14 June is the deadline for the latest in a long line of HMRC “crackdowns” on those who “don’t pay their fair share” when the so-called e-Markets Disclosure Facility ends. Translated into English, HMRC are giving a one-time opportunity to those who trade via eBay, Amazon and the like to come forward and declare their earnings. If they do so then they can avoid the penalty that would otherwise be charged if and when HMRC catch up with them. Previous such amnesties have targeted Avon ladies, Ann Summers party hosts, doctors, dentists, plumbers, electricians and those with off-shore bank accounts to name but a few! And of course it is difficult to feel too much sympathy for anyone who thinks it is OK to deliberately ignore paying taxes but this whole methodology opens up a range of serious questions that need to be answered.
For one, are we really comfortable with the now regular use of HMRC information powers – which in May resulted in both eBay and Amazon being forced to surrender tens of thousands of members’ details – to scoop up the database information of commercial third parties with whom we transact? Before you just brush it off with a quick “well if you have nothing to hide”, spend a few minutes thinking about the broader consequences here.
HMRC themselves acknowledge that the overwhelming majority of people operating on eBay and the equivalent are simply selling old junk they no longer need, are not therefore “trading” and are not liable to income tax and national insurance. Their guidance on what constitutes a trade (and the so-called “badges of trade”) is vast. Furthermore they point out that even if you aren’t trading, you could still be liable to VAT and/or capital gains tax. So to sum it up, in order to catch a relatively small number of deliberate evaders, thousands of innocent people can expect to receive a frightening and/or baffling letter from HMRC asking them to consider their position against an array of taxes, case law and complex guidance. They will do so under a perceived Sword of Damacles – which if past experience is anything to go by, will be the tone of the letter. There is a feel of sledgehammer to crack a nut about this but I fear it is the sign of things to come.