Overview
HMRC have advised they are currently targeting dog and cat breeders who may have undisclosed income from the breeding and sale of animals. But it’s not just breeding that might cause a tax problem, as pet sitters will also fall onto HMRC’s radar with the introduction of the online platform reporting rules. Are you prepared if HMRC start to sniff around your tax affairs?
HMRC’s latest nudge letter to dog and cat breeders
In August 2024 HMRC began a One to Many or ‘nudge’ letter campaign directed specifically at dog and cat breeders where they believe individuals have either not declared income on their self assessment tax returns, or they have not registered for self assessment at all.
HMRC’s letters indicate that they have information that shows the individual has earned money from the breeding or sale of animals. Therefore if you have received one of these nudge letters it is safe to say you are on HMRC’s radar, and we recommend seeking advice on how best to respond.
If you believe you do not have any tax obligations for example if you have earned under £1,000 in a tax year from the breeding or sale of animals, then we recommend writing back to HMRC to confirm this.
What do I do if I have tax to declare to HMRC?
If you have been breeding and selling animals and have not been declaring your historic profits to HMRC, then you may need to make a voluntary disclosure under HMRC’s Digital Disclosure Service (DDS). Once you have notified HMRC you intend to make a disclosure, HMRC allow 90 days for the taxpayer, or their adviser, to calculate the tax, interest and potential penalties due. Menzies’ approach is to also prepare and submit a separate disclosure letter to HMRC to explain the background and make representations on the taxpayer’s behalf.
The tax calculations can potentially go back up to 20 years depending on the circumstances. The nature of the underlying “tax offence”, i.e. whether it is an error in a filed return or whether no tax returns have been filed, as well as the “behaviours giving rise to the loss of tax”, will determine how many years to include in the disclosure.
In more serious cases it may be necessary to consider making a disclosure to HMRC under the Contractual Disclosure Facility and Code of Practice 9 (COP9) to protect the taxpayer from any risk of criminal prosecution.
You may also need to register for self assessment and file self assessment tax returns on an ongoing basis if you are continuing to earn money from pet-related activities.
New regulations for online platforms
It’s not just pet breeders who may face a tax problem; from 1 January 2024 new regulations came into force which require all online platforms to share information with HMRC about their users and their earnings. Online platforms will include sites where users offer their services for pet sitting such as Pawshake, Rover, or TrustedHousesitters, but can also include sites where you offer other pet related services such as dog walking, pet boarding, and pet grooming services.
The first reports due from online platforms will be in respect of the 2024 calendar year, to be submitted to HMRC in January 2025. It’s therefore safe to assume that if you are earning money via an online platform and have not been declaring this to HMRC that if you do nothing now, you will more than likely receive a nudge letter from HMRC in early 2025.
Our advice is to check your tax position now so that you can get ahead of HMRC, which will help you keep on top of your tax affairs but will also mitigate any potential financial penalties.
What should I do now?
You needn’t have kittens about receiving an HMRC nudge letter as the specialist Tax Disputes and Disclosures team at Menzies is on standby to help you respond to any letters and advise on the best course of action for you.
If you have received an HMRC letter and need advice, or would like to discuss the new online platform regulations or disclosures more generally, please contact us for a free confidential consultation now:
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