Gabelle Tax Analysis: HMRC targets Direct Sellers

HMRC announced on 28 January 2013 that people involved in direct selling have until 28 February 2013 to inform HMRC of any previously undeclared earnings, settle the tax liability and take advantage of the favourable settlement terms available.

HMRC have categorized ‘direct sellers’ as those people who are involved in selling directly to customers and receive commissions without the need for a retail outlet. Most people would recognise direct sellers as door to door salespeople or people that sell through product parties.

Direct sellers need to approach HMRC before 28 February 2013 and make a full disclosure of all undeclared income and gains. In exchange they will be offered;

  • a simple and straightforward process to put there tax affairs in order; and
  • a reduced penalty (reported to be 10% in most cases).

To encourage people to come forward HMRC have announced that they are going to write to people that they believe are affected by this campaign. This indicates that HMRC have co-ordinated their approach and have already reviewed people’s tax records and the third party information in their possession to generate a ‘target’ list of people they believe need to come forward.

Once the disclosure window has closed HMRC will investigate the people they believe still owe tax and charge considerably higher penalties on the tax paid late. In view of the recent fivefold increase in criminal investigations, there is also an enhanced risk that the most serious offenders may face a criminal investigation. It is safe to say those people who have been written to and have not made a disclosure will be the first to be investigated.

Should any of your clients receive a letter from HMRC or you are approached concerning the direct selling campaign we recommend that serious consideration should be given to utilising the disclosure facility by registering with HMRC by 28 February. In the more serious or complex cases, we recommend that specialist tax investigation advice is sought to ensure that the best settlement route is taken. There are other voluntary disclosure routes available and by seeking advice now a client’s exposure to tax and in the worst case scenario, a criminal investigation, can be minimised.

The direct seller’s campaign is one of a series of targeted campaigns launched by HMRC and signifies a more strategic approach to tackling tax evasion. HMRC have reported that almost £540 million has been raised from their campaigns and a further £137 million from related enquiries.

Noel Hankinson is a Tax Investigation Consultant at Gabelle LLP. He can be contacted at noel.hankinson@gabelle.com or via TaxDesk on 0845 4900 509.