website sales were paid into a different bank account held in the name of the director. The company accounts comprised only the Amazon sales. HMRC had full details of the Amazon sales and conducted a review of the company’s accounts prior to launching the investigation. The additional undeclared sales were soon revealed, and the case progressed along normal enquiry lines to a settlement. Luckily during Covid the company sales went through the roof and the company had been quite profitable up to the date of the enquiry.

They therefore had sufficient funds to pay it and going forward ‘took their medicine’, were treated fairly by HMRC and with a few concessions agreed on HMRC’s part settled and had learnt a very salutary lesson.

eBay

A nurse came to me who had been earning extra pocket money with a side line in importing and selling clothing through eBay. She brought in ladies’ clothes and sold them quite profitably, but the case revealed import duty errors that have also been seen in a few other cases over the last two or three years.

This was through no fault of her own and there was absolutely nothing she could do about it, but it involved the companies in China understating the value of the goods in transit on the export invoice. Whilst she would agree a price in emails and pay them for example £1000, the import paperwork would show the value of the goods of say £500 thus understating the Import Duty.

HMRC are aware are looking at this and did not hold her responsible and it did not feature as an additional element of her enquiry.

HMRC held full details of her online eBay business and could see the feedback and potential levels of sales. She had never submitted a tax return and did not have a UTR self-employed reference number. Therefore, they checked their information against her record and issued an enquiry notice.

Bank accounts and paperwork were examined by me and HMRC and a mutually acceptable settlement agreed.

Inter-Country co operation

In a more serious fraud case being dealt with under Code of Practice 9 it transpired that the traders had previously had a business in an EU country. Many years ago, they had sold the business to a colleague who continue to trade at their shop there.

However, HMRC were able to very quickly establish that the taxpayers had not declared the proceeds of the sale, received in instalments, over a couple of years following the sale date. They were able to go back to the tax authorities there and obtain this information very simply. It therefore had to be brought into the COP9 report and settlement despite it being emanating in another country but paid into a UK bank account periodically thereafter.