[UK] £1.4bn ‘hole’ in HMRC accounts left by self-employed

In the UK, HMRC believes large businesses are underpaying employment taxes by  £1.4 billion, Yahoo reports.

The authority is cracking down on “hidden employees”; self-employed workers who should be classed as employees for tax purposes.

According to Pinsent Masons, HMRC is concerned some large businesses are underpaying Employers’ National Insurance contributions by classifying some of their workers as self-employed when they should be employees for tax purposes.

Hidden workers reportedly include those paid by businesses on a self-employed basis and those paid through a personal service company (PSC), who fall within the rules.

IR35 tax regulation changes for off-payroll workers were introduced in April 2021. The new rules impose tax and compliance risks on large and medium-sized businesses when engaging individuals through PSCs.

The contractor was previously the one responsible for applying IR35 and paying all employment taxes due.

Penny Simmons - legal director at Pinsent Masons - told The Standard that the figure suggested that HMRC still believes that many large businesses continue to pay contractors on a self-employed basis when they should be employees for tax purposes.

Ms Simmons said, “Large businesses need to review how they engage off-payroll workers and manage employment tax risks. Businesses should ensure they have robust onboarding procedures in place and are applying the IR35 rules correctly, whilst also having a process for making comprehensive employment tax status determinations for all workers to be paid on a self-employed basis.”

Also speaking to The Standard, Steven Porter - a partner at Pinsent Masons - said, “Off-payroll workers are one of HMRC’s biggest priorities at the moment – even businesses that have sought to comply with the IR35 rules are finding themselves in the crosshairs.”

“HMRC believes it may be missing out on more than a billion pounds a year from large businesses that are paying workers on a self-employed basis. Figures on that scale will push off-payroll workers to the front of the queue when it comes to HMRC opening investigations.”

Source: Yahoo

(Link and quotes via original reporting) 

In the UK, HMRC believes large businesses are underpaying employment taxes by  £1.4 billion, Yahoo reports.

The authority is cracking down on “hidden employees”; self-employed workers who should be classed as employees for tax purposes.

According to Pinsent Masons, HMRC is concerned some large businesses are underpaying Employers’ National Insurance contributions by classifying some of their workers as self-employed when they should be employees for tax purposes.

Hidden workers reportedly include those paid by businesses on a self-employed basis and those paid through a personal service company (PSC), who fall within the rules.

IR35 tax regulation changes for off-payroll workers were introduced in April 2021. The new rules impose tax and compliance risks on large and medium-sized businesses when engaging individuals through PSCs.

The contractor was previously the one responsible for applying IR35 and paying all employment taxes due.

Penny Simmons - legal director at Pinsent Masons - told The Standard that the figure suggested that HMRC still believes that many large businesses continue to pay contractors on a self-employed basis when they should be employees for tax purposes.

Ms Simmons said, “Large businesses need to review how they engage off-payroll workers and manage employment tax risks. Businesses should ensure they have robust onboarding procedures in place and are applying the IR35 rules correctly, whilst also having a process for making comprehensive employment tax status determinations for all workers to be paid on a self-employed basis.”

Also speaking to The Standard, Steven Porter - a partner at Pinsent Masons - said, “Off-payroll workers are one of HMRC’s biggest priorities at the moment – even businesses that have sought to comply with the IR35 rules are finding themselves in the crosshairs.”

“HMRC believes it may be missing out on more than a billion pounds a year from large businesses that are paying workers on a self-employed basis. Figures on that scale will push off-payroll workers to the front of the queue when it comes to HMRC opening investigations.”

Source: Yahoo

(Link and quotes via original reporting)