HMRC targets app sector in new measures to tackle hidden economy

The hidden economy has long been an issue that HMRC have entered into battle with and new progressions have been announced this week. Revenue & Customs is expected to turn its sights onto the digital app sector, where they believe tax evasion is particularly rife. The new measures have been outlined in its Tackling the Hidden Economy: extension of data-gathering powers consultation document.

The document outlines new proposals that have put in place in a bid to strengthen the ongoing war against undeclared earnings and this time third-party trade facilitators are being targeted. HMRC tackles App tax evasionHMRC has been pushing for greater powers continuously over the past decade as it seeks increased control over the collection of bulk data and the use of stolen data. Earlier this year the department announced that it had retrieved £160m through clamping down on income through prostitution, drugs and cash-in-hand jobs and hopes to now do the same in the digital sector.

What is this mysterious ‘hidden economy’?

The ‘hidden economy’ is something that HMRC uses to refer to sources of income earned from the sale of goods or services, which are not declared fully (or at all) in an attempt to dodge tax payments. It is estimated that the country’s hidden economy is worth around £5.6bn in missing tax, which is something the department has been working hard to recoup over the past decade through its continued clamp down on tax dodging.

New measures to intercept app sector tax avoidance

Revenue & Customs suspects that there is a “large-scale” tax evasion operation occurring in the app sector and is set to focus on services such as app stores and online booking systems. Apple, Gumtree, Craigslist and Airbnb are amongst those at the top HMRC’s digital hit list. The department is set to apply its new powers to enable increased and more efficient collection of data from such targets, as well as “reduce error and improve overall compliance.”

The new measures will allow HMRC access to bulk data, which can be “used as an independent check against the data that taxpayers themselves report” and is expected to recoup a sizeable £860m by 2020/21. Improved access to financial information will make it more difficult for businesses to hide the full value of their sales, which is a tactic HMRC believe many are currently employing. The data collected would be used to identify any compliance issues but won’t be used to analyse the transactional behaviour of individual customers.

Tax partner at UHY Hacker Young, Roy Maugham, said: “HMRC is stepping up its pursuit of tax evaders, and the new powers it is seeking indicate that it believes there is large-scale tax evasion in the ‘app economy’.

“The digital economy generates huge profits and HMRC clearly believe that they can raise additional revenue by targeting the sector – this is the latest in a long line of aggressive moves by HMRC to boost tax intake.”

 

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