The latest group to come under scrutiny from HMRC are those individual taxpayers who are earning a second untaxed income.
As a precursor, the HMRC have launched the Second Incomes Campaign that provides the opportunity for any employed taxpayer who is resident in the United Kingdom and who has additional untaxed income to bring their tax affairs up-to-date.
Essentially, any payment an individual receives either from the provision of services or for trading in goods is taxable income.
Most frequently the source of a second income is from one of the following categories:
– consultancy fees – for instance for the provision of training or IT support.
– payments for organising parties or events.
– providing services such as taxi driving, hairdressing or fitness training.
– the making and selling craft wares.
– trading goods at market stalls, car boot sales or online platforms.
On this last category, it is important to emphasize that selling personal possessions is not deemed to be trading. However, it can be difficult to judge where the break point is. As a result, we have added ‘Are You Trading?’ into our Guide section at http://cooperfaure.co.uk/are-you-trading/.
If you are earning income in any of the above areas that is not being taxed at source and is not already being declaring in your Self-Assessment Tax Return, the HMRC is urging you to make a Voluntary Disclosure.
As an incentive, the HMRC is offering preferential terms through their Second Incomes Campaign which will reduce the level of penalties applied.
The first step is to submit a Notification Form that you wish to participate in the campaign. Thereafter, you will have four months to submit a Disclosure Form and to pay the amount due.
There is also the possibility to negotiate an extended payment term during this four month period.
The risk of not making a Voluntary Disclosure is that, should the HMRC find out that you owe tax, they will levy substantial penalties and, potentially under new powers in the 2014 Finance Bill, will be able to seize the money owed directly from your bank account.
At CooperFaure, we have extensive knowledge of personal tax matters. If you are unsure as to whether you have a second income or have any questions on your circumstances, please contact email@example.com to arrange a free consultation.