HMRC Crackdown on Unregistered Traders

Recent commentary suggests that HMRC may be planning a detailed crackdown on businesses that should be registered for VAT and are not.

 The recently announced amnesty to be introduced for traders to come forward voluntarily suggests that this is an area that HMRC are interested in, and a recent case highlights the direction they are taking.

 The case (Annett Glen-Jones t/a Sophisticuts v HMRC) centred around a self-employed hair stylist who owned a hairdressers’ of which the basement floor was used by independent stylists.

 The appellant claimed that the usage was an exempt supply of a license to occupy land, whereas HMRC argued that she was making a taxable supply of services to hairdressers of which the use of the basement was one part.

 The tribunal agreed with HMRC and therefore VAT was chargeable on the supply.  The increased taxable supplies resulted in the business trading above the VAT threshold having not been registered for VAT and so a number of years of VAT was due in respect of the whole business, plus interest and presumably penalties.