Of course we’re not talking about you. We know our readership are bastions of honesty, purity and fiscal responsibility. We just thought we’d let you know anyway, so you can warn your less-scrupulous friends about HMRC’s latest clampdown.
In a press release late last week, HMRC warned they are going to begin cracking down on the self-employed who are claiming more tax credits than they are entitled to. They are sending letters to around 12,000 freelancers and contractors who they believe are submitting inaccurate claims. Those lucky individuals selected must provide evidence to back up their claims, to ensure they are receiving the correct amount. A common error is an increase in income, which in theory means less credits would be available – however HMRC suspect many may not be correctly reporting their new levels of income. If there is evidence of deliberate fabrication, individuals could face prosecution.
In the last financial year around 9% of tax credit claims (overall – not just from the self-employed) were inaccurate due to income-related errors. Exchequer Secretary to the Treasury David Gauke (who we’ve been hearing from a lot recently) said of the new measures –
“HMRC is determined to take a tough approach to targeting possible fraud among tax credit claimants. Last year the Government launched radical proposals to reduce the billions lost to tax credit error and fraud every year. These losses are unaffordable and unacceptable.”
These new measures specifically targeting the self-employed will add yet more pressure to freelancers and contractors worrying about their finances, given HMRC’s recent announcement of bookkeeping check-ups for small business, which are apparently also being used to check people’s IR35 status.