‘There’s only three things that for sure: taxes, death, and trouble’ – as Marvin Gaye rightly said, and he knew a thing about all three! – Laurence Taylor, founder and chair, Easy As 123 looks at the challenges facing the self-employed and those in the gig economy

 

As Mr Hammond yet again circles us 4.8 million self-employed with his child-catcher net muttering about pinning us down and making us pay our fair share of NICs, it troubles me that the Exchequer and its HMRC dogs of war continue to view us as the adversary.

The latest battleground is over off-payroll working rules (known as IR35), and having completed a short and by all accounts extremely negative consultation, with damning responses from tax firms and trade bodies to charities and status experts, Mr Hammond eyed this Autumn’s Budget as a way of slipping us a Mickey Finn whilst the smoke & mirrors illusion of Brexit holds the attention of the headline-writers and ‘opinion-formers’.

‘Mr Hammond yet again circles us 4.8 million self-employed with his child-catcher net’

What other delights are passing mostly under the radar could be seen as proving that HMRC has been told by its trainer to come steaming out of the corner with its gloves up and head down. It is seeking new powers that will allow it to obtain information about people they suspect of tax evasion without prior approval from a tax tribunal, as happens at present, and that involves bank data. This seems to be allied to an EU directive that seeks to facilitate the exchange of banking information in a bid to combat tax fraud.

There has also been talk about HMRC developing the scope of digital tax accounts by gaining access to our bank data. In this scenario, they will see all receipts as taxable income with the onus on us to provide evidence otherwise, and then will base their tax calculation on what they see as the source of truth. Depending on your standpoint, this is either a brave new world of seamless integration of technologies or a horrifying Orwellian prospect…

In other news, anyone failing to pay late tax faces increased measures as HMRC cracks down, seizing assets from 2,833 businesses last year, a jump of 400% since 2014-15.

‘this is either a brave new world of seamless integration of technologies or a horrifying Orwellian prospect’

I didn’t realise that it takes a debt of as little as £750 to attract a winding-up petition, so expect to read a deal more about business deaths. And in a nice little twist of the knife, HMRC has increased the interest rate it charges on late tax payments to 3.25% but, surprise surprise, overpaid tax is repaid at 0.5%!

What doesn’t help is the perception that HMRC is soft on the big poissons: a deputy director let slip that criminal proceedings are not the ‘default option’ for cases of tax evasion, that they won’t prosecute the rich and famous because ‘these types of people don’t want the reputational damage of custodial sentences’ – unlike the other 99.9% of us who positively welcome a spell in chokey!

This is nowhere better illustrated than with the so-called ‘Google Tax’. A year ago HMRC started a consultation on the challenges posed by the digital economy for the corporate tax system, only 3 years after George Osborne pledged (before his neat sidestep to BlackRock) to ensure big multinational businesses pay their fair share. To be fair, Google are now paying all of £49.3m on UK profits of £202.4m on sales of c. £5.7bn…

‘There are bigger fish out there to catch in your net, Mr Hammond’

All of this is taking place against the backdrop of HMRC insisting on bringing in Making Tax Digital in 2020 or 2021, meaning 4 tax returns a year to be submitted late, attract penalties and late interest at 3.25% on, and generally add to the sense of frustration, divide, and outright anger that we feel.

It shows what I have previously identified as a fundamental lack of trust from HMRC towards us self-employed – surely we can all work together with shared objectives such as paying a fair amount tax through a simple system? We don’t mind it being more regular, it helps us with our planning and keeps us on top of things.

What might help is a consultation with us on the massive difficulties we face in completing our Tax Returns.

I have just helped a client new to self-employment through that task of Hercules, someone who is excellent at their job, very concerned at keeping proper records and doing everything by the book, and yet was completely overwhelmed by an extraordinary online form that asks arcane questions and seems to have been created with one aim in mind: to catch us out and make us feel like criminals. There are bigger fish out there to catch in your net, Mr Hammond…

 

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