COG905325 - Supporting Guidance: employer compliance: guidance by subject: commencing the compliance check: hidden economy - employers team: definition of a case in terms of employers work in the hidden economy
The definition of the Hidden Economy as set out by National Audit Office is usually taken to mean any undeclared economic activity. Definitions vary, but it can range from casual moonlighting, work paid cash in hand, fraudulently claiming benefits, through to tax evasion and organised crime, in particular:
- businesses that should be registered to pay tax, but are not
- people who work in the hidden economy and pay no tax at all on their earnings (ghosts)
- people who pay tax on some earnings but fail to declare other additional sources of income (moonlighters) and
- employers who may facilitate ghosts and moonlighters, and also evade employers’ National Insurance contributions.
Some of the work described above is appropriate to all intervention teams. Work which will be undertaken by Hidden Economy (Employers) teams is as follows:
- information is received that a business is trading with employees but without operating PAYE (Ghost employer)
- information is received that a business is employing ghosts (people who are not registered with HMRC) or moonlighters (people who are known to HMRC but are not declared as working for that business)
- third party information is received for example from the Tax Evasion Hotline.
As with all compliance checks cross tax risks must be considered and referrals follow LC guidance. Mandatory guidance for referral to the Evasion Referral Team must be followed where you suspect or have evidence of evasion (This text has been withheld because of exemptions in the Freedom of Information Act 2000).
None of the above points are restricted by the size of the business under investigation or by turnover. However Hidden Economy (Employers) should be aware that where the Employer falls into the Large & Complex Employers population (identified by a Large & Complex flag on ECS), or a Public Body (Local Authority, University, NHS, Trade Union or Charity) they will only be able to undertake compliance checks as follows:
- CRM cases - only with the approval and direction of the CRM
- Non-CRM cases - only with the approval and direction of
- an EC Tax Specialist where appointed, or
- EC Manager or Customer Co-ordinator in L&C.