HMRC is concerned that large businesses are underpaying employers’ National Insurance contributions by classifying a percentage of workers as self-employed when they should be employees for tax purposes. This concern covers those who are self-employed and also those who are paid through a company (PSC).
Steven Porter, partner at Pinsent Masons commented “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.”
Off-payroll working rules (IR35) changes were introduced within the private sector in April 2021, shifting responsibility for working out employment status for tax from the contractor to the client.
Whilst IR35 is aimed solely at PSC’s, companies who contract with self-employed workers should be aware of the employment status.
Employment status is designated based on the type of work that is carried out as well as the level of control that a self-employed worker has over their work. If HMRC deem that a self-employed worker should have been treated as an employee for tax purposes, the company could be liable for an investigation by HMRC and would potentially become responsible for tax and National Insurance contributions.
Further information can be read here: https://www.standard.co.uk/business/selfemployed-could-be-causing-ps1-4-billion-hole-in-hmrc-accounts-b1015981.html