HMRC have always been concerned with the impact of the hidden economy and have had teams focussed on policing the system for people that haven’t notified them they are trading or in business.
The Government will legislate to extend HMRC’s data-gathering powers in order to obtain information on those operating in the hidden economy.
In addition, the Government will consult on whether it should restrict licences or services for businesses on the condition that they can show they are already registered for tax. The Government will also propose stronger sanctions against those who repeatedly and deliberately operate in the hidden economy. Further details will be set out in Budget 2017.
HMRC are aware that almost half of the tax gap is attributable to tax evasion and intend to focus resources on proactively seeking out those involved in the hidden economy. HMRC are aware that in order to deter people they need to show that there is a real and present threat of discovery. HMRC are also tasked with a five-fold increase in prosecutions so there is a strong likelihood that people operating in the hidden economy could face a criminal investigation with a view to prosecution.
The additional powers will enable HMRC to identify individuals that either fail to declare additional income or deliberately evade taxes.