Play Your Cards Right

Following the launch of the Card Transaction Campaign last month, HMRC has been writing to businesses, asking them to review the level of income declared on their 2016 tax returns and to make a disclosure of any omitted sales.

The letters, issued by the HMRC Campaigns and Projects team, read as follows:

Debit and credit card transactions

HMRC obtains credit and debit card transaction details from companies that process such transactions. The card transaction data provides HMRC with a view on the level of income we would expect businesses such as yours to declare. Although we appreciate that all businesses are run differently we would ask you to check that all your income, including all card and cash payments, has been included on your tax returns and to put things right if you need to.

What you need to do within the next 28 days

  • check the income you have included on your tax return for 2015 to 2016 is correct and go back and look at earlier years if you find a discrepancy
  • if you have additional income to declare, go to which explains a straightforward way to bring your tax affairs up to date for 2015 to 2016 and earlier tax years
  • if you are satisfied all income has been declared and you wish to avoid further necessary contact, please call our dedicated team on 0300 123 9272
  • if you need more than 28 days to check your records, please call 0300 123 9272 to arrange more time

What will happen after 28 days

If you have correctly declared all of your income there is no need for concern.

If you fail to tell us about income that has been omitted or under declared, further action may be taken. You could face an enquiry and any penalty charged could be significantly higher.

Copies of the letters are being sent to accountants who have a valid 64-8 authority in place with HMRC.


The content of the letter is very similar in tone and intent to the benchmarking initiative HMRC trialled back in 2014, when certain trades were targeted if their net profit ratios were outside the benchmarking range expected by HMRC.

A similar tactic is being adopted now, with HMRC writing to businesses it suspects of under declaring income based on the card transaction data it has received from the Merchant Acquirers.


A convenience store business owner has declared a turnover of £76,000 on his 2016 tax return. HMRC has received confirmation from the Merchant Acquirer that credit and debit transactions totalled £70,000 during the accounting year, but suspects more than £6,000 of cash has been taken. The business owner in this example may well receive one of these letters because HMRC will be struggling to understand how a cash business has only taken £500 in cash, on average, per month


The Merchant Acquirers credit and debit card data has increased HMRC strike rates by 20% and the average yield per case by more than £2,000.

HMRC can also interrogate the data it receives quickly. In one month Connect, HMRC’s ‘snooper computer’ analysed more than 800m Merchant Acquirer transactions representing £40bn in credit and debit card spending. A large restaurant was identified where the declared sales did not match the expected card spending. An enquiry was opened by HMRC and the projected settlement is in excess of £4m


If you are a business owner who wishes to participate in the Card Transaction Campaign, you need to notify HMRC of your intention to make a voluntary disclosure. You do not need to wait to receive one of these letters.

HMRC will then provide you with a unique Disclosure Reference Number (DRN) in writing, as well as a Payment Reference Number (PRN).

Full disclosure and payment then needs to be made within 90 days of the day you receive your notification acknowledgement.

Years to include

The number of years to disclose depends upon the reason(s) why your turnover has been under declared.

HMRC will want to know whether:

  • you declared the incorrect turnover despite taking reasonable care to get it right, in which case 4 years may need to be included in your disclosure
  • you made a careless mistake in calculating your turnover, in which case 6 years may need to be included, or
  • you deliberately under stated your turnover, in which case a maximum of 20 years may need to be included.

It is important to remember that making a voluntary disclosure means putting everything right, so if investment or rental income has also been omitted from your tax returns, then that income will also need to be included in your disclosure.

Further detailed information on the disclosure process is available here


HMRC charges interest on tax paid late.

Interest is calculated on a daily basis from the date the tax is due until the date it is paid. If you fail to include the correct amount of interest in your disclosure, then HMRC may well reject your disclosure as being incomplete.


HMRC charges penalties on additional tax owed if an incorrect tax return has been filed, or if you did not tell HMRC you had begun to trade.

The penalty charged is based on the additional tax owed and can be up to a maximum of 100% if the tax liability arose in the UK. Typically the penalty is reduced depending on the behaviour giving rise to the error and whether the mistake was made despite taking reasonable care, carelessly or deliberately.

HMRC has provided an interest and penalty calculator which can be accessed here

One final word of warning. If HMRC thinks you have included the wrong penalty, it may reject your disclosure.

Failure to disclose

HMRC is actively using the Merchant Acquirers data to target potential tax evaders and launch tax enquiries. If people who need to make a disclosure do not take this opportunity to do so, then they can expect to receive a higher penalty during a tax enquiry and may even be considered for a criminal investigation.

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