Tutoring and the black economy
Tutoring is a growth sector, with figures from the Institute of Education showing that 25% of 11-18 year olds receive tutoring during their schooling. We have previously reported that the UK market for tutoring is far larger than the government and DfES admit and may be worth £1.5-2bn p.a. The larger tutoring brands such as Kumon (turnover about £12m in 2006), Kip McGrath, First Tutors, etc, are thought to account for less than £100m of this market – leaving a huge gap filled by small companies and individuals, many of whom are paid in cash.
When we spoke to Aiden Close from the Inland Revenue (IR) Law Enforcement team he said, ‘Being paid in cash is perfectly legal so long as you declare it. We don’t flag up specific groups we are targeting, but the consequences of not declaring any type of income, whether from tutoring, driving a cab at night or whatever are significant and include not just repaying the missed tax, but interest and penalties’.
So, while the IR would not confirm that they are now targeting tutors it is our understanding that this is the case. A crackdown on tutors by the IR, together with the DfES’s recommendations that parents check to see if tutors are CRB checked and registered with the General Teaching Council, may cause many independent tutors to abandon the market. This was the case when the Australian tax authorities has a similar crackdown several years ago. The beneficiaries in that instance were the larger providers, one of whom (Kip McGrath) subsequently grew to a size where they were listed on the stock exchange. While the situation in the UK is somewhat different, many companies we have spoken to in the last year are looking at ways of entering this market.