HMRC have published responses to their consultations ‘Tackling the hidden economy: Sanctions’ and ‘Tackling the hidden economy: Conditionality’.
The ‘hidden economy’ is made up of those who fail to register for tax or who fail to declare a source of income. HMRC estimate that the tax gap in 2014/15 from the hidden economy was £6.2bn.
The original consultations proposed:
- Tougher sanctions and increased monitoring for those who repeatedly operate in the hidden economy.
- Making access to licenses or services needed to trade conditional on tax registration (‘conditionality’).
In their response HMRC state that:
- They will consider the design of tougher failure to notify penalties for the hidden economy as part of their broader penalties review.
- No changes are proposed to penalties for failing to operate PAYE in the hidden economy, but the position will be kept under review.
- Proposed changes to tax penalties where illegal working is also detected will be dropped.
- The monitoring of taxpayers previously found to be operating in the hidden economy will be strengthened. This will be achieved using existing powers rather than introducing new legislation.
- Further work will be undertaken to develop proposals on conditionality and conduct pilot tests.
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