“HMRC are turning up the heat!” Tales from the front line

“HMRC are turning up the heat!” Tales from the front line

16th July 2013 | Hudson Contract

HMRC have produced a CIS status guide – a 85-page A5 booklet that I’ve read from cover to cover. My verdict? It’s the perfect guide for an insomniac. Full of contradictions that, at best, make it pretty tough to follow.

As I turned the pages, I was reminded of an observation made by my good friend Peter Hulance, a now-retired Bedford accountant, who once told me: “I have little doubt that HMRC’s strategy is to keep their rules of compliance as mystical as possible, making it practically impossible for contractors to gauge whether they comply or not.”

Peter’s opinion is shared by a Birmingham-based accountant who specialises in the construction industry. His firm has been supplying its construction clients with self-employment contracts to satisfy HMRC compliance tests for years – but not any more.

The accountant told me: “Status is such a grey area, and it has become practically impossible to monitor what either our clients or HMRC were up to. And that placed my firm in an untenable situation.

“HMRC are under immense pressure to collect more revenue from the construction industry, so contractors have to be really careful when using labour-only subbies, because the consequences of getting it wrong WILL have a serious financial impact on their business.

That is why we have taken the decision, as professional accountants, to advise our clients to engage the services of Hudson Contract. We want to make sure they stay safe.”

HMRC: A new and worrying strategy

Meanwhile in Norwich, tax specialist David Curtis reports that HMRC appear to be taking a very aggressive approach with compliance.

“In a recent case I dealt with, HMRC were not interested in reviewing any of the documentation that had been set up between the contractors and their freelancers, and they went straight to the workplace,” he says.

“This is a new and worrying strategy, since the workplace is where firms are most vulnerable, especially if HMRC interviews any of their workers. In this particular case, it took me seven months of legal arguments and a substantial amount of paperwork before HMRC accepted that all the operatives were correctly classified as self-employed.”

A further update on HMRC strategy came during a meeting I had with a contractor in Stoke, whose accountant told me: “With a surplus of inspectors, HMRC have adopted a policy of randomly telephoning contractors to endeavor to extract employment information that they can use to criticise and penalise that firm.


“Another tactic that is clearly designed to catch firms out is to turn up unannounced at a contractor’s offices or freelancer’s home to seek an interview. They are working on the basis that most people will let them in and start talking.”

It can prove a profitable route for HMRC.

The potential tax liability for just a single labour-only subbie earning £500pw comes to a staggering £6,319.04 a year – multiples of which HMRC will seek to collect when they carry out a routine compliance investigation. And since the legislation allows HMRC to go back six years, a firm with five freelancers could be looking at a tax debt of more than £100,000

Hudson Contract clients: What to do if you get a visit from HMRC
Clients of Hudson Contract have nothing to fear from HMRC’s latest practices, as they are protected by our 100% Tax Guarantee.

Having said that, it is still vital not to underestimate the taxman’s power.

Critically, if you or any member of your workforce should receive a request from HMRC to be interviewed, please contact us immediately.

We will issue you with a detailed information pack to guide you through any compliance investigation. And prior to any meeting with HMRC, one of our consultants will visit you and your accountant to discuss the correct strategy.

Tags: HMRC, Opinions
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