Online businesses who have not previously declared all of their taxable profits have until 14 June 2012 to notify HMRC that they wish to sort out their tax affairs and take advantage of the e-Markets Disclosure Facility.
The incentives for online traders to use the e-Markets Disclosure Facility are:
- The tax liability may be limited to the past 4 years (if reasonable care can be demonstrated);
- Most people will receive a penalty of no more than 10% and some may not be liable to any penalty.
- Time to pay is available, if funds are not available to pay the overall liability.
It is possible to register with HMRC online, by phone or by post; although with the deadline fast approaching it would be advisable to use the online and telephone options to ensure the deadline is met. Once registered, advisers have until 14 September 2012 to make the disclosure and pay any liabilities.
Throughout May 2012, HMRC contacted in excess of 300,000 people who are trading on the internet to make them aware of the e-Markets Disclosure Facility, with a further 100,000 people’s information still being assessed. HMRC has warned that those people who do not take advantage of the disclosure facility will face penalties of up to 100% of the tax and, in the most serious cases, HMRC may decide it is appropriate to offer the person the chance to disclose the additional income/gains via the Contractual Disclosure Facility (Code of Practice 9) or even undertake a criminal investigation.
Promoted as a fresh start, the e-Markets Disclosure Facility is an effective route for online businesses to sort out the past, although advisers assisting their clients to make a disclosure should consider whether they need to go back more than six years to sort out the past (in case HMRC challenge whether the disclosure is complete).
If advisers have clients that are not eligible for the e-Markets Disclosure Facility there are other methods of voluntary disclosures available which will enable clients to regularise the past, which we would be happy to discuss.