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In the latest in a series of campaigns aimed at tax dodging businesses, HMRC is targeting small businesses who have failed to register for VAT when they should have done. A partial amnesty is available to those who own up before the end of September.

If you expect to turnover more than the current VAT threshold over the coming year, you must register for VAT.

Even if you don't expect to breach the threshold (£73,000 in the 2011/12 tax year), there are many business benefits to doing so - particularly if you join the Flat Rate VAT scheme.

HMRC has identified over 40,000 sole traders and limited companies who they believe have failed to register for VAT, despite passing this threshold figure.

These businesses will be sent letters over the next couple of weeks, with the promise of a partial amnesty on any unpaid tax if they settle their outstanding liabilities by September 30th.

Any businesses who have failed to register will be liable for a 10% fine on the tax which should have been paid, although this latest HMRC swoop will also open the doors for the authorities to look for other inaccuracies in these businesses' accounts.

To comply with the latest crackdown, 'offenders' must notify HMRC by 30th September that they have failed to register for VAT, and arrange to pay any backdated liabilities and penalties by the end of 2011.

In line with its tough penalties regime, HMRC also reserve the right to impose a full 100% fine if they can show that a business deliberately failed to register for VAT.

Over the course of two previous campaigns, HMRC have raised half a billion pounds from voluntary disclosures, and a further £100m from 'follow-up activity', so more clampdowns are bound to follow.

The vast majority of limited company contractors will have accountants who will oversee their VAT registration and ongoing compliance with the VAT rules. You can find out more in out VAT guide.