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.


Our subscriber guides:

Making a tax disclosure (Digital Disclosure Service)

Worldwide disclosure facility

Consultation documents:

Tackling the hidden economy: Sanctions

Tackling the hidden economy: Conditionality

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