Cash Income

[cjs296]

I recently discovered that my sister has been carrying out a small amount of freelance work in addition to her full-time job, to supplement her income. This work is for an overseas client, based in the Far East, and the money (amounting to around £2500 per year) has been paid to her via Western Union, i.e. she has been picking up cash. She was unaware that she should be declaring this income and I have now put her straight on this; she will be declaring it from this point onwards. She has, however, been carrying out this work for around three years now and has never really banked the cash, i.e. she has tended to use it as spending money. She is a very honest person and is planning to now declare her entire history of freelance income, and will thus no doubt land a tax bill that she has not made provision for. My question, then, is will she be overcomplicating matters by doing this? Would she be better off accepting that she didn't know any better, comforted by the fact that she is now doing things properly? Many thanks in advance to anyone who can offer any advice.

[amadeus]

She is not overcomplicating matters and, if she doesn't declare earlier years she may well "get away with it". Any adviser is duty bound to tell her to disclose it and a voluntary disclosure to the Revenue would probably give rise to an assessment to pay the tax and interest from the original due date when the tax should have been paid. I doubt she will be charged a penalty although much depends on the Revenue officer dealing with the case.

[cjs296]

Thanks amadeus - I appreciate your response, and I will of course advise her to set about declaring that earlier income, as she planned to. I must confess at being previously unaware that people could be paid in this way (cash via international money transfer) - it must provide quite a headache for the IR. I would imagine there are many (less honest) people out there not declaring such earnings, and going un-noticed. Thanks again.

[Bob Jones]

If the tax lost is in excess of £1000 HMRC will consider a penalty- they now have an audit trail - thye are much more keen on this than they were. The penalty is based on a %age of the tax lost but but a voluntary disclosure will gain an extra 10% deduction which may make the charging of a penalty not worthwhile.

Bob