Around 1,500 GlaxoSmithKline contractors have been sent identical letters from HMRC, accusing them of being ‘disguised employees’ – and therefore subject to the IR35 rules.
The letters have been sent to contractors who have worked in a number of GSK’s departments.
The letter states that in the 2018/19 tax year, “…our view is that the contract between your PSC and GlaxoSmithKline (GSK) comes under the off-payroll working rules ‘IR35’.”
Recipients are then urged the check their employment status on HMRC’s CEST tool. Should those affected not agree that their contracts are caught by IR35, they are told to write to HMRC explain why (and provide evidence), by September 19th.
The letter, kindly shared with us by Qdos, then explains how IR35-caught contracts are taxed, and then threatens potential compliance checks for those who HMRC suspect of non-compliance with the letter’s requests. You can download the letter here.
Taxman’s aggressive approach continues
This news is another example of HMRC’s increasingly aggressive approach to the independent workforce. The taxman’s seemingly insatiable appetite for limited company contractors isn’t confined to IR35. The Loan Charge being the most prominent example, as well as a renewed interest in potential non-compliance with the Managed Service Company legislation.
HMRC has also launched a number of cases against high-profile individuals who have provided personal services via their own limited companies, including Lorriane Kelly and Kaye Adams.
Seb Maley, CEO of Qdos explained that HMRC is taking the view that contractors are guilty until proven innocent:
“At this stage, none of these contractors’ actual working practices have been reviewed. Without doing so, it’s impossible for HMRC to say with confidence that contractors are in the wrong.”
If you have received a letter, ignoring the issue is unlikely to be the best option.
“First and foremost, we urge contractors to contact an IR35 specialist, who will be able to assist with a response and further handling of the situation. IR35 is a complex legislation and HMRC has a habit of aggressively pursuing contractors – often unfairly.”
And, for contractors in general, if you don’t already have tax investigation insurance, this is precisely the type of situation it was designed to cover.
Contractors need to protect themselves
Clearly, HMRC is taking a heavy-handed approach to independent workers – particularly limited company contractors. Over the past 20 years, the industry has been subjected to successive waves of legislation – with the ‘off-payroll working’ upgrade to IR35 being the latest (and potentially most impactful) example.
The April 2020 private sector IR35 changes are significant. From this date onwards, your client will be responsible for determining your employment status. The official guidance is minimal and much of it ambiguous, and HMRC’s CEST tool has been widely criticised.
As a result of the uncertainly around the April 2020 changes, industry experts are urging contractors to take steps to protect themselves in the event of an HMRC compliance check.
We asked Qdos if the GSK letters signal the start of a campaign to target contractors working on other large projects:
“Potentially. It’s no secret that HMRC suspects contractors of widespread non-compliance when it comes to IR35, so the taxman could well focus on other large private sector firms going forward. HMRC is unpredictable, aggressive and obviously desperate to win an IR35 case, judging by this scattergun approach.”
Read these guides for further information, and steps you can take to make sure you’re prepared.
- April 2020 Private sector IR35 reform – what happens now?
- What clients can do to prepare in advance of April 2020.
- What contractors can do to protect themselves against the IR35 changes
- Insure yourself against IR35 – tax investigation cover