HMRC using new powers to request tax repayments upfront
The Telegraph recently reported that thousands of freelance and contract workers are being caught in a wide-scale initiative that means HM Revenue & Customs can order backdated taxes to be paid in full within just three months.
The taxman was given these powers in 2014 in a bid to retrieve tax liabilities from wealthy investors who had used tax avoidance schemes, without having to go through the court.
This change in legislation meant that millionaires and Premier League footballers, for example, have been forced to pay back up to £10 million in tax after putting money into dubious investment schemes.
But it now seems that these powers are also being used to demand payments from less wealthy individuals. As part of a £5.5 billion 'tax grab' effort, HMRC is sending "accelerated payment" demands to some 64,000 people; and because underpaid tax can relate to previous employment, many are being asked to pay back taxes from jobs they worked years before.
Jennie Granger, HMRC's director of enforcement, explained that the department is taking a firm stance: "Tax avoiders are running out of options. People now have to pay upfront and dispute later."
One example offered by the Telegraph is 'Mr Adams', a freelance IT technician who worked at numerous London banks between 2008 and 2010. Since April this year, he has received three repayment demands from these jobs, totalling £27,900 – and has been given until the end of September to pay this back.
Mr Adams, who explained that the amount is approximately a third of his annual salary, stated: "If I don't get the money, I'll go bankrupt."
According to Telegraph Money, they have received similar reports from "countless freelancers" - mostly working in the IT, banking and oil and gas sectors - who are only just being told by HMRC that their tax arrangements from years ago were deemed "aggressive avoidance."
A spokesperson from HMRC has reassured that, "anyone who can't pay should talk to us as soon as possible and we will do all we can to help, such as a suitable payment arrangement."
Dominic Arnold from Moore Stephens accountants repeats HMRC's insistence that "these powers wouldn't be used disproportionately," and that "that they would be issued to people who can afford it, which masks the reality that thousands of people are being caught who haven't got the funds to pay an accountant – let alone challenge the sums in court."