IR35 Crackdown: Why Small Businesses Are HMRC’s Newest Target
According to data obtained by Price Bailey under the Freedom of Information Act, the number of HMRC customer compliance staff has jumped by 26% over the last three years! If that wasn’t enough to make small business owners sit up and take notice, consider this: HMRC is hiring 5,000 additional tax inspectors to intensify its crackdown, targeting small businesses and their owners in an effort to claw back an eye-watering £6.5 billion in additional revenue by 2029/30.
For years, IR35 and tax compliance enforcement have been perceived as issues primarily affecting large corporations or high-profile cases. However, that’s no longer the case. The latest hiring spree at HMRC signals a clear shift in focus—small businesses are now firmly in the crosshairs.
Simply put, because it’s easy money. Large corporations have deep legal pockets and entire teams dedicated to compliance, making investigations long and expensive. But small businesses? Many have been operating under the assumption that their long-standing use of self-employed workers—who in reality might function more like employees—would fly under the radar. That assumption is now a costly gamble.
HMRC knows that thousands of small businesses have been paying freelancers, contractors, and sole traders in ways that could be classified as disguised employment under IR35 rules. And with the government needing to plug holes in the Treasury, those small businesses are ripe for scrutiny.
If your business regularly engages self-employed workers, now is the time to review your practices. Just because you’ve “always done it this way” doesn’t mean HMRC will turn a blind eye. Quite the opposite—they are actively hunting for cases that are easy to challenge and yield the most unpaid tax.
Non-compliance with IR35 can lead to serious financial consequences, including backdated PAYE tax, National Insurance contributions, interest, and uncapped hefty penalties. And if you think pleading ignorance will save you, think again—HMRC’s compliance teams are well-versed in closing loopholes and making examples out of businesses that fail to get their house in order.
Review Your Workforce: Assess whether your self-employed workers should be classified as employees under IR35 rules. Take our free business health check now:
https://geniusmoney.co.uk/legislation/business-healthcheck
Seek Expert Advice: Don’t leave it to chance. A payroll and compliance specialist (like us!) can help you navigate the rules and avoid costly mistakes.
Stay Proactive: Waiting until an investigation lands on your doorstep is a recipe for disaster. Take action now to ensure you’re fully compliant.
IR35 isn’t just a problem for big business anymore. HMRC has made it abundantly clear that small businesses are on their radar, and they’re investing heavily in enforcement. The cost of ignoring this could be catastrophic—but with the right approach, it’s entirely avoidable.
The message is clear: If you’re still relying on outdated practices when engaging self-employed workers, now is the time to get compliant before HMRC comes knocking.
Need Help? At The Payroll and Compliance, we specialise in helping small businesses stay on the right side of the law while optimising their payroll and compliance strategies. Get in touch today to safeguard your business from unnecessary risk!
https://www.accountancytoday.co.uk/2025/01/23/hmrc-to-hire-5000-extra-tax-compliance-staff/
