HMRC announces “Second Incomes Campaign”

What’s the issue?

HMRC has been busy pushing its new Second Incomes Campaign, so – how might directors and other business owners be affected?

Why are HMRC doing this?

HMRC are concerned that many taxpayers aren’t properly declaring all taxable sources of income, and have therefore introduced the Second Incomes Campaign. It says this is to enable individuals to bring their tax affairs “fully up to date on a voluntary basis”. There are many activities which can bring in a second income but two of the most likely sources for directors and other business owners are consultancy and training services offered in a personal capacity, i.e. not through the business.

HMRC’s Approach:

Although HMRC is encouraging voluntary disclosures of this nature, it won’t assign them to the ‘Second Incomes Campaign’ automatically. In order to take advantage of what it calls the “best possible” tax repayment terms you must specifically tell it that you want to participate by completing the correct notification form. Once this has been done you then have to calculate the unpaid tax that’s due and send HMRC a disclosure form. Once that’s acknowledged the tax owed must be paid within four months.

If undeclared sources of income aren’t voluntarily disclosed and HMRC subsequently finds out, you could face higher penalties or, even worse, a criminal prosecution. There is no end date for the Second Incomes Campaign

What to do if you think you may be affected:

If you’re concerned, Sapphire suggests that you don’t leave things to chance.

Sapphire Tip:

Rather than going straight to HMRC – either for advice or to make a disclosure – directors and business owners should first seek specialist advice and, if necessary, representation. Apart from the fact that HMRC’s online calculator can only manage basic tax affairs, personal declarations made by high net worth individuals may prompt an inspector to undertake a deeper investigation.

Undeclared personal fees, e.g. for consultancy work, are being targeted. If you’re worried, don’t automatically make a disclosure under the campaign – it could prompt a deeper investigation. Speak to your accountant first.

Employment Intermediary Reporting – Act Now!

What is it?

From 6th April 2015, any Employment Intermediary who has a direct contractual relationship with an end user/hirer (with whom they place workers) must send a report to HMRC each quarter with details of each worker paid where PAYE was not operated (i.e. not reported on a PAYE RTI return – Full Payment Submission).

In other words, a Recruitment Agency who pays a worker through an Umbrella company or direct to their own Limited Company (PSC) rather than operating PAYE themselves (via their own PAYE payroll) MUST be reported to HMRC on an Employment Intermediary report every quarter.

Why the changes?

These changes have been brought in to help ‘police’ the Onshore/Offshore Intermediaries legislation which took effect in April 2014, to tackle the avoidance of employment taxes (false self-employment) by using intermediaries.

Act now!

The first quarter (6th April – 5th July) has now elapsed, and Employment Intermediaries now have one month (until 6th August) to submit their first quarter’s report. This must be done by uploading a CSV/OSD file containing the information required (see the link below for what must be reported) to the HMRC website. You must specifically add this feature to your HMRC online services section by entering your company’s PAYE reference and Accounts Office reference numbers.

There are fines in place for intermediaries that do not comply, file on time or provide false information.

More info

You may find the following link of some use in the lead up to the first deadline:

https://www.gov.uk/government/publications/employment-intermediaries-reporting-requirements

 Sapphire Summary

These changes place even more of an administrative burden on Recruitment Agencies. If you’re still unsure of your obligations as a result of these changes, Sapphire can provide you with further advice and assistance in order to comply with these new requirements.

Please feel free to contact us at any time if we can help in any way to meet your new obligations.