HMRC Second Incomes Campaign

H M Revenue and Customs (HMRC) have recently launched a new campaign which is intended to target people with second incomes, i.e. those who are employed and pay tax through PAYE but who also have undeclared income from a separate self-employment source.

HMRC gives various examples of what they class as a second income for the purposes of this campaign which can include consultancy fees e.g. for providing training, organising parties and events, providing services such as taxi driving, hairdressing or fitness training, making and selling craft items and generating profits from buying and selling goods e.g. regular market stalls or car boot sales etc.

This campaign is the most recent campaign launched by HMRC and follows previous campaigns which have targeted a number of different taxes and various sources of undisclosed income.  HMRC state that since 2007 such campaigns have collected over £580m in tax from individuals making voluntary disclosure and a further £280m from follow up activities.

Like all the previous campaigns launched by HMRC, the second incomes campaign aims to encourage people to bring their tax affairs up to date by making a full voluntary disclosure to HMRC and in return HMRC should issue a lower level of penalty than would otherwise have been the case if HMRC had discovered the undisclosed income themselves and caught up with the tax payer at a later date.

As with most of the campaigns launched by HMRC, there are two main steps involved in making a disclosure.  The first is notifying HMRC of the undisclosed income which can be done by using a standard form and, upon receipt, HMRC will issue a notice to complete a disclosure form.  That is the second step and the disclosure form details the additional tax that is due plus interest and penalties.  The form is then submitted to HMRC and payment of the tax and interest and penalties can be made at 

the same time or at least within four months of receiving HMRC’s acknowledgment of the notification.  In certain circumstances HMRC may allow more time to pay.

As we have detailed in earlier articles, the level of penalties that can be issued by HMRC are now almost exclusively based on the behaviour of the tax payer which can mean that much lower levels of penalties are issued if the disclosure is made by the tax payer voluntarily as opposed to HMRC identifying it first and then pursuing the tax payer for the underpaid tax.

If you are in such a situation where you have a second source of income but have not accounted for tax thereon either through self-assessment or via your PAYE tax code then it may pay for you to consider making a voluntary disclosure to HMRC under this campaign. 

Further information regarding HMRC campaigns can be found at www.hmrc.gov.uk/campaigns. You can also find there details of HMRC’s other current campaign which is aimed at individuals with let properties who have not previously disclosed the income from the letting of the properties to HMRC.

Should you require any assistance in making such voluntary disclosures to HMRC then please contact us and we would be happy to help. Professional help can lead to minimising the tax that may be due on any secondary source of income and maximising any available tax reliefs and claims and also eventually the negotiation of penalties etc.

The above is for general guidance only and no action should be taken without obtaining specific advice