It seems as though every week new figures are published showing that HMRC compliance activity is drawing in more revenue than ever before. As wave after wave of measures come into force to help the department clamp down on tax evasion and avoidance, fears have been raised that small businesses, contractors and other self-employed individuals will face heavier scrutiny. So what does the taxman's new, tougher stance mean for contractors?
The impact of some measures won't be felt for some time. For example, the government's consultation on making offshore employment intermediaries responsible for the income tax and National Insurance contributions paid by UK-based workers could affect umbrella contractors whose providers are based offshore. Although the consultation has closed and revised proposals have been put forward, the impact of the draft legislation may be difficult to determine until it has passed into law.
However, some of the means being used to root out cases of tax avoidance are already producing results. Figures obtained by UHY Hacker Young earlier this month showed that investigations into personal tax returns have earned the tax authority an extra £609 million last financial year. The firm added that a key part of this tougher approach was heavier scrutiny of Self-Assessment tax returns - the kind submitted by many contractors and other self-employed workers.
The taxman keeps watch in other ways too. At the beginning of September, the tax authority was granted access to data from all of the UK's card processing merchants. This meant that tax officials could now see information pertaining to all debit and credit card transactions made to UK businesses. HMRC says that this is a new method of tracking down undeclared income which is being shifted into businesses by traders seeking to reduce their personal tax bills.
David Gauke, exchequer secretary to the Treasury stated "These new powers give HMRC an extra tool to ensure a level playing field between businesses, and also reducing opportunities for those who try and cheat the system".
Between these examples of mounting scrutiny and legislative minefields such as the IR35 rules, it can feel as though tax compliance is becoming increasingly difficult. But the most important decision you can make is to entrust your financial and tax obligations to a credible and compliant accountancy service, such as PayStream. Not only does this relieve some of the hassle that comes with running your own business, but also gives you complete peace of mind that your tax bill is in safe hands.