New contractors are at an increased risk of being caught by HMRC if they are unsure about the procedures involved with declaring income due to the tax authority’s renewed clampdown on the ‘hidden economy’.
HMRC has warned that it will now make it “increasingly difficult” for traders who “fail to register for tax and people who fail to declare a source of income”. Newcomers to flexible working are being urged to get their finances in order as soon as possible.
Tim Stovold of accountancy firm Kingston Smith said: “Where HMRC uncovers trading profits which have not been declared, they will be unsympathetic to a plead of ignorance of the rules.”
Aspiring contractors and permanent employees looking to begin working independently are often worried about what income they have to declare and when they have to do so.
The new proposals could mean that more freelancers face financial penalties; however, HMRC is hopeful that the proposals will enable more data to be gathered on ‘third parties’, such as electronic payment providers, which may be unknowingly supporting the hidden economy.
HMRC said in a report published last week: “Where a business is using an intermediary to offer goods and services, HMRC believes that the intermediary will be able to provide valuable information that can identify sellers that have not registered with HMRC or who have not declared the full value of their sales.”
It is estimated that HMRC could raise a staggering £285m from the hidden economy by the end of 2021.