HMRC in tax crackdown on private tutors
The taxman is targeting private tutors for tax assessments. We explain what to do if you suspect you’ve been underpaying.
Image: Gareth Fuller - PA Wire
Private tutors are the latest group to be targeted by HM Revenue and Customs (HMRC) as part of its tax evasion crackdown.
The taxman has launched the Tax Catch Up Plan (TCP) to target anyone who provides tuition, instruction or coaching. That includes the traditional academic subjects, as well as fitness, dance, art and musical instrument tuition.
It gives people until 31 March 2012 to come forward and tell HMRC about any outstanding tax due up to 5 April 2010, and to pay any money they owe.
If you take advantage of the TCP and tell HMRC about any income you have not previously declared, you may be eligible for reduced penalties of between 10% and 20% of the amount of tax you owe.
Usually, when the tax authority finds undeclared income, it means heavy penalties - anything from 30% to 100% of the tax owed - and possibly even criminal prosecution.
Don't miss the deadline
Those covered by the TCP have until 6 January 2012 to notify HMRC that they plan to make a voluntary disclosure of unpaid tax.
Gary Ashford of the Chartered Institute of Taxation said anyone who is worried that they have been underpaying tax - whether deliberately or in error - should get professional advice without delay.
"Even if they are not covered by a disclosure opportunity, penalties will generally be less severe for taxpayers who come forward voluntarily to put their affairs in order with HMRC," said Ashford.
- All declarations must be completed and taxes paid by 31 March 2012, unless a 'time to pay' arrangement has been agreed with HMRC
- The standard penalty during the disclosure period ranges between zero and 20% of the unpaid tax, dependent upon individual circumstances
- The TCP closes on 31 March 2012. Individuals subsequently found to have undeclared earnings will be subject to fines between 30% and 100% of the unpaid tax, and possible criminal prosecution
HMRC tracking down tax evaders
The tax authority says that, after the 6 January deadline, it will use data from an extensive range of sources to identify those who have failed to come forward and notify their intent to make a full declaration.
"HMRC uses advanced IT tools such as 'web robot' software, which helps identify people who have failed to pay the right tax," it said in a release. "Those identified face substantial penalties or even criminal prosecution. When this leads to prosecution, HMRC will seek the maximum publicity to discourage others from failing to pay the right tax on time."
HMRC went on to say it is using legal powers to obtain information about payments made to tutors and coaches from various sources, including the academic, sport and leisure sectors, among others.
According to Guy Smith, senior tax consultant at Abbey Tax Protection, the taxman has been writing to colleges to obtain information about private tutors they have used, and will fine any college that fails to comply with its demands.
If you believe you need to contact HMRC under the Tax Catch Up Plan (TCP) and would like professional assistance call TWD Accountants on 0800 093 9433.
Please note that articles on MSN Money do not constitute regulated financial advice, which recommends a course of action based upon the specifics of your personal circumstances. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. You can search for an IFA in your local area. Any statement regarding financial services products and tax liability is based on legislation and tax practices as at 6 April 2011, which is, of course, subject to change. The value of any tax benefits or reliefs depends upon the individual circumstances of the investor. When investment performance is mentioned you should remember that past performance is no guarantee of future performance. Where products have an underlying investment content, in many cases the value of the investment can fall as well as rise. For with-profit based investments, there is no guarantee as to the level of bonuses that will be declared, if any. Where mortgages or secured loans are explained do remember that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. All mortgages are subject to underwriting, status and are not available to people under the age of 18.
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