HMRC has announced it has the hidden economy in its sights, with more details about plans to use conditionality as a tool to tackle non-compliance, as well as tougher sanctions, included in the Spring Budget 2017 overview
In its policy paper, HMRC says following an announcement at Autumn statement 2016 and consultation, it plans to develop further proposals on conditionality, which is the principle of making access to certain licences or services conditional on tax registration.
HMRC intends to explore options to trial conditionality through pilot activity, arguing there is ‘a good case’ for conditionality as a tool to prevent non-compliance. It also says the government recognises that conditionality must also minimise burdens for compliant businesses and providers of licences or services.
In addition, HMRC is considering the design of a stronger ‘failure to notify’ hidden economy penalty which may take account of past behaviour. This will be delivered as part of the longer term HMRC penalties review
HMRC will also strengthen its monitoring of taxpayers found to be operating in the hidden economy, to keep them compliant.
As announced at Spring Budget 2017, HMRC is actively monitoring compliance with the National Insurance employment allowance, following reports of some businesses using avoidance schemes to avoid paying the correct amount of National Insurance contributions. The government has said it will consider taking further action in the event that this avoidance continues.
Details are in Section 2.32 of HMRC’s policy paper Spring Budget 2017: overview of tax legislation and rates (OOTLAR), which is here.
