Having been contacted by more than 30 contractors who had received letters from HMRC regarding their IR35 status at GlaxoSmithKline (GSK), Qdos contacted The Financial Times, who then broke the news that the tax office had sent correspondence to nearly 1,500 contractors currently or previously engaged by the pharmaceutical giant.
In these identical letters, HMRC accuses contractors of wrongly operating outside the IR35 legislation during the tax year, 2018/19. Despite not having reviewed the actual working practices of these engagements, which are often pivotal in an IR35 case, the taxman has taken the view that these contractors are guilty until proven innocent.
HMRC states in the letter: “It is our view that the contract between your PSC and GlaxoSmithKline (GSK) comes under the off-payroll working rules ‘IR35.’” The letter then goes onto explain that contractors who disagree with HMRC’s opinion must respond in writing by 19th September. Worryingly, it also details how contractors who accept HMRC’s view can calculate and make the ‘deemed payment’, which is the tax owed whilst working inside IR35.
The letter itself rightly states: “Whether a worker is employed or self-employed is not a matter of choice. Instead, you need to look at the facts of the working relationship between you and GSK.”
However, while HMRC will have likely caught sight of the written contracts, it will not have inspected each contractor’s actual working practices. Therefore, at this stage, given the tax office has not established the full facts of every working engagement, it cannot say with total confidence that these contractors belong inside IR35.
The approach taken by HMRC here is reflective of the tax office’s growing aggression towards independent workers who, concerningly, have grown accustomed to being targeted by a tax office that is desperate to raise revenues.
First and foremost, do not ignore it. While the claims made by HMRC will no doubt concern you, it’s important to remember that until a full and thorough review of your actual working practices during your time at GSK is conducted, you are innocent until proven otherwise. The tactics employed by HMRC in this scenario are irresponsible and designed to scare contractors.
We recommend that you contact an IR35 specialist, who will be able to assist with your response and advise you on the best course of action to take when dealing with the issue. From general advice, through to legal representation and IR35 insurance, Qdos provides a range of trusted IR35 solutions. Please do not hesitate to contact us on 0116 269 0999 or [email protected].
Contractors need to be aware of HMRC’s approach to IR35 compliance, given the tax office could well contact other large private sector firms with a view to opening up widespread IR35 enquiries. Above all else, this should serve as another reminder to contractors that it’s vital you are confident of your IR35 status, regardless of the fact that from next April, unless you work with a ‘small’ private sector firm, you will not be setting it.
Not directly, no. However, with IR35 reform approaching fast, businesses that engage contractors and agencies that place independent workers would also be wise to take note of how HMRC polices IR35. From 6th April 2020, whichever party operates as the fee-payer in the supply chain will carry the IR35 liability, meaning HMRC will approach them and not the contractor. To find out how you can protect yourself from IR35 reform, as a recruiter or engager, please visit our commercial services pages, here.
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