Contractor clients are being contacted by HMRC’s Large Business Service with letters requesting full details of all individuals, companies and partnerships that have been paid between £1,000 and £350,000 during the 2012-2013 financial year.
According to PCG, the campaign could damage contractor-client relationships and threaten contractor livelihoods.
PCG CEO Chris Bryce explains: “There is simply no justification for HMRC to write to clients requesting detailed information on the working practices of their suppliers, especially when you consider that they are doing so with absolutely no evidence of any wrongdoing.
“For any business, it would be incredibly damaging to have HMRC writing to their clients to insinuate that the way they are doing business may not be legitimate. For the smallest businesses, where client relationships are key, this is especially harmful.”
George Anastasi, PCG’s policy and external relations adviser, told ContractorCalculator that he feared clients might be put off from hiring contractors, assuming that something untoward is going on as a result of HMRC’s interest. “Or some clients might just stop using contractors because it becomes too much hassle,” he adds.
Although PCG has only become aware of the campaign relatively recently, and it certainly looks like contractors are being targeted for IR35 investigations, judging from the questions being asked, Anastasi believes HMRC may be fishing for false self-employment information in a broader context.
“With the Onshore and Offshore Intermediaries Legislation proposals pending, it is possible that HMRC has started to gather information from freelancer clients to identify targets for compliance activity. IR35 and freelancers using limited companies may not be the core target.”
However, Anastasi is surprised that HMRC has not mentioned the campaign in IR35 Forum Meetings: “The whole point of the IR35 Forum is to monitor HMRC’s approach to enforcing IR35. We will be using the forum to find out more about this campaign and its implications for freelancers and contractors.”
PCG highlights that HMRC’s increased attention is as a result of the growing number of contractors, freelancers and self-employer workers in the UK. Bryce believes that targeting freelancers and contractors as a result is “penalising the sector for its success”.
“Considering that the Prime Minister, David Cameron, recently told PCG that he believes SMEs are the very lifeblood of our country and of local communities across the land, we are deeply concerned about this unwelcome development,” continues Bryce.
“Waging a campaign against these enterprising individuals by targeting them via their clients is anti-business. What’s more, to use the success of the sector as an excuse just isn’t acceptable. Independent professionals should be celebrated, not penalised for the way they choose to work.”