HMRC seeking payment details for contracted services

Tuesday 18 March 2014

Limited companies have found themselves under the microscope recently, according to one industry expert. The PCG has learned that HM Revenue and Customs (HMRC) has begun to target the UK's smallest businesses by demanding information from their clients on all payments made under a contract for services.

In a series of letters clients are asked for sensitive information, including the supplier's name, the 'worker' name (if different), VAT number, passport number or national insurance number. This is in addition to details on amounts paid.

Speaking out against the move, Chris Bryce, PCG’s chief executive officer, said: "There is simply no justification for HMRC to write to clients requesting detailed information on the working practices of their suppliers. Especially when you consider that they are doing so with absolutely no evidence of any wrongdoing."

HMRC is currently only requesting information on payments of up to £350,000. This is in a bid to avoid bringing in larger suppliers to investigations - something Mr Bryce claims is another example of one rule for small companies and another for big business.

"For any business, it would be incredibly damaging to have HMRC writing to their clients to insinuate that the way they are doing business may not be legitimate. For the smallest businesses, where client relationships are key, this is especially harmful."

The PCG believes HMRC is using data from the Office of National Statistics that indicates a rise in self-employment to justify the new strategy.

However, according to the 'voice of freelancing' body, this isn't a wise strategy, as independent workers bring in considerable amounts of money for the UK economy - £95 billion last year alone.

"Considering that the prime minister, David Cameron, recently told PCG that he believes SMEs are the very lifeblood of our country and of local communities across the land, we are deeply concerned about this unwelcome development," Mr Bryce said.

He added that the move is "anti-business" and using the success of the sector against it isn't acceptable.

Indeed, limited companies and independent professionals should be supported in their choice of work.

This isn't the first time the government has come under fire for penalising small businesses.

In December the Public Accounts Committee (PAC) accused HMRC of pursuing easier targets like small businesses, opposed to chasing down larger companies for tax avoidance.

MP Margaret Hodge, chair of the PAC, explained that the tax body doesn't use its full range of sanctions and fails to mount prosecutions against multinational companies.

She claimed HMRC loses its nerve, costing the UK £35 billion in missing payments.

However, the tax body has rejected these criticisms, claiming the statistics presented by the PAC are "selective and misleading".  A spokesperson said that MPs had chosen to highlight figures that showed an increase in money going uncollected, opposed to the percentage of tax that hadn't been received.

What's more, the spokesperson added, HMRC endeavours to collect tax from all required to pay it, ensuring everyone pays their fair share.

By Victoria McDonnell

Get in touch

Please select your type of enquiry:

Brookson on Twitter