Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

IR35TaxLatest NewsEmployment lawFreelance workers

HMRC looking to recoup £1.4bn from businesses’ use of hidden employees

by Adam McCulloch 1 Aug 2022
by Adam McCulloch 1 Aug 2022 Photo: Shutterstock
Photo: Shutterstock

The UK’s tax authorities suspect large businesses of underpaying £1.4bn in employment taxes as they promise to crack down on ‘hidden employees’.

The use of self-employed workers that HMRC believes are really employees for tax purposes could be leading to some some large businesses underpaying Employers’ National Insurance contributions. This could include both workers who are paid by businesses on a self-employed basis and those who are paid through a personal service company (PSC) and fall within the IR35 rules.

HMRC recently won a tribunal case against Alan Parry, the former Sky Sports football commentator, regarding whether he should have been taxed as an employee under IR35. The tax bill was £356,000.

The government changed the rules for off-payroll workers in the private sector in April 2021. The new rules imposed tax and compliance risks on large and medium-sized businesses when engaging individuals through PSCs. Previously, the contractor was responsible for applying IR35 and paying any employment taxes that were due.

IR35 worker status decisions

‘Unfair IR35 led to rise of rogue umbrella companies’

HMRC: Long-term impact of IR35 on contractor use ‘minimal’

How to comply with the IR35 rules on off-payroll working

HMRC is said to be pursuing £1.4bn in tax as of 31 March 2022.

Penny Simmons, a legal director at multinational law firm Pinsent Masons, told Personnel Today that HMRC still believed that many large businesses were continuing to pay contractors on a self-employed basis, when they should be employees for tax purposes.

This may be because HMRC considers that they are not applying the IR35 rules correctly, although this may also reflect that HMRC is increasingly questioning whether businesses should be paying individuals on a self-employed basis even when the IR35 rules don’t apply because the workers are not engaged through PSCs.

The test for determining whether an individual is an employee for tax purposes is complicated and can be difficult to apply, creating an additional and unwelcome layer of complexity for businesses, said Pinsent Masons. There is no single test – rather a business needs to consider a number of factors. Undoubtedly, this means that in some cases, even when a business believes that it has applied the test correctly, HMRC may still disagree with the tax status determination.

Even businesses that have sought to comply with the IR35 rules are finding themselves in the crosshairs” – Steven Porter, Pinsent Masons partner

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

Steven Porter, a partner at Pinsent Masons said that businesses that engaged large numbers of contractors (either through PSCs or as self-employed individuals) ran the risk of HMRC investigations and potential penalties. In recent months, HMRC has begun to levy penalties on businesses that have misapplied the IR35 rules having given them 12 months’ grace period following the IR35 rule changes.

Porter added: “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.”

In May, the parliamentary public accounts committee said that organisations did not always have the information they needed to make accurate worker status decisions under IR35 requirements and it was too difficult for workers to challenge decisions they feel are incorrect.

Latest HR job opportunities on Personnel Today


Browse more human resources jobs

Adam McCulloch
Adam McCulloch

Adam McCulloch first worked for Personnel Today magazine in the early 1990s as a sub editor. He rejoined Personnel Today as a writer in 2017, covering all aspects of HR but with a special interest in diversity, social mobility and industrial relations. He has ventured beyond the HR realm to work as a freelance writer and production editor in sectors including travel (The Guardian), aviation (Flight International), agriculture (Farmers' Weekly), music (Jazzwise), theatre (The Stage) and social work (Community Care). He is also the author of KentWalksNearLondon. Adam first became interested in industrial relations after witnessing an exchange between Arthur Scargill and National Coal Board chairman Ian McGregor in 1984, while working as a temp in facilities at the NCB, carrying extra chairs into a conference room!

previous post
80% of employers offer no support with breastfeeding
next post
CPD activities: supporting the health needs of university staff

Leave a Comment Cancel Reply

Save my name, email, and website in this browser for the next time I comment.

You may also like

Government responds to umbrella company call for evidence

6 Jun 2023

HMRC proposes change to address IR35 tax overpayments

28 Apr 2023

Gary Lineker case ‘nothing to do with IR35’...

3 Mar 2023

IR35 impact report ‘fails to tell the full...

16 Dec 2022

Top 10 HR questions October 2022: disciplinary witness...

1 Nov 2022

IR35: self-employed contractors have been ‘thrown under the...

17 Oct 2022

IR35 policy: It is time to stop ‘tearing...

17 Oct 2022

Hunt reverses tax cuts including repeal of IR35...

17 Oct 2022

Conservatives: Seven proposals that could impact HR

5 Oct 2022

HMRC umbrella company tax avoidance action is ‘a...

30 Sep 2022

  • Almost a fifth of UK workers feel undervalued – we need to solve this PROMOTED | A new report has found...Read more
  • Discover the value of CIPD accreditation PROMOTED | See how the CIPD can increase your earning potential...Read more
  • What does it mean to be an HR professional in 2024? (survey) PROMOTED | The world of HR is changing rapidly...Read more
  • The Contractor Management Mastery Pack: Everything you need to manage and pay global contractors PROMOTED | Answers to cross-border...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2023

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2023 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+