IT contractors working for public sector organisations will not be happy to hear the latest news from HMRC. The taxman has gone ahead and set up a new unit that will focus on the employment status of freelancers and contractors. It is believed that this move has been initiated to do away with tax avoidance due to the mis-classification of contractors and freelancers.

Financial Secretary to the Treasury Jane Ellison disclosed this vital piece of information to Labour MP Frank Field. Ellison stated in her letter that the setting up of this new unit will allow HMRC to utilise its resources in a better manner when it comes to issues related to employment status.

The new HMRC division is called “Employment Status and Intermediary” division. According to the official brief, this unit will be handling “intermediary risks.” This will affect contractors who come under the purview of Intermediaries legislation, also known as IR35.

Field got in touch with Ellison due to concerns about the employment practices being followed at Hermes UK. He had brought to the notice of the authorities the poor working conditions and low pay scale that workers had to endure at Hermes. In response, it is believed that Ellison informed the Labour MP that for the Treasury and HMRC, false self-employment was a big priority, and HMRC was in favour of taking stringent action against companies that deny entitlements to their employees with the aim of reducing their operational costs.

HMRC Executive Chair Edward Troup has also written to Field, informing him that the dossier that he had submitted about the employment practices at Hermes had been forwarded to the relevant team. They would study the documents and decide the next course of action. Troup tried allaying Field’s fears by assuring him that HMRC was committed to resolving issues related to false self-employment.