HMRC Secondary Incomes Campaign

As part of HMRC’s drive to encourage voluntary disclosures, a campaign has been launched to assist individuals to disclose undeclared income and/or capital gains from part-time and/or secondary activities. The campaign offers people the chance to pay the interest due and lower penalties on the tax paid late.

The Secondary Incomes Campaign (SIC) covers earnings from occupations such as events planning, taxi services, hairdressing or selling craft items or other goods. Broadly speaking, it covers any income, which is not directly sourced from primary employment or business, including self-employment income, capital gains, rental and investment income.

HMRC highlight that the SIC does not apply to primary earnings, or the following taxes: VAT, employer liabilities, IHT or trust tax. Issues related to these taxes can be addressed through other disclosure facilities, or by making a voluntary disclosure.

In order to make a disclosure through the SIC, the individual or their adviser must complete a notification form to register for the campaign. The individual then has four months to calculate and pay the tax due.

For 2009/10 onwards, the penalty for previously undisclosed secondary income is 10% or 20%, depending on the actions of the taxpayer.  An explanation for the penalty rate applied must be provided to HMRC. If the explanation for the penalty is not satisfactory, HMRC may open an enquiry or impose the higher penalty rate. Pre-2009/10, the penalties are fixed at 20%. The latest year for which a disclosure can be made is 2012/13.  HMRC can go back up to 20 years, if the taxpayer deliberately didn’t disclose the secondary income.

The SIC allows people with secondary sources of income to bring their tax affairs up to date, without the need for a full-blown enquiry.  There is no immunity from prosecution and the campaign is not suitable for people that have failed to disclose their primary source of income.

For advice on whether the SIC is appropriate for your clients please call TaxDesk on 0845 4900 509 and speak to John Hood or Isobel Clift.