Around 1,500 GlaxoSmithKline contractors have been accused by HMRC of falling inside IR35 during the 2018/19 tax year, according to Qdos, the status review firm.
HMRC has written to the contractors, advising them they have until 19th September 2019 to agree with their assessment and make a so-called ‘deemed payment’ for their work at GSK, or outline the reasons that they disagree with the assessment.
Former tax inspector Carolyn Walsh described the letters as “disturbing”, while contractors have taken to online forums to criticise HMRC’s “shocking” approach in giving them less than 30 days to respond to the assessment, with one contractor writing: “Who do HMRC think they are? The personnel affected need to seriously get legal advice or representation.”
This sentiment has been echoed by Qdos, who have accused HMRC of “working off the basis that these contractors are guilty until proven innocent”, saying the department has not run a “review of these contractors’ actual working practices at GSK”. Seb Maley, the Qdos CEO, added: “If you’ve received a letter, it’s important you seek the help of an IR35 expert, who will advise you on how to respond, deal with the matter throughout and, if necessary, represent you legally.”
Co-founder of IR35 advisory Bauer & Cottrell, Kate Cottrell, has encouraged those who have received letters to act quickly, saying “doing nothing is now not an option”. She has urged them to immediately get in touch with their accountant or an IR35 expert and request a written review of their contract that they can supply to HMRC if they disagree with the body’s assessment. She adds: “If you do decide to argue your case and an IR35 investigation is opened by HMRC, you should be prepared to answer hundreds of questions and your case may drag on for many months and in some cases years before being resolved.”
However, Ms Walsh, who is now the boss at CWC Solutions, has suggested, whilst it is important to act, that the situation is “not as shocking as HMRC makes it sound”. She says all limited company contractors should consider their IR35 status, use HMRC’s ‘Check employment status for tax’ (CEST) tool, and then seek support. She clarifies: “These HMRC letters about IR35 compliance will be disturbing but not altogether unexpected. [They effectively say] a review isn’t imminent but if the recipient doesn’t spring into action, the penalties for getting [IR35 status] wrong … are much greater … action means either gathering evidence to counter HMRC’s opinion – which is all it is … or if the CEST tool does give an ‘Intermediaries legislation applies’ result, then the normal action … would require the additional tax and NI to be reported at the next pay/due date.”
You can read a copy of HMRC’s IR35 letter to GSK contractors below, but first, to learn more about how IR35 will affect you as a contractor, read our quick and simple guide by following this link: https://rubiconpay.lpages.co/rubicon-pay-ir35-guide/
“Dear Sir or Madam,
Check your employment status
We’re writing to you because you told us that you were self-employed when you worked for, and received payments through, your own company. We call this type of company a ‘Personal Service Company’ (PSC).
It’s important that you full consider the employment status of every contract/engagement.
After looking at the information we have for the 2018 to 2019 tax year, our view is that the contract between your PSC and GlaxoSmithKline (GSK) comes under the off-payroll working rules ‘IR35’. In order to check and confirm your employment status, you can use our online tool, accessible at www.gov.uk searching for ‘Check employment status for tax’ (CEST), or seek advice from a tax expert.
Whether a worker is employed or self-employed for tax purposes is not a matter of choice. Instead, you need to look at the facts of the working relationship between you and GSK. This will help you decide if you would have been an employee of GSK had you worked for them directly and not through your PSC. To find out more about how this decision is made, go to www.gov.uk and search ‘IR35’. You can also see the common differences between being an employed and a self-employed person.
What you need to do by 19 September 2019
If you do not agree that your work with GSK comes under the off-payroll working rules, you must write to us to tell us why and give us evidence. You must do this by 19 September 2019. The address you need to write to is at the top of this letter.
If you agree that your work comes under the off-payroll working rules, you now need to work out how much Pay As You Earn (PAYE) tax and Class 1 National Insurance contributions (NICs) you have to pay for your work with GSK. This will be based on the income you got from working with them for the tax year 2018 to 2019. The 2018 to 2019 tax year is from 6 April 2018 to 5 April 2019.
The amount you have to pay is called a ‘deemed payment’. To work out the amount you have to pay, please use the ‘IR35 Deemed Employment Payment Calculator’. Go to www.gov.uk/guidance/ir35-what-to-do-if-it-applies and go to the section ‘Calculate the deemed employment payment’.
Once you have worked out the deemed payment, report the details of that income and deductions in your ‘Full Payments Submission’ (FPS) and pay us any PAYE tax and NICs due by the 22nd of the tax month following your employment status check.
You must also work out how much PAYE and Class 1 NICs that you have to pay for any income you get from GSK in the 2019 to 2020 tax year. This will be for work that you do through your PSC. You must make sure that you do not treat these payments as if you were self-employed. You must report the details of that income and deductions in your FPS and again pay us any PAYE tax and NICs due by the 22nd of the next tax month.
You must continue to report these details in your FPS each month and pay us any PAYE tax and NICs due. You must do this while your employment status stays the same.
If you have any questions about your employment status check, please phone us by 19 September 2019. Our phone number and opening hours are at the top of this letter.
If we carry out a compliance check
We will be contacting all those who are self-employed and use their own PSC to receive payments. We will then be checking that they have done what we asked. If we find that you have not done what we asked, this may lead to further review work. We call this a ‘compliance check’.
If we carry out a compliance check and find something wrong, we may charge you a penalty. We call this an ‘inaccuracy penalty’. For more information about inaccuracy penalties, see the enclosed factsheet CC/FS7a ‘Penalties for inaccuracies in returns or documents’. Our factsheet CC/FS9 ‘The Human Rights Act and penalties’ explains your rights when we are considering penalties. To find our factsheets, go to www.gov.uk and search for ‘CC/FS7a’ and ‘CC/FS9’.
Employment Status and Intermediaries Team”