In the Spring Statement 2025, the government has launched four consultations aimed at tackling tax avoidance and payroll fraud that could have a profound impact on how you work as a contractor.
While we support cracking down on non-compliant operators, we believe these changes need to be fair for legitimate contractors like you.
Thankfully our accreditation provider The Freelancer & Contractor Services Association (FCSA) is doing their best to consult with HMRC to ensure that contractors are protected.
In this article, we’re summarising everything you need to know about each consultation and why they matter to you.
The Four HMRC Consultations Explained
The Chancellor announced four key areas for consultation on March 26th, 2025:
- Enhancing HMRC’s ability to tackle tax advisers facilitating non-compliance
- Reform of behavioural penalties
- Closing in on promoters of tax avoidance
- Better use of new and improved third-party data to make it easier to pay tax correctly first time
Let’s break down what each of these could mean for you.
1. What Does ‘Reasonable Suspicion’ Actually Mean?
One of the biggest concerns is around HMRC’s proposed powers to investigate tax advisers. They want easier access to information based on ‘reasonable suspicion’ that an adviser has helped create inaccuracies in tax returns.
However, HMRC hasn’t actually defined what ‘reasonable suspicion’ means. This is worrying because it could lead to investigations based on little more than a compliance officer’s gut feeling rather than solid evidence.
To address this, the FCSA has suggested a ‘two sets of eyes test’ – where two separate HMRC officers from different teams would need to review a case before any investigation gets the go-ahead independently. This seems like a sensible safeguard to prevent unfair investigations that could damage reputations and waste taxpayer money.
2. Penalties Should Fit the Crime
The consultation on penalty reform is also important for contractors. The key principle should be that the punishment fits the crime, and penalties should apply to all parties who are responsible – not just those who get caught.
There’s also a question about how HMRC defines things. For instance, how can a disclosure be both ‘unprompted’ (where you voluntarily tell HMRC about an issue) and ‘concealed’ at the same time? These contradictions need sorting out.
The FCSA believes there should be more focus on education, especially for first-time mistakes that are genuinely honest errors rather than deliberate attempts to avoid tax.
3. The Grey Areas That Affect You Most
Perhaps the most relevant concern for contractors is around the consultation on tackling promoters of tax avoidance schemes. The proposed powers might not be clearly defined enough, which could create problems in areas where the law is already unclear.
Take expenses, for example. The rules around what you can and can’t claim are often ambiguous. If you see that someone else has been allowed to claim relief on a particular cost, it should be fair to assume the same rules apply to you. Unfortunately, that’s not always the case right now.
As the FCSA puts it, most freelancers and contractors aren’t lawyers and shouldn’t be expected to constantly seek legal advice just to stay on the right side of the law. We need clearer, more consistent rules that everyone can understand and follow.
4. More Data Collection: But Is It Really Necessary?
Starting with the data consultation, HMRC wants access to even more information about taxpayers. While this sounds reasonable in principle, there are some concerns about how this might affect you as a contractor.
The concern is that HMRC already has access to a vast amount of data that it’s not utilising effectively. Adding more data sets could make things worse, not better. More concerning is that they want to place new obligations on businesses to collect information that might not serve any clear purpose.
For contractors, this could feel unfair. Imagine if suppliers in the construction industry had to collect National Insurance numbers from individual customers – that’s a lot of personal data being stored, which creates unnecessary risks. As the FCSA points out, bosses and middle management in large companies wouldn’t be expected to hand over this sensitive information, so why should contractors face this risk?
A Loophole That Needs Closing
One consultation proposes exempting not-for-profit organisations from new rules targeting tax advisers who facilitate non-compliance. Even though the FCSA is itself a not-for-profit organisation, it sees no need for this exemption as it could create a significant loophole for bad actors to exploit.
What’s Happening Next?
The government published draft legislation on July 21st, 2025 – known as ‘L-Day’ – as part of the Finance Bill 2025-26. The FCSA’s immediate focus has been on understanding the changes to PAYE liability for umbrella companies’ clients (the Joint and Several Liability legislation). Still, they’re also conducting legal reviews of the other proposed changes.
Why This Matters to You
We are in full support of efforts to crack down on unscrupulous operators who exploit loopholes and defraud taxpayers; these changes need to be proportionate and fair. They shouldn’t harm compliant contractors or the legitimate companies that support them.
The key is finding the right balance – tackling non-compliance while ensuring that legitimate contractors like you can continue to work without unnecessary bureaucracy or unfair treatment. The good news is that policymakers seem to be listening, and there’s a real opportunity to get these rules right.
We’ll keep you updated as these consultations progress and any final legislation is published. Consider following us on LinkedIn and Twitter to stay updated on our latest posts.
