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.
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.
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.