Contractors IR35 HMRC Battle
A letter sent out from HMRC to GSK”S contractors has provoked a massive contractors IR35 HMRC Battle. HMRC wrote to the agency of 1,500 contractors at GlaxoSmithKline asking for a list of their contractors.
They then sent a letter to 1,500 contractors at GSK saying that they are all inside IR35 and to pay up their employee tax and National Insurance for the 2018/19 year by September 222nd.
If they disputed this they had until September 19th to provide all the information and documents to show they are not inside IR35.
Questions on Contractors IR35 HMRC Battle
- What did the HMRC letter say?
- How could HMRC tell that 1,500 GSK contractors were inside IR35 remotely?
- How will a contractor’s IR35 status be determined?
- So, how will the IR35 reforms affect how companies hire contractors?
- What is HMRC’s promise to contractors?
- How will contractors IR35 HMRC battle take shape?
- Why is GSK Contractors IR35 battle crucial for all contractors?
- Are GSK contractors likely to succeed?
What Did the HMRC Letter Say
The letter said “We’re writing to you because you told us you were self-employed when you worked for and received payments through, your own company.
“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.”
It then went on to demand the tax by September 22nd.
How Could HMRC Tell 1,500 Contractors Were Inside IR35 Remotely
How HMRC could tell that 1,500 contractors are all inside IR35 is a mystery. When the IR35 reforms in the private sector come into force in April 2020 all contractors have to be assessed individually. Indeed HMRC have said that there should be no blanket assessments. Each contractor must be looked at individually.
How Will a Contractors IR35 Status Be Determined
To help companies assess their contractors individually HMRC devised an online IR35 test called Check Employment Status for Tax. This has been widely ridiculed as being heavily weighted in HMRCs favour.
However, HMRC are telling companies that if a contractor passes the IR35 test, then if the contractor is subsequently shown to be inside IR35, HMRC won’t come after the company for back tax, National Insurance, penalties and interest.
After April 2020 it is the hiring company who must decide a contractors IR35 status. If they get it wrong they have to pay the tax themselves. This is a heavy incentive for companies to have a blanket ban on hiring limited company contractors. This is exactly what HMRC want.
How Will the IR35 Reforms Affect How Companies Hire Contractors
According to a recent survey of companies by Brookson Legal, 73% of companies are considering a blanket ban on limited company contractors. Also, 59% of them said that the IR35 reforms would affect the number of contractors that they hire. I don’t think they mean they will be taking on more contractors.
This would mean that there would be fewer contractor roles available. With the same number of contractors chasing them that would mean rates would plummet too.
What Is HMRC’s IR35 Promise to Contractors
HMRC have stated that if contractors are found to be inside IR35 by the CEST tool they won’t chase them for IR35 tax for previous years. That appears, however, to be a Boris Johnson type of promise.
They may (or may not) keep to that promise but is a bit sly to go after contractors prior to the April 2020 date. And it is also a bit sly to blanket assess them which they say shouldn’t after April 2020.
Indeed they are not even assessing them. The contractors all have different contracts with GSK depending on their agencies. They also may have different working practices depending on department.
How Will Contractors IR35 HMRC Battle Take Shape
So, the GSK contractors have decided to take on HMRC over this instead of meekly complying. There are 350 of them in a group which is going to fight HMRC for their own sake and for the sake of all contractors.
The majority of them have IR35 insurance with QDOS. Part of that package is that their contracts have been assessed for IR35. They all have contracts that are outside IR35. QDOS are confident that the contractors are all outside IR35. They will represent those contractors in their battle with HMRC.
Around 100 of the contractors are not insured. However, they have jointly taken on the services of tax specialist David Kirk who has successfully defeated HMRC in cases they brought against TV presenters. They were helped in all of this by Dave Chaplin of ContractorCalculator.com.
Why is GSK Contractors IR35 HMRC Battle Crucial for all Contractors
It’s great for all contractors that the GlaxoSmithKline contractors are fighting back against HMRC. If they win then HMRC won’t pull this stunt again with other contractors at other companies.
However, even if they lose, it will, at least, hold up HMRC repeating this at other companies. Hopefully it will hold it up till the April 2020 date when HMRC said they won’t chase contractors caught by their CEST tool for back tax for previous years.
Actually they said their focus would not be on chasing those contractors for back tax. Perhaps that gives them some wriggle room.
Are GSK Contractors Likely to Succeed
However, QDOS and David Kirk are confident of success.
Those contractors at GSK are in good hands.
The outcome of this affects all contractors. They are all under threat from getting a letter like this through their doors. All contractors will wish the GSK contractors success in their battle.
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