Public opinion may be divided on the positive or negative impact of the UK’s booming freelancer and contractor population – however it seems HMRC is making the most of the newly self-employed, and has launched four times as many tax investigations against this group in the last year as in the previous twelve months.
Figures seen by the Telegraph show that the number of tax investigations in 2012/13 stood at 237,215, compared to 119,000 in 2011/12 – a rise of 99%. HMRC also seem to be getting more effective at securing prosecutions. In the same period the number of convictions rose by a factor of seven.
With reports variously claiming that agents are being paid on results, mass redundancies in specialist tax departments, and HMRC gaining aggressive new powers to remove funds directly from bank accounts, experts have warned that first-time self-employed professionals who make honest mistakes on their Self Assessment are an easy target for investigation teams.
Conservative MP Brooks Newmark told the Telegraph:
“[People in] middle England are easy targets. The year-end comes, they’ve filled in their forms and sometimes there are some errors there that HMRC may in previous years have left or not necessarily picked up, but they are now nit-picking.
“It doesn’t take away from the fact that this money is genuinely owed. But it’s the approach with which HMRC goes about it. When HMRC writes you a letter it causes a huge amount of stress. I hope HMRC, if there is an innocent error, is not heavy-handed in the same way it should be if over two or three years they’ve seen a pattern of behaviour from that individual.”
If this trend continues, 2013/14 will be another record year for tax investigations. HMRC was awarded yet more anti-avoidance powers at the Budget, and January 2014 saw a record number of Self Assessment tax returns filed.
Photo by HMRC