Over 20 years ago, an inspector of taxes was sitting in my office while we concluded matters relating to a tax investigation. We were discussing how the Inland Revenue would change over the next few years. What he said to me at that time was that he thought that there would be no tax offices north of the Central Belt. That seemed a bit unlikely, bearing in mind the number of tax offices as far north as Wick with major centres in Inverness and Aberdeen. Well, his prediction has pretty much come to pass. The only thing he did not see, or was not admitting, was the merger of The Inland Revenue with HM Customs & Excise in 2005 to form HM Revenue & Customs.
So, how do HMRC actually know what is going on in the North? All they apparently have to go on are the Self-Assessment Income Tax Returns, Corporation Tax Returns and VAT Returns. Their computer is left to generate inconsistencies for examination by real people.
It used to be that local inspectors looked about them and kept an ear to the ground. I remember one Inspector going to buy a rabbit hutch for his daughter from an ad in the local paper. The guy who made the hutches only took cash. This inspector thought it was highly unlikely this was being declared, but I do not know for sure if he followed it up.
One of my clients used to drive for HMRC. He was taking an Inspector to a meeting one day when a very fancy car raced away from the lights. The inspector recorded the registration number. The next time my client was driving him, he said that he had traced the car and discovered that the income being declared by the driver was wholly inadequate to afford a car like that, and they had opened an investigation into the driver’s tax affairs.
Well, unless they have CCTV around the North, they are not going to be able to do this anymore.
At one time, there was the “Black Economy Project”. Revenue staff would scrutinise the ads in local papers and walk along rows of shops, and then try to locate the tax files associated with them. I remember one inspector telling me that they had found an Indian Restaurant that had been trading for some time, and the Revenue had no file for them and had never received a return or accounts. However, before they could do anything, the restaurant closed, and the owner was nowhere to be found.
I suppose the equivalent now is the information provided by the various online trading platforms, such as Amazon, to HMRC. They will have discovered thousands of small traders who have never declared their income.
I imagine that HMRC have done their risk assessments and decided that it was not feasible to pursue small-scale traders and hence instigated the £1000 trading allowance so that, if your turnover in the year is less than £1000, you don’t need to declare your profits and waste valuable HMRC resources.
Will MTD make any difference? Probably not, because if you are not declaring some or all of your income now, it is going to be the same when MTD begins after April next year. It might take a bit more planning to not declare some or all of your profits, however.
It all reminds me of traffic speed enforcement these days. Cars doing 20 in the new 20mph zones are rare indeed, and many cars don’t even slow down, but there is no enforcement, so why slow down? I regularly drive the A96 between Elgin and Inverness and the A9 between Inverness and Thurso. I set off, set the cruise and relax, generally listening to music. But quite often, I am noticeably the slowest car on the road. Not always!
We often joke that there are no speed limits north of Tain, and sometimes that is what it feels like. The only traffic calming measures in place are the lorries, motorhomes and cars doing 35mph.
I think that somebody has decided that the North is to be left alone, and I hope that we don’t all kill each other on the roads.
So, whether it is tax, speed limits or whatever, is this now bandit country, where the normal rules only apply if you want them to, but it is up to you, because generally nobody is watching.
What do you think?
Alan E Long
The Long Partnership
07770 738770
