Beyond Spotlight 68: What to do if HMRC contacts you

If you’ve received a letter from HMRC about your involvement in a tax arrangement promoted by Hubfind Limited or Bizifind Limited, you’re not alone. HMRC is now actively reviewing businesses that participated in these schemes and contacting them directly.

Even if you haven’t yet heard from HMRC, now is the time to get to grips with your position. The way you respond (and when you respond) can have a significant impact on the amount of tax, interest, and penalties you face.

Everything you need to know about Spotlight 68 and what to do if HMRC contacts you about a Hubfind or Bizfind tax scheme

What Is HMRC Spotlight 68?

HMRC published Spotlight 68 to warn businesses about arrangements that claimed to reduce Corporation Tax and VAT through advertising or marketing expenditure while returning value to directors or key individuals through reward points or similar benefits.

According to HMRC, these arrangements do not achieve the tax advantages they claim.

HMRC’s published view is that:

• The advertising or marketing costs are not valid tax deductions;
• VAT cannot be reclaimed on those amounts;
• Any rewards or loyalty points received by directors or key individuals may be treated as taxable income.

As a result, businesses that used these arrangements may now face additional Corporation Tax, VAT, Income Tax, and National Insurance liabilities.

Why Is HMRC Contacting Businesses Now?

HMRC’s focus has shifted from issuing general warnings to taking direct action.

The promoters connected to this particular arrangement – Hubfind Limited and Bizifind Limited – are in liquidation or insolvency. As a result, HMRC has obtained information relating to users of the scheme and has confirmed it is reviewing cases individually.

Rather than waiting for businesses to come forward voluntarily, HMRC is now writing directly to affected taxpayers.

If you have already received a letter, it is important to act before any deadline expires.

If you haven’t received one yet but know you participated in the arrangement, you may still have an opportunity to address the issue before HMRC contacts you.

Which Businesses Could Be Affected?

Although this article focuses on the Hubfind and Bizifind arrangements, HMRC has indicated that similar concerns may apply to other reward or cashback-based tax schemes.

Businesses that have used arrangements connected with the following may also wish to seek specialist advice:

• Prosper Squared
• IDDigi
• MMSP (trading as Consultly)
• Mind Tank
• Visionault

If you’re unsure whether your business participated in one of these arrangements, reviewing the paperwork with a specialist can help establish your position before HMRC does.

What Happens If You Receive an HMRC Letter?

Receiving a letter from HMRC does not automatically mean wrongdoing has been established. However, it does mean HMRC believes your business may have participated in an arrangement it considers ineffective.

Typically, HMRC will ask for information about your involvement before calculating any additional tax that it believes is due.

Depending on the circumstances, HMRC may seek to recover:

• Corporation Tax
• VAT
• Income Tax
• National Insurance Contributions
• Statutory interest
• Financial penalties

Ignoring the correspondence or delaying your response rarely improves the situation. Deadlines are often short, and your response can influence how HMRC views your level of cooperation.

Professional advice at an early stage can help ensure information is provided accurately while protecting your position throughout the enquiry.

What If You Haven’t Heard from HMRC Yet?

Many businesses assume that no news means there’s nothing to worry about.

That may not be the case.

HMRC has stated that it is working through the information it holds and contacting businesses individually. If you know you used one of these arrangements, waiting for a letter may not be your best option.

Taking advice before HMRC contacts you allows you to understand your exposure, assess your options, and decide on the most appropriate course of action.

Can You Make a Voluntary Disclosure Before HMRC Contacts You?

Yes. Where appropriate, businesses can make an unprompted voluntary disclosure before HMRC opens an enquiry or issues a formal request for information.

In many cases, this is treated differently from responding after HMRC has already made contact.

The timing of any disclosure can affect:

• The level of penalties charged;
• How HMRC views your behaviour;
• How efficiently the matter can be resolved.

Every case is different, and there are no guaranteed outcomes. However, seeking advice before HMRC contacts you generally provides more options than waiting until an enquiry is underway.

What Tax Could HMRC Ask You to Repay?

The exact amount depends on your circumstances, but businesses may face several different liabilities.

These can include:

Corporation Tax

HMRC may argue that deductions claimed through the arrangement should never have been allowed, increasing your taxable profits.

VAT

Any VAT recovered on the disputed expenditure may also be challenged.

Income Tax and National Insurance

Where directors or key individuals received reward points or similar benefits, HMRC may consider this taxable income.

Interest

Interest is generally charged on tax that HMRC believes has been underpaid.

Penalties

Penalty levels vary depending on the facts of each case, including how HMRC assesses the taxpayer’s behaviour and whether disclosure was made before or after HMRC opened an enquiry.

How We Help Businesses Respond to HMRC

If your business has used one of these arrangements, specialist advice can help you respond in a structured and informed way.

We can assist by:

• Reviewing the arrangement and identifying your potential exposure;
• Calculating the correct tax position;
• Identifying any genuinely allowable expenditure;
• Preparing voluntary disclosures where appropriate;
• Managing all correspondence with HMRC;
• Negotiating penalties where possible;
• Supporting you throughout any enquiry until the matter is resolved.

Whether you’ve already received an HMRC letter or you’re concerned one may arrive soon, obtaining advice early can help you make informed decisions and avoid unnecessary mistakes.

Speak to a Specialist Before HMRC Contacts You

If you’ve received a letter from HMRC, there is likely to be a deadline for responding.

If you haven’t yet been contacted but know your business used one of these arrangements, the opportunity to make an unprompted disclosure may become more limited as HMRC continues working through the information it holds.

Seeking advice early allows you to understand your position, consider your options, and respond in a way that is appropriate for your circumstances.

To discuss your situation confidentially, contact, Stuart Petrie, a member of our tax investigations team or your usual AAB contact.

Key Takeaways

• HMRC’s published position in Spotlight 68 is that these advertising and marketing tax arrangements do not deliver the Corporation Tax and VAT savings claimed by their promoters.
• HMRC is now contacting businesses that used arrangements linked to Hubfind Limited and Bizifind Limited after obtaining information about scheme users.
• Businesses may face additional Corporation Tax, VAT, Income Tax, National Insurance, interest, and penalties if HMRC determines tax has been underpaid.
• If you’ve received an HMRC letter, responding promptly and seeking specialist advice can help you understand your position and meet any deadlines.
• If you haven’t yet been contacted but know you used one of these arrangements, making an unprompted voluntary disclosure may offer more options than waiting for HMRC to get in touch.
• Specialist representation can help you manage HMRC correspondence, quantify any liabilities, prepare disclosures where appropriate and negotiate penalties where possible.