Empowering the Freelance Economy

IR35: HMRC to name and shame deliberate defaulters

In certain circumstances, the HMRC can publish details of IR35 deliberate defaulters to encourage them to put their tax affairs in order
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The HMRC has said that it will identify and correct non-compliance with the off-payroll working rules by using a ‘robust risk assessment‘.

The tax body says it will identify and target the areas where hiring companies (‘customers’) are most likely to apply the off-payroll working rules incorrectly. It goes as far as saying it will name and shame ‘deliberate defaulters’.

Its monitoring activities include, but are not limited to:

  • actively monitoring and assessing data we receive, including RTI data
  • identifying business sectors with a known high usage of PSCs
  • monitoring population trends and usage of PSCs
  • acting quickly where non-compliance is reported to HMRC, including reports from other parties in the labour supply chain or contractors

“Identifying non-compliance allows us to offer targeted support to those who need it, as well as stepping in where we find deliberately non-compliant organisations,” said HMRC.

HMRC to challenge deliberately non-compliant

Although most customers try to pay the right tax, some deliberately get their tax affairs wrong. The HMRC has said that it will always follow up on non-compliance if there’s a sign of deliberate behaviour.

We call people who deliberately get their tax affairs wrong ‘deliberate defaulters’. In certain circumstances, we can publish details of deliberate defaulters to encourage them to put their tax affairs in order.

HMRC

“We realise that publication is a very serious matter and we want to make sure we only publish details when it is right to do so,” said the HMRC on its website.

Further details about how they will decide whether to publish details of deliberate defaulters are available on GOV.UK.

Any deliberate non-compliance involving criminal activity can lead to prosecution.

HMRC will challenge tax avoidance schemes that claim to avoid the off-payroll working rules or otherwise to reduce the tax payable

We know that as a result of the changes to the off-payroll working rules, some organisations may consider whether engaging PSCs, or other intermediaries, is the best way for them to continue to engage contractors.

Is this the end of the freelancer economy?

Some companies may offer contractors permanent roles instead of assessing whether they are inside or outside IR35, some may require contractors to work through agencies or umbrella companies (at the freelancer’s cost) and others may fully contract out the services their contractors are providing to another organisation.

“Many of these will be commercial choices and will be fully compliant with tax law,” said the HMRC.

However, HMRC will take action if contractors are engaged through artificial, contrived arrangements which are claimed to avoid the application of the off-payroll working rules or result in customers paying less tax than should be the case.

This could include umbrella companies offering take-home rates of pay that are too good to be true through artificial schemes that claim to disguise earnings as non-taxable payments, such as loans, said HMRC.


HMRC will never approve tax avoidance schemes. It suggests if you are worried about becoming involved in a tax avoidance scheme, or think you are already involved in one and want to get out of it, the HMRC has provided links for more information.

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