Over the last few months, HMRC has doubled down on those it believes have undeclared income. The move started back in January when HMRC required online ecommerce platforms, including AirBnB, Etsy, eBay and Vinted, to share details of the traders using their sites and the income those users have made.
In the latest swoop, HMRC has written to those it believes have undeclared income from the breeding and sale of animals including pet cats and dogs.
Declaring income on the breeding or sale of animals for 2023/24
UK residents are allowed to earn up to £1,000 without paying tax. This is the total amount an individual can earn from any ‘channel’ including income from items made to sell on, brought specifically to resell or sold for someone else via an online marketplace. Once an individual has earned more than £1,000, they must register for self-assessment.
Individuals making more than £1,000 by breeding or selling animals in 2023/24 must:
- register for self-assessment by 5 October 2024
- complete a self-assessment by 31 October 2024 (deadline for paper returns), 30 December 2024 (for online returns where HMRC calculates what tax you owe) or 31 January 2025 for online returns
- pay any tax owing by 31 January 2025.
It is important to highlight that no tax has to be paid on the sale of personal items – for example, selling old clothes or used furniture etc.
Declaring income from the breeding or sale of animals in earlier tax years
HMRC has begun writing to those it believes have undeclared income in previous tax years from the breeding or sale of animals. It has informed those people that they should use the online voluntary disclosure service within 30 days. Once the process has begun, they have 90 days to complete their disclosure and pay any tax due.
If HMRC has not yet written to someone, they should register for self-assessment (if not already registered) and request the self-assessment tax returns needed (tax returns for previous years are not available online via the online tax account unless they have been requested from HMRC).
If individuals have deliberately avoided declaring tax (tax fraud), they should use HMRC's contractual disclosure facility (CDF). This method should only be used for those who wish to admit tax fraud.
By entering the CDF, taxpayers will:
- admit deliberate conduct that resulted in a loss of tax
- tells HMRC about all the tax losses as result of their actions
- provide as much detail as possible within 60 days
- provide an additional report which includes a statement that they have given HMRC complete and accurate details of their conduct.
In turn, HMRC will agree not to investigate or bring a criminal prosecution for the deliberate conduct the taxpayer admits to in the CDF. However, interest will be due on any tax that has been paid late. Individuals should pay any tax owing when submitting their CDF. This will help prevent more interest accruing and demonstrates a willingness to co-operate with HMRC.
Possible tax penalties for animal breeders
HMRC charges interest on tax that is paid late. Even if you make a voluntary disclosure on behalf of your client, they may also be charged a penalty by HMRC. If a penalty is charged, it will be calculated based on the fact that you have made a prompted disclosure. Penalties can range for 0%-30% of the tax owing for an unprompted disclosure or 15-30% for a prompted disclosure.
Read this article for further guidance on your obligations under the Professional Conduct in Relation to Taxation (PCRT) and any AML reporting obligations.