Online traders accused of tax evasion

MPs have warned that some internet traders are evading taxes

Spending watchdog the Public Accounts Committee has singled out traders on the internet as contributing to the £2bn lost each year in undeclared taxes.

A new report (PDF) highlighted individuals who trade on the internet, self-employed people and buy-to-let landlords as key areas of risk, creating a 'hidden economy' worth over £2bn and involving more than two million people in the UK.

Public Accounts Committee chairman Edward Leigh maintained that HM Revenue & Customs (HMRC) has had little success in stamping out a "cash-in-hand" culture in the UK.

"[HMRC] has had some success at motivating people with offshore accounts to come clean and voluntarily to pay the tax they owe," he said. "It should devise similar schemes to persuade those in other risk areas to put their tax affairs in order."

HMRC has been making more use of data matching techniques and a tax evasion hotline to expose people in the hidden economy, the report said. If found, they could be liable to a penalty of up to 100 per cent of the amount of tax owed.