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HMRC has announced its latest tax campaign - this time targeting tutors or coaches who have not declared all of their income. The ‘Tax Catch-up Plan’ offers instructors and trainers who have not paid the tax they should the opportunity to put their hands up and come forward to declare it.
This is the latest in a long line of HMRC campaigns that target a specific population where HMRC believes there may be under-declared tax. In 2011 we had the ‘Plumbers Tax Safe Plan’ (which has so far collected £1.98m and resulted in six arrests) and the VAT initiative which has sought to identify those trading on the VAT threshold who should have registered and have not.
In 2012 we can expect a second Trades Campaign focusing on electricians and allied trades and also a focus on people using e-market places (eBay and the like) who operate a trade but are not paying tax.
In a campaign HMRC uses its legal powers to request information from third parties, and IT tools such as ‘web robots’, to gather information on people they think should be paying tax. They can then compare this to the information and disclosures they receive and ask questions where the two don’t match. That being the stick, the ‘carrot’ to encourage disclosure is the offer of lower penalties on undeclared tax.
In the case of the campaign for tutors and coaches, this is intended to cover both academic and sports coaching and applies whether or not you have any professional qualifications. Notifications that you may have undeclared tax need to be made by 6 January 2012 and then the amount of tax due formally declared by 31 March 2012. Declaring within the prescribed window provides the opportunity to make a ‘fresh start’ with HMRC and very significant savings on penalties which can otherwise be up to 100% of the underpaid tax.
It’s not just campaigns though, HMRC is also operating a number of taskforces as part of a range of different approaches to try and tackle tax evasion. In November five more were announced including a focus on:
• scrap metal dealers and fast food outlets in Scotland
• construction traders in the North West and North Wales
• landlords owning or renting three or more properties in the North West and North Wales
The aim of these taskforces is to try and focus in an intensive burst on what HMRC perceives as high risk activity. Each group tackled should comprise around 600 taxpayers.
HMRC states that if you are compliant and your tax records are up to date you will have nothing to worry about. In a way that is correct, but there will still be a cost in time and fees (and a natural degree of stress) in dealing with an HMRC enquiry even though you have nothing to declare. You may therefore want to ask your accountant or professional body if they offer tax investigation insurance which should at least remove the worry about the professional costs of dealing with an investigation. Such costs, even though you have no additional tax to pay, can be substantial. Given the current climate HMRC is focusing strongly on getting more tax out of us and anyone, whether compliant or not, is at risk from an enquiry.
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