A clampdown on tax dodgers was launched today as traders who have failed to register to pay VAT were given a chance to come forward.
Small businesses such as builders may not have realised their turnover was above the threshold of £73,000, while others could have been avoiding paying the tax, HM Revenue and Customs said.
More than 40,000 letters will be sent out over the next few weeks offering those who have not registered the chance to come forward before September 30 and avoid a maximum penalty.
HMRC said where traders have to pay a penalty on undeclared tax other than VAT, this will be lower than the customary penalty of up to 100% charged to those who fall outside the opportunity.
HMRC warned it would investigate all those who fail to come forward before September 30, and substantial penalties or even criminal prosecution could follow.
Mike Wells, HMRC's director of risk and intelligence, said: "Our campaigns are designed to ensure tax is paid so that the money is available to spend on public services used by everyone.
"The aim is to make it easy for individuals and businesses to contact us, make a full disclosure of their income and face a reduced penalty on any tax owed.
To use the VAT initiative people and businesses must register with HMRC by September 30 to notify that they plan to make a voluntary VAT disclosure.Reuse content