HMRC Clampdown on ‘Hidden Employees’ Brings in Over £800m

Written by: Keith Tully

Date: Tuesday 13th February, 2018

Investigations into payroll arrangements among companies across the UK brought in around £819 million to the Treasury during the 2016/17 tax year.

PayrollThat figure represents a rise of 16 per cent compared with the previous tax year and is believed to reflect an increased focus within HMRC on issues relating to company payrolls and self-employment.

A team of specialists has been established by HMRC with a brief that sees them focussing on employment statuses and the use of self-employed contractors across a variety of industries.

Investigations specifically into businesses and their use of self-employed professionals is understood to have led to the discovery of numerous instances of alleged misuse of self-employed workers.  

Amounts recovered by HMRC as a result of these enquires are known to be worth close to £820 million for the tax year 2016/17 because of a freedom of information request that saw those details released publicly by the UK tax authorities.

HMRC’s clampdown on the use of what are sometimes called ‘hidden employees’ reportedly saw £503 million recouped from large companies during the most recent tax year, which represents a notable increase compared with the figure of £383 million recouped from big companies for the same reasons during the year 2015/16.

The law firm Pinsent Mason was behind the freedom of information request which led to HMRC revealing the amounts of money its payroll-related investigations had seen gathered in during the tax year that ended in 2017.

The issue of ‘hidden employees’ and the tax implications for businesses that rely heavily on self-employed individuals have been the subject of considerable political and HMRC scrutiny in recent months.

“HMRC has made no secret of its suspicions of how companies classify their workers,” Paul Noble, Pinsent Mason’s head of tax investigations, said in a recent statement.

“Considering the scale that the gig economy has grown to, it is no surprise that it is now under intense scrutiny by HMRC.

“As well as its broader brush investigations in which HMRC aims to collect millions at a time, it is also combing carefully through the minor details of payroll. Even the most trivial of expenses are now being investigated.”

Keith Tully

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Keith Tully
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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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