£6.2billion. That’s the size of the tax gap in 2013/14 according to HMRC. Putting this into context, that’s less than half of the back taxes which the EU estimates Apple owes the Irish government but nevertheless it’s a gap which HMRC and the UK government would quite like to close. Accordingly HMRC have recently issued three consultations which they believe may help them to tackle the problem of the hidden economy.
The first proposal would see HMRC’s bulk data gathering powers being extended to take in money service businesses such as Bureau de change, cheque cashers and those who transmit money on behalf of customers. This, HMRC believes, would better enable them to compare declared against actual income as well as picking up on those who may operate their businesses outside of the mainstream economy and to fail to complete the appropriate tax returns.
In tandem with this extension of data gathering powers, HMRC proposes that access to some services could be conditional on having been registered for tax. This consultation is fairly open, at the moment, simply seeking feedback on the type of services and sectors for which this would be a useful tool. Finally, HMRC proposes a strengthening of sanctions for those who seek to circumvent the tax system by operating in the hidden economy; in particular for those who are repeat offenders.
Should these proposals come into force, they will join other measures which are already in place such as ‘hit squads’ which target a specific business sector or area of the country. These are already proving successful; reinforcing the message that in the long run legitimate tax planning may be more effective than ignoring tax obligations.
If you would like to speak to a tax adviser about efficient tax planning, please contact Newshams Tax Advisers on 0203 151 0650 or email us at firstname.lastname@example.org.