Tim Creighton, Director
“Pay now and argue later” is very much the mantra for HMRC in its latest drive to recover £5.5bn in taxes from wealthy people who have been tax dodging, but freelancers and people who are working as contractors have been drawn into this tax recovery scheme where HMRC can backdate taxes and ask for payment within three months.
New powers afforded to HMRC for accelerated payments were supposed to be there to avoid lengthy court cases to recover taxes where investors had actively used tax avoidance schemes and had the money to pay the demands from HMRC within the three month timescale and then argue about the details and amounts later.
What appears to be happening now though is that HMRC is targeting not just the very wealthy people these powers were supposed to encompass, but normal contractors or freelancers who are alleged not to have paid sufficient tax in their previous jobs.
Under these new powers, and claiming that you have deliberately avoided tax, HMRC can claim back taxes from twenty years ago, rather than the four year time limit that is in place under ‘schedule 39’ – in fact the longest HMRC could go back was six years if it could prove you were ‘careless’ before these new powers were granted.
One man reported a demand from HMRC of nearly £30,000 to be paid back in 12 weeks after working as a freelance IT Consultant from 2008 to 2010. HMRC wrote to him during this time and told him that they would let him know if there was an issue with his taxes as they were looking at his tax affairs.
He heard no more from them until the recent request for nearly £30,000. Whilst this individual will get back all the money if he can prove that he has not purposefully avoided paying tax, how many of us could raise £30,000 in twelve weeks without there being some serious financial repercussions?
In fact, some research by the Daily Telegraph suggests that 64,000 workers who freelanced in the late noughties are now being accused of aggressive avoidance and being hit with large sums, often equalling their yearly salary.
This is worrying for anyone who has been a freelance worker and you should seek advice about your options, particularly if you received a letter from HMRC stating that they were looking into your tax affairs.
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