The so-called hidden economy consists of businesses who evade tax by failing to register and individuals who fail to declare a source of income.

HMRC estimates that the tax gap in 2012/13 due to the hidden economy stood at £5.9bn, which equates to 17% of the total tax gap.

The government will legislate to extend access to two types of data to help tackle the hidden economy. These changes will apply to data held by:

• Electronic payment providers – businesses that perform a similar function to merchant acquirers by handling monetary transactions, but not necessarily in relation to credit and debit cards (increasingly these transactions are online and take different digital forms); and
• Business intermediaries – these businesses can take many forms, ranging from suppliers of advertising boards or platforms and app stores to booking and reservation intermediaries. The increasing use of online ecommerce makes this a prime target for HMRC.

There are no plans to change the schedule 23 powers, which gives individuals the right of appeal at tribunal against a data-gathering notice. In HMRC’s view ‘the existing safeguards present should be sufficient for the purposes of the extension of powers discussed in this consultation, but would welcome views’.

This consultation invites views on the scope of these changes to implement the extended data-gathering powers to obtain information from electronic payment providers and business intermediaries, how to put the rules into legislation and ways to minimise any costs for businesses to comply with the new requirements.

The closing date for comment is 14 October 2015.

The consultation, Tackling the hidden economy: extension of data-gathering powers, is available here

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