UK Freelancers Call For Duty Of Care On Tax Inspectors

by Robert Lee, Tax-News.com, London

29 August 2007

The Professional Contractors Group (PCG), which represents UK freelancers, is calling for a legal duty of care to be placed on HM Revenue and Customs.

In its formal response to HMRC’s consultations on safeguards and compliance checks, the PCG argued that HMRC’s risk assessment and other systems should mean that it does not launch rogue investigations, or that when it does, they are swiftly closed, and at minimal cost. Where this does not happen, there should be strong safeguards available.

PCG’s Policy Officer John Kell observed that: “Freelancers and other small businesses have very little trust in HMRC so it’s high time that HMRC was put under a legal obligation not to harm peoples’ commercial interests. Many of our members have costly and distressing experiences of dealing with HMRC, even when they owe no tax and it’s quite wrong that HMRC can just walk away. There’s currently no mechanism for compensation for the stress and loss of earnings that a lengthy Revenue investigation can bring. PCG believes that must change.”

PCG’s formal response argued that if HMRC is functioning as well as it claims, there is nothing to fear from such a legal duty of care, which would in fact help improve the relationship between small businesses, freelancers and HMRC.

This call comes only weeks after the judgment in the Arctic Systems case, in which HMRC were found to have issued a wholly incorrect tax demand for GBP42,000, and the owners of Arctic Systems, Geoff and Diana Jones, were pursued to the House of Lords after several years and hundreds of thousands of pounds spent in legal fees. Despite HMRC’s repeated denials that Arctic was a test case, the Government announced its intention to change the law as soon as it lost the case.

The PCG further argued that IR35 has also shown HMRC’s consistent inability to deal adequately with small businesses: of the 1,431 cases known to PCG, only 4 have resulted in any tax being owed. A recent survey by PCG showed that 73% of freelancers questioned said that they felt HMRC was out to extract as much money as possible, and 69% saw tax inspectors as viewing them as “guilty until proven innocent”.

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