HM Revenue and Customs have recently turned their attention to those who do not declare second incomes and so avoid getting taxed on these earnings.
The taxman has taken his usual approach when it comes to clamping down on tax evasion by offering individuals the opportunity to voluntarily declare and pay any additional tax due upfront in exchange for more lenient terms.
At the other end of the scale HMRC have issued warnings to those who don't make a voluntary disclosure that they, will face hefty penalties. In a recent notice they stated that "Where additional taxes are due HMRC will usually charge higher penalties than those available under the Second Incomes Campaign. The penalties could be up to 100 per cent of the unpaid liabilities, or up to 200 per cent for offshore related income."
This targeted compliance initiative is supported by HMRC's data intelligence systems, used to pinpoint individuals who potentially won't have declared their second income. This can highlight them as high risk candidates worthy of further investigation.
- Any earnings, fees or commission from organising and running events, parties and entertainment related activities in general.
- Additional income
sfrom jobs such as taxi driving, gardening and hairdressing.
- Any arts and crafts products that are made and sold to produce a profit.
- Any incomes made from buying and selling products, this includes car boot /garage sales and online selling on sites such as eBay and Amazon.
- Fees from public speaking or consultancy activities.
So what steps can you take if you want to declare your second income?
We would recommend that initially you should speak to a member of PayStream's Tax Team who will ensure that you can put the best possible case to HMRC ensuring the maximum mitigation of your liabilities
However if you want to go it alone you'll need to:
- Notify HMRC that you wish to become involved in the Second Incomes Campaign and inform HMRC about all additional income you have received.
- After discussion with HMRC make a formal offer in settlement
- Pay any additional tax, interest and penalties due.
- Keep HMRC up to date with any changes and extra information they may request from you.
Signing up for the Second Incomes Scheme could dramatically lower any penalties you will face from undeclared income and will avoid the risk of further investigation. Please see here for more information on the scheme or call PayStream's Tax Team on 0161 929 6000 for more detailed advice.