How four HMRC consultations from Spring Statement 2025 are shaping up for contractors

At Spring Statement 2025, the government reaffirmed its commitment to tackling non-compliance in the labour market, announced additional enforcement resources for HMRC, and launched four consultations relating to payroll fraud and tax avoidance, writes Nick Dancer, head of policy and public affairs at the Freelancer & Contractor Services Association (FCSA).

When Spring Statement tax consultations don’t pass our proportionate and fair test

We strongly support greater enforcement and the resources to make that a reality -- compliant businesses should not be undercut by ‘payroll pirates’ who exploit loopholes and workers alike, while defrauding the taxpayer.

However, we must also ensure that the enforcement approach is proportionate and fair -- without causing harm to compliant firms or their contractors.

What four HMRC consultations did the chancellor announce on March 26th 2025?

Our responses to the four HMRC consultations announced at Spring 2025, which are listed below, seek to help the government strike the right balance:

1. Enhancing HMRC's ability to tackle tax advisers facilitating non-compliance;
2. Reform of behavioural penalties;
3. Closing in on Promoters of marketed tax avoidance, and;
4. Better use of new and improved third-party data to make it easier to pay tax right first time.

Starting with the last first, our concern is that HMRC wants to obtain access to even more data sets, when they have yet to make effective use of the data they can already access!

Clear, viable purposes for more third party data into HMRC? We think not

The Revenue also proposes to place new information collection obligations on data supplier businesses -- new responsibilities that we think do not serve a clear or viable purpose.

We are concerned that more data sets could add to the challenge of HMRC making sense of the information it has, and that the risks of collecting these additional data have not been properly assessed.

Implications, misunderstanding and false conclusions

From what we can see, not even the GDPR implications seem to have been considered!

FCSA has identified and highlighted some instances where the data would serve no useful purpose, and/or could feed misunderstandings and false conclusions in instances where it is incomplete.

For example, we see no purpose for a supplier in the construction industry from collecting National Insurance Numbers for individual customers -- only risks.

Discriminatory risk for contractors

If you are a freelancer or contractor this could appear to be somewhat discriminatory and an unnecessary risk to your personal data – the bosses and middle management of large companies would not be expected to hand over this sensitive personal information and have it stored, would they?!  

How will HMRC define ‘reasonable suspicion’ relating to investigations?

Secondly, and turning now to the first of the four consultations ("Enhancing HMRC's powers…"), we worry about how HMRC might define “reasonable suspicion,” with regard to triggering investigations.

In the consultation, HMRC argues that it should be granted easier access to information from tax advisers based on the tax department’s 'reasonable suspicion' that the adviser has facilitated an inaccuracy in a taxpayer’s document or return.

But ‘reasonable suspicion’ is not defined by HMRC in the consultation. This granting of access needs to be backed by something more tangible than an individual compliance officer’s ‘gut instinct’.

The two sets of eyes test

A key safeguard that we have suggested, in response to “Closing in on the promoters of marketed tax avoidance schemes,” is to ensure that two separate HMRC officers from separate teams are able to review a prospective case for investigation.

And both must come to the same conclusion – independently of one another.

It is important, we believe, that an investigation does not get senior sign-off without passing this ‘two sets of eyes test.’

At FCSA, we believe such a test would help to prevent unfair costs and reputational damage for firms and individuals, to help ensure that HMRC’s investigations are well-founded.

In turn, that should look after taxpayer value for money, as it ought to significantly increase the chance of convictions sticking.

Where HMRC’s ‘closing in on promoters’ consultation should concern contractors

Third, we have some concerns that the scope of the proposals in “Closing in on the promoters of marketed tax avoidance” may not be sufficiently broad or well-defined.

What do we mean here? Well, the powers should be limited to clear legal breaches and not stray into areas where an opinion, or interpretation of the law may be necessary. The ambiguity around allowable expenses, for example, is enough to warrant this limitation being realised.

This is a very significant concern for freelancers and contractors – if they see that an individual or firm has been allowed to expense or claim relief on a cost, it should be fair to assume that the same rules would apply to them.

Sadly, that is not currently the case; we need clarity, consistency and fairness – in the most part, freelancers and contractors are not lawyers, they should not be expected to interpret the law or constantly be seeking legal advice to stay on the right side of it.

Grey areas, loopholes and the nefarious

For our liking, there are currently too many ‘grey areas’ and instances where HMRC’s exceptions (dispensations) set the wrong precedent. These need to be addressed to give legal clarity to aid compliance, enforcement and prosecutions.

Fourth, in “Enhancing HMRC’s ability to tackle tax advisers facilitating non-compliance,” the exemption proposed for not-for-profit organisations from the scope of the proposals provides a very significant loophole for the nefarious.

As a not-for-profit ourselves, FCSA see no need for this exemption.

Taxman’s take on penalties needs to change

Fifth, when it comes to HMRC’s consultation on penalty reform, we think it is important to make sure the punishment fits the crime -- and that the penalty is applied to all culpable parties – not just those who have been caught.

More generally, the current thinking from HMRC around penalties needs to change. For instance, how can a disclosure be both ‘unprompted’ (which HMRC defines as where a taxpayer voluntarily discloses an issue or inaccuracy) and ‘concealed’?  

FCSA also feels that there needs to be a greater emphasis on education, particularly for first-time offenders who will often have made an honest mistake.

Our legal review of ‘Enhancing HMRC’s powers’ is underway

With these consultations, we feel that the government is starting to ask some of the right questions, which will hopefully lead to a balanced approach that works.

And there’s already progress. On July 21st 2025 – ‘L-Day,’ the government published various pieces of legislation as part of the Finance Bill 2025-26,

Our initial focus has had to be on understanding the changes to PAYE liability for umbrella companies’ clients, also known as the Joint and Several Liability legislation. However, we are widening our attention to – and conducting legal reviews of – the other pieces of draft legislation that relate to these consultations:

• Enhancing HMRC’s powers: tackling tax adviser facilitated non-compliance - GOV.UK
• Modernising and mandating tax adviser registration with HMRC - GOV.UK

And finally, (HMRC), your first idea is scarcely your best…

In policy development, your first idea is scarcely your best and fine-tuning is always needed! The concerns outlined above can all be addressed, and it does seem that policy makers are in listening mode – so there is a real chance to get this right.