Warning as the taxman catches up with 'cash'

by Susie Hughes at 14:53 18/01/16 (News on Business)

Self-employed people and small business owners racing to complete their tax returns this month should take care not to under declare their cash earnings, as the taxman turns to the new technology to spot undeclared earnings.

The warning comes from accountants HW Fisher & Company as HMRC extends the reach of its sophisticated software, which is designed to detect if someone is earning more than they declare on their tax return. The Revenue is increasingly able to pinpoint people who are earning large sums in cash and not declaring them as income. Such invisible 'cash-in-hand' earnings have traditionally been near impossible for tax inspectors to spot. HW FIsher & Company says that HMRC’s software now cross-references the tax returns of thousands of people in similar circumstances and professions, together with records from countless other sources - from the Land Registry to loyalty cards - and flags up cases where an individual’s declared income is significantly lower than might be expected. Tax returns which are submitted with errors or cash transactions omitted risk being rejected – or investigated – by the Revenue. Scrutiny The accountants advise that the extra scrutiny comes as HMRC is set to gain access for the first time to records of payments made via electronic payment systems such as Paypal. The 2016 Finance Bill is due to extend the Revenue’s data-gathering powers to include transactions made between individuals using online payment providers, in addition to conventional credit and debit card purchases. Advertisement Tim Walford-Fitzgerald, tax principal at HW Fisher & Company, said: “Computer power is proving a game-changer, and is helping the taxman to catch up with the previously hard to spot cash-in-hand payments – meaning it’s more important than ever for small businesses to record all their cash earnings, and declare them on their tax return. “Though time is tight and many people are rushing to get their tax return finished in time, they should resist the temptation to cut corners and overlook cash that wasn’t banked. They may think that the return is correct but HMRC’s computer may say 'no'. “There are penalties for submitting incorrect returns, even by mistake, and HMRC’s systems can find even supposedly hidden assets if you plead poverty to try and avoid them.” Last year more than four million people left it until January to complete their Self-Assessment Tax Return. Anyone submitting a tax return after the January 31 deadline must pay an automatic £100 penalty. HMRC warns there are severe penalties for failing to declare all relevant income on a Self-Assessment Tax Return. People deliberately omitting a source of income – such as cash payments – from their tax return may face prosecution. Tweet -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2016

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