The government plans to give the HM Revenue and Customs more power to tackle the “hidden economy” of businesses who fail to register for tax and individuals who fail to declare a source of income. In a 19-page consultation paper published yesterday (22 July), the tax office stated it should be allowed to demand aggregated and/or transactional level data from “digital wallets” and other newer types of payment provider. In a bid to keep up with how quickly online money management systems are developing, HMRC also proposed that the legislation is “future-proofed” so similar data can be requested from any new business models as they emerge. Digital wallets are a type of software application that serves as an electronic version of a physical wallet that allows individuals to make electronic commerce transactions. These digital wallets can be used in conjunction with mobile payment systems that allow individuals to make purchases with their smart phones. The customer loads a virtual wallet with funds from his/her bank account or payment card which can be used to transfer funds to retailers or traders. According to HMRC, the extended powers will directly affect businesses who act as intermediaries or provide electronic payment services, as they may be required to provide data to HMRC under the new legislation. The tax office stated those who are tax compliant should see little or no impact. HMRC estimates that the tax gap in 2012 to 2013 due to the hidden economy stood at £5.9bn, which equates to 17 per cent of the total tax gap. The tax gap is the difference between the receipts HMRC actually collects and the amount of tax that should be collected if all taxpayers complied with the letter and spirit of the law. The consultation period for feedback on the proposals to extend HMRC’s data-gathering powers closes on 11 October 2015. emma.hughes@ft.com
A consultation paper published by the UK tax authority, HMRC, has proposed that the authority be granted new powers to help it regulate the 'hidden economy'. Under the powers HMRC has asked to be granted, it would be able to demand aggregated and transactional level data from digital wallet providers, and other types of payment provider. The proposals are part of a wider review into how HM Revenue & Customs can better tackle money laundering in the UK.