Rags to Riches for HMRC

And following the latest pronouncement from HMRC, detailing the latest in their sector specific campaigns, I expect to be even busier in the months to come.

One of the regions and indeed sectors to be targeted in HMRC's latest attempt to recover unpaid taxes is the rag trade across the West Midlands. Businesses coming under the keen gaze of the inspectors will include manufacturing, wholesalers (both importers and exporter) retailers and those involved in textile recycling.

HMRC will be running an 'intensive project' in the coming months to recover a projected amount of £9 million of unpaid tax from traders who do not pay the right amount of tax, through errors or deliberate avoidance.

This is a large and respected sector in the Midlands, based on garment and textile manufacturing and selling, so we can expect HMRC to flood the area with teams of investigators. They will visit businesses, generally unannounced, across the region and examine the tax records, looking for any amounts of tax, however small, that should have been paid.

Businesses can expect to have the records inspected for their payments across all relevant taxes including Corporation Tax, Income Tax, VAT and PAYE. I suspect that HMRC will involve other agencies to check the employment status of workers in those businesses being targeted, with the possibility of discovering illegal workers ensuring it's another good news day for HMRC.

HMRC claims it accepts that "the vast majority of people play by the rules", but warns it will not tolerate tax evasion and will crack down on the minority who choose to break the rules – strong words indeed.

My advice would be for any traders in the area who have not registered with HMRC or suspect they may have understated their profits to seek specialist advice immediately. If you get things sorted now, before they come looking for you and you make a disclosure, it might reduce the chance of a potential prosecution and bring down the amount of any penalty.

And remember, this isn't something that's just going to go away and traders can ignore the threat from HMRC. They have launched 30 taskforces since May last year and aim to raise an additional £7 billion each year by 2014-15, in tax and penalties, by reducing tax evasion, avoidance and fraud – you have been warned.