Under powers introduced in Finance Act 2013, HMRC can access information from the UK’s merchant acquirers – the companies that process debit and credit card payment transactions – to ascertain the value of transactions completed by a specific trader.

No personal information identifying the card owners or card numbers will be obtained by HMRC, but the merchant acquirer data will be used to ensure that traders have correctly accounted for all taxes due. Whilst no actual details relating to the value of this information has been made available, HMRC estimated that it could raise an additional £50m per annum in unpaid taxes.

Exchequer Secretary to the Treasury David Gauke said at the time:

‘Tax evasion and the hidden economy cost the taxpayer £9 billion a year. While the majority of traders are honest, they may find themselves undercut by the minority who seek to lower prices by cheating the tax system.

The Government has given HMRC nearly £1 billion to tackle fraud and evasion, and these new powers give HMRC an extra tool to ensure a level playing field between businesses, and also reducing opportunities for those who try and cheat the system’.

Returns are issued annually to the merchant acquirers by the Centre for National Information on behalf of HMRC. The return specifically requests the merchant acquirer data on a month by month basis, so the completed year end return is made up of 12 entries.

The return also requires the merchant acquirer to provide:

  • The bank and bank account number into which the payments have been made and, where necessary for identifying the account, the branch where the account is held.
  • The name, address, telephone number, email address, website address and VAT number of each retailer and for each merchant account.

There are a number of merchant acquirer businesses operating in the UK which process credit and debit card transactions for UK businesses. The top 5 are as follows:

  • Worldpay – the UK’s largest. Its subsidiaries include Streamline and Cardsave. This merchant acquirer partners with several banks including RBS, Clydesdale Bank, Yorkshire Bank and Nat West Bank.
  • First Data – whose subsidiaries include Clover Network and Bluepay. The merchant acquirer is partnered with Cooperative Bank.
  • Barclaycard – operated by and partnered with Barclays Bank.
  • Lloyds Cardnet – operated by Lloyds Bank and partnered with Bank of Scotland.
  • Global Payments – whilst not a household name in its own right, this merchant acquirer accounts for 20% of all card transactions in the UK. Subsidiaries include Realex Payments, Heartland Payment Systems, Active Network and eWay. It partners with HSBC.

HMRC has confirmed that only those merchant acquirers based in the UK are required to comply with the legislation.

Merchant Acquirer Investigations

The merchant data is analysed by HMRC in order to identify discrepancies between the merchant acquirer data and tax / VAT returns submitted by traders.  WLH Tax has dealt with a large number of investigation cases which have commenced as a result of a mismatch between the Merchant Acquirer data held by HMRC and the turnover disclosed by a particular business on their respective tax or VAT return.  Currently, restaurants, bars, coffee shops, hairdressers, beauticians and high street retailers are high on HMRC’s list of targets.

We have found that the largest issue in most these cases will be the understated VAT on the sales that have not been reported to HMRC.

How can WLH Tax help

If you have not declared all or part of your card sales income in your business, and you have received a letter from HMRC opening an investigation or would like to make a voluntary disclosure to HMRC, please contact us for a free, confidential and no obligation discussion.  We are happy to have an initial free of charge meeting with prospective clients.

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