HMRC 'Hidden Economy' visit

HMRC 'Hidden Economy' visit

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A client has had a call from a HMRC 'SME Hidden Economy' person who wants to do a visit.  The client has asked me to attend too.

This is a new experience for me.  Do you have any pointers that I should bear in mind?  Is this a general visit which will encompass all taxes?  They are going to send a confirmation of what records need to be made available, but I expect that to be broad.

Thanks in advance.

Replies (14)

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chips_at_mattersey
By Les Howard
10th Nov 2015 18:29

Hidden Economy

The assumption will be that the client is guilty of wrong-doing! You need to be clear whether you will declare undeclared activity (if applicable), or insisting that declarations are correct. And, yes, do expect it will cover all relevant taxes.

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Glenn Martin
By Glenn Martin
10th Nov 2015 20:37

Will be nothing routine about the visit.
They will time up pre armed with info that they think your client is guilty of.

You need a serious chat with your client to sound him out for what the issue could be.
Has he had any disgruntled staff leaving or ex wife type of situation who could wrote causing trouble.
Does he pay cash wages out or do cash jobs etc.

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By Sheepy306
11th Nov 2015 01:48

One of my clients had a visit from the hidden economy team a couple of years ago. He'd gone over the VAT threshold and hadn't registered, not sure if they knew it beforehand or whether it was just likely from his trade sector. The HMRC officers were fairly low-ranking and not particularly knowledgeable about things in general but sufficient to identify the VAT issue and subsequently agreed a reasonable arrangement regarding VAT registration and penalties.

You need to consider all areas of tax as their checklist covered them all.

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Replying to Sheepy306:
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By andrew1211
26th Apr 2019 15:17

Hi, can you give me any more brief details on how you handled this if you have time? Thanks.

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By Sarah P
11th Nov 2015 08:53

That's interesting

Thanks for your input.  I need to sit down with the client and have a full and frank.  I've been agent for all taxes for about 3 years and I think everything has been straight in that time.  It's not a cash business.  If something's been hidden then it's been hidden from me too!

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By SteveHa
11th Nov 2015 08:58

That's usually the way. They are hardly like to tell you what they are hiding from HMRC, since any agent worth his salt with either insist it's declared or walk away.

During your talk, you also need to advise your client about the likely consequences (penalty for a prompted, deliberate and concealed activity can be as much as 100% of tax found to be due).

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By Sarah P
11th Nov 2015 09:43

@ SteLacca

Good point

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By bernard michael
11th Nov 2015 09:47

What industry is your client in ?? Knowledge of this may enable us to give more pointers 

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By Sarah P
11th Nov 2015 10:26

Industry

It's a distribution business, buys stuff in from the EU, sells B2B into the UK.  All done on invoice as far as I'm concerned.  VAT registered, one director on the payroll.

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By John R
11th Nov 2015 10:35

Is it the company or the individual that is trading?

Presumably the client is an Ebay/Amazon type seller. Check that all online sites clearly indicate that it is the company that is selling the goods. HMRC have possibly picked up the registered name of the online business, which may well be the individual's personal name. You will need to convince HMRC that the individual is not trading on a personal basis.

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By bernard michael
11th Nov 2015 10:47

My guess it is a VAT query loking for any circular trading

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blue sheep
By NH
11th Nov 2015 11:40

yes

that will be it then - carousel fraud

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By Sarah P
11th Nov 2015 13:05

Not online

No online trading, all to genuine 3rd party UK business customers (as far as I'm aware!)

My gut feeling was VAT, because the returns can fluctuate quite wildly.  The invoices are quite high in value but are infrequent.  But I would have expected the VAT team not this hidden economy team.

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