In the next chapter of HM Revenue & Customs (HMRC) versus the taxpayer, the Revenue will crackdown on organisations that use freelance workers to fill would-be full-time roles.
Employers that utilise freelance staff to fill full-time positions in an effort to avoid National Insurance Contributions (NICs) will be the focus of the investigation.
HMRC warned that if an organisation was found to be in breach of existing laws, it could be fined up to 100 per cent of the tax owed. According to the Treasury, it is currently owed more than £300 million in lost NICs.
A specialist tax team will be deployed to investigate so-called “umbrella companies”, which are used to pay staff and operate other unusual working arrangements that circumvent NICs.
Alexandra Mizzi, senior associate at law firm Howard Kennedy, said she believed the practice of using freelance staff is becoming increasingly widespread.
She said: “Research suggests that nine in 10 new jobs are described as self-employed, some of which genuinely are self-employed roles. But it does appear that some businesses are hiring staff whose working arrangements are indistinguishable from full-time employment, yet they are treated as having fewer employment rights.
“This is a real challenge for regulation because some workers are attracted by the independence and flexibility of the gig economy, but others are finding it impossible to find secure employment.”
Earlier this month, more than 100 BBC presenters were being investigated over whether they paid too little tax by working as freelancers, and not full-time staff.
An HMRC spokesperson said: “When the employment relationship does not accurately reflect the underlying reality of the relationship, the wrong tax is paid then we intervene to ensure the rules apply as parliament intended.
“While there can be many legitimate business reasons for workers being employed through their own companies, there are rules in place enabling HMRC to make sure people who provide their services in this way pay the right tax and National Insurance.”