A few months ago people asked me for examples of people who might be moonlighting.
One of the examples I gave was private turos - cramming children to get their GCSEs.
This was met with howls of derision.
I should careful of what I ask for. Sometimes HMRC listen.
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I used to teach, and to do private tuition on the occasional evening and weekend. It was well-paid and made a significant difference to my income – with just my two regular A-level pupils on a Friday afternoon I would return home with £90 in cash in my back pocket. And while it’s a socially retrogressive type of work to do, it’s hard to resist that kind of temptation.
In the end I was struck by conscience when filling in my tax return, and so I eventually did declare it, but it would have been extremely easy not to, and I know that very few of my colleagues who did private tuition declared their income.
Ben, as an employee of HMRC, I can only say, well done. Nice to see there are some honest people out there.
Seconded
When HMRC begins to rely on taxpayer honesty and not the legislation and proper administration of the act, then we are in a dark place.
I had an interesting discussion with someone in a web master forum who had a very difficult time reversing an assessment for tax on a website that was not actually earning any revenue (it was at an early stage).
HMRC can give those who are paying the correct taxes a hard time when clamping down, and if they can get it so badly wrong in such an easy case, how are they going to get it right with cash payments?
An assessment?
We live in an era of self assessment?
Are you sure?
I may have used the wrong terminology – I do not know much about tax.
What happened was HMRC contacted him and charged told him to pay tax on the basis of their estimate of the amount of profit the site was making.
The site was in at an early stage, and was not generating any revenue yet.
It is usually very easy to find out how much money a website is making because the sources of revenues are usually obvious, and it is not a cash business: there is paperwork from the ad networks, or payment processors, of whoever pays. Of course a site that is just an online brochure for a cash business is an exception
To be honest – none of that makes any sense at all
Sorry – it’s just not how tax system works
Here is the forum thread with that story. I do not see that he has any motive to lie about it.
Graeme Pietersz –
I read your linked thread… firstly, I’d like to say that the question posed by the thread originator demonstrates everything that is wrong with people’s attitude to paying tax in this country. The vast majority of the respondents are to be congratulated for advising him that honesty is the best policy, although I nearly punched hole in my monitor when someone asked him if he’d considered using of****re jurisdictions… grr… but I digress.
To throw some light on what probably happened to your colleague – If someone carries on an activity that is chargeable to tax (a trade, profession or vocation), then they are required by law to notify HMRC of it, whether they’re making money or not. They have to register with the tax authorities.
If someone fails to notify HMRC within the prescribed time limit and fails to make a tax return declaring the profits of the enterprise (even if those profits are nil), HMRC are empowered to make an estimate (called a Determination) of the tax that could be lost. Basically, they can just think of a number. This can’t be appealed.
Sounds pretty grim, but it’s easy to sort. If someone recieves a Determination, they can reverse the position by supplying an accurate tax return. The amount HMRC asked for will be replaced by the amount self-assessed by the taxpayer (as they are now entitled to call themselves!), plus interest and a small penalty for failing to notify HMRC in the first place. Stands to reason that, if your colleague’s business hadn’t made any profits, supplying a tax return to that effect would remove any charge raised by the determination.
If it took 6 months to get sorted out, that can only mean that it took 6 months for your colleague to submit a return… if he’d got his act together more quickly…?
It’s not up to HMRC to go chasing everyone receiving taxable income – they don’t have the resources and frankly shouldn’t have to. We should all be responsible enough to realise what it means when we pay tax… it’s our subscription fee for living in a civlised society. It’s our end of the deal we have with Government which says “Gov’t – you provide a nice place to live and we’ll pay for it”.
Tax is a Good Thingâ„¢.
Thanks – well said
Is Tax is Good Thing really TM?
Geearkay, thanks for the explanation. Its good to know because it is a situation that I could be faced with in the future, and I did not know you had to notify even before you make a profit – and by the sound of it of it if you start a new line of trade in addition to an existing one?
Its still a bit harsh in this case because a web site at that stage is really just a prototype, not a trade…
Although the person who started the thread was trying to evade tax, everyone who replied told him to pay his tax, and the owner of the forum told him not to ask for advice on tax evasion and closed the thread (the last post on the thread).
Good. As long as there’s a balanced approach to chasing down evaders at all the extremes of income, this is what we want to see.. and it helps to get the message across that it’s not only the rich who do this sort of thing. I hope we see the teaching unions explicitly support this, and urge those members who don’t delcare private income to come clean.
I could not agree more,as we are all equal under the law. Some may recall a TV series on the then Inland Revenue, where a businessman involved in a big VAT fraud was arrested by several gentlemen of the Revenue carrying handcuffs and truncheons. Maybe a U.S. style approach to arresting big time tax evaders,with the no doubt wide publicity that would be given to the event,is the way to go.
Yes it is
The problem with the US approach is that public humiliation on arrest (not conviction) amounts to punishment before the trial.
Graeme,
So you can humiliate an often passive driver who is over the alcohol limit,as shown countless times in documentaries on police arrest practice,but not someone who defrauds the country of huge sums of money? Maybe I`m a little cynical in thinking the man in the City suit is shown more respect than the poor guy who just staggered out of the pub and drove off.
You should not humiliate the driver either. EVERYONE should be treated as innocent until proven guilty. That applies to murders or rapists or genocides.
geearkay – i wouldnt get too wound up with offshore suggestions. despite what many seem to think, its not actually that easy to get an offshore tax plan to work properly, you have tax residence issues, transfer of assets abroad regs, attribution of gains regs (S.13) etc etc
HMRC have plenty of ammo to attack these structures if they want to – but again, the facts dont make good headlines. Whether HMRC choose to use their weapons or not is another matter, but the fact is that they do exist.
But there is tax evasion, remember
It’s hard for the small operator to avoid using offshore I agree – which is one reason why large business should not be allowed to do so either
But evasion is regrettably commonplace
I agree whole-heartedly about equal treatment, governments preferential treatment of big business as shown by the recent announcement of a “buddyline” fr big business means this is very unlikely to happen. Tax is just one of the things that are unjust about this.
I know you like to deride economic theory, but if governments actually followed free market thinking, they would not let business interests drive policy – Adam Smith was only the first free market thinker to warn against this, and many of the regulations he argued against favoured businesses (e.g. laws imposing maximum wages).
We agree on this