When the taxman first started peering into the hidden world of private tutoring at the end of last summer, he was fairly certain he would find a decent wedge of unpaid tax.
But now, with a campaign fully up and running, the sheer scale of the potential operation has become clear. Indeed, the taxman now believes there could be up to 100,000 tutors and coaches - including many thousands of teachers and retired teachers - who have not properly declared their income.
The taxman in question is Mike Wells, director of risk and intelligence services at Her Majesty’s Revenue and Customs (HMRC) and the senior civil servant in charge of HMRC’s campaigns. His latest project is aimed at private tutors and coaches who have undeclared tax liabilities. In short, Mr Wells is certain that too many of them have been banking the cash-in-hand they have been paid without declaring it.
Unsurprisingly, Mr Wells is keen to avoid sabre-rattling and admits that those he expects to hear most from will be the careless, the error-prone and the negligent.
As such, HMRC has given teachers and tutors until 6 January 2012 to make a “notification” - taxman-speak for “I think I might owe you some money and would like to tell you about it” - and until the end of March 2012 to make a “disclosure”. That is, to pay what HMRC thinks is owed together with any penalties it may have imposed.
“But those who choose not to come forward,” Mr Wells warns, “we will find them, and we will collect the tax that’s due and impose penalties.”
These can range from a fine of between 30 and 100 per cent of what is due - on top of paying the outstanding tax - to, in the most serious cases, a criminal investigation.
Mr Wells is urging all those who think they owe money to own up rather than wait for tax inspectors to knock on doors. “People will receive the best terms that are available if they come forward. Whether that involves a fine or not depends on the circumstances,” he said. “No one who comes forward is likely to get a whacking great fine.”
Indeed, far from trying to frighten people, Mr Wells is insistent that the campaign is a chance for people to get their finances back on track. “People see this as an opportunity to put their affairs in order if they’ve got out of hand,” he said. “People start on a small scale, helping someone out, then the situation snowballs and they don’t think through the tax implications. They find themselves stuck.”
Before launching the campaign, Mr Wells spoke to professional bodies and teaching unions asking for their advice. “Clearly, a number of people who provide tuition are teachers. There will be retired teachers as well,” he said.
The revenue is expected to go back no more than six years into people’s tax affairs, but Mr Wells warned: “If we find people have deliberately misled us then we can go back 20 years.”
He is reluctant to put a figure on how much money HMRC will collect, but a recent campaign involving doctors and dentists ended up with 10,500 of them handing over more than #163;10 million.
According to Mr Wells, up to 100,000 tutors and coaches could end up coming forward but it is unlikely HMRC will collect much more money than it brought in from the medics. “It’s not about the tax we collect, it’s about helping them to keep their affairs in order for the future,” he said.
MAKING A DISCLOSURE
- Tutors, coaches and instructors have until 6 January 2012 to register with HMRC to “notify” it that they plan to make a voluntary tax disclosure.
By 31 March, those who notify HMRC must pay the tax, interest and penalties due.
You can register online by going to www.hmrc.gov.ukristcupindex.htm or by calling HMRC on 0845 601 8817.
As well as medical professionals, previous campaigns have targeted plumbers, offshore investments, and individuals and businesses trading above the VAT threshold (currently #163;73,000) who have not registered for VAT.
