If HM Revenue and Customs finds out that you have not declared income on which tax is due, you may be charged interest and penalties on top of any tax bill, and in more serious cases there is even a risk of prosecution and imprisonment.

HMRC actively search for non-registered businesses and un-declared or under-declared income. Information can come from a variety of sources: on-line search, door to door enquiries, reports from members of the public or from relatives, information from other government departments, investigations into other businesses, among others. The situation is very serious, but you will generally benefit from disclosing the position to HM Revenue and Customs as soon as possible because:

• if you report the situation voluntarily, before HM Revenue and Customs suspects anything, you are unlikely to be prosecuted
• if you disclose your income and cooperate fully with the investigation or enquiry that will follow, this should help to reduce any penalties payable.

It may also help to know that HM Revenue and Customs will often try to reach an agreement with you regarding your outstanding tax that reflects your ability to pay.