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Tax avoidance risk very real, freelancers told

Freelancers were told at a London seminar recently that the risk of being accused of tax avoidance is very real if using a payroll company to cut corners.

Theresa Mimnagh, associate director of Lawspeed, the firm holding the seminar, remarked that there has been a significant amount of HMRC activity behind the scenes, and while all umbrella companies and payroll firms will claim that they are in full compliance with all relevant rules, many may not be. It is all too easy for a contractor or freelancer to get embroiled in an IR35 crackdown because the agency they use is playing loose with tax rules without their knowledge, Ms Mimnagh said.

The seminar, which addressed how umbrella companies and contractors are affected by tax legislation, comes after an entire year’s worth of government furore over tax avoidance. The public has been subject to several high profile investigations into the area as well after incidents like the Jimmy Carr tax avoidance scandal went viral, bringing the issue to the forefront of the discussion for many Brits, and not just freelancers and their employers.

The recruitment industry in particular has to be much more diligent than they have been in the past, according to several industry experts, as it is truly impossible to take a laissez-faire approach to tax schemes in the wake of this heightened scrutiny. In fact agencies must be even more vigilant in taking steps to get the proper advice when delving into any contract that has a net result of increasing net pay for their workers, especially for contract workers – and while some of these arrangements are perfectly legal, there are others that can cause the taxman to come knocking at your door because they feel the need to investigate the matter.

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