Thousands of contractors and freelancers have become entangled in a £5.5bn tax issue that allows HMRC to demand and collect backdated underpayments from as long as 10 years ago that must be fully paid within a three-month period.
HMRC were able to do this as of last year to force wealthy investors accused of using aggressive tax avoidance schemes to pay their potential tax liabilities up front, rather having to chase potential avoiders through the courts.
HMRC are now able to issue Accelerated Payment Notices (APNs) demanding payments and any individual who believes they are innocent can appeal and if their case is won will have their money refunded along with interest.
Previously, HMRC was forced spend large sums of money on costly court battles, prompting the Government to approve the changes in 2014.
Jennie Granger, HMRC’s director of enforcement commented:
“Tax avoiders are running out of options, people now have to pay upfront and dispute later.”
Although evidence implies that HMRC’s powers to issue APNs are being used to target less wealthy individuals who are being demanded to pay back-taxes from jobs they held years ago.
Victims such as Mr Adams, who freelanced in the financial sector between 2008 and 2010, explained how the payment HMRC are demanding is almost a third of his annual salary, and claimed if his appeal was to fail he’ll go bankrupt.
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