HMRC investigating IR35 status of TfL contractors

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HM Revenue & Customs has commenced a probe into the off-payroll status of Transport for London’s limited company contractors.

TfL have been asked to supply HMRC with information regarding its PSC workforce, so that it can be scrutinised by those officials responsible with applying IR35.

Recruitment giant Hays has sent an email to its affected TfL contractors, in a bid to offer clarification and reassurance. It reads: “HMRC have asked TfL … about their contractors … Nothing has changed from … [the April 2017 rules], and therefore there is no need for you to be concerned … It is likely that HMRC are trying to satisfy themselves that TfL have met their own obligations under IR35.”

A TfL spokeswoman also sought to downplay any fears, saying: “HMRC are currently conducting a standard IR35 compliance check to ensure TfL’s compliance with the [2017] legislation. This follows other similar checks elsewhere in the public sector.”

TfL-Hays contractors are remaining calm, with one commenting: “TfL is not going to burn their IT contractors just yet, partly as they already got burnt when the IR35 public sector reforms came in and people left in droves which delayed almost all projects … Both agency and client probably think they are in a stronger position. Let’s hope that they actually are.”

However, status expert Kate Cottrell, has described Hays’ and other businesses’ assertions that no concern is required as “shocking”, adding: “Many PSC contractors are facing massive pay cuts [due to IR35’s expansion into the private sector] … And just like large and medium-sized businesses, they need to know the risks they face.”

This is the latest in a series of moves by HMRC to enforce the April 2017 legislation, after it challenged the IR35 status of 1,500 GlaxoSmithKline (GSK) PSC contractors, as well as the NHS being hit with a £4.3m tax bill for incorrect status determinations.

CWC Solutions managing director, Carolyn Walsh, was quick to highlight the difference between this and the GSK case, noting: “I wouldn’t say that this is another GSK, because the public sector has had two-and-a-half years to get to grips with the off-payroll working rules, and if any public sector body has got it wrong at this late stage, it would be surprising.”

However, IR35 advisory Bauer & Cottrell has suggested this series of HMRC probes suggests something larger than “routine compliance activity”, when they are all looked at together.

“We wonder if HMRC’s claim [in its IR35 guidance] that they will not investigate contractors retrospectively is actually aimed at end-clients rather than contractors,” B&C said. “Such a stance would enable end-clients to soften the blow. But it seems a disingenuous claim for those engaged by the NHS, GSK and now TfL. Yes, there’s no retrospection from April 2020, but that does not apply to whatever activities HMRC launch in the meantime.”

Ms Walsh added: “If affected TfL contractors have been asked to complete a comprehensive IR35 status check each time they start a contract, they probably do have nothing to worry about … But if they’re asking themselves ‘what status check?’, then any missives received that seek to allay fears of an HMRC investigation heading their way, should be taken with a pinch of salt.”

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