GlaxoSmithKline HMRC IR35 Raid
In a GlaxoSmithKline HMRC IR35 raid last week nearly 1,500 nearly of the company’s contractors received a letter saying that they are inside IR35. HMRC ordered the contractors to calculate their employee tax and National Insurance for 2018/19 and pay it by September 22nd. If they didn’t believe that they were inside IR35 they had to send the documentation to prove it by September 19th.
Contractor Questions on GlaxoSmithKline HMRC IR35 Raid
- What are HMRC Acting Outrageously?
- What does the HMRC letter to contractors say?
- What should GSK contractors do?
- How can contractors prove to HMRC they are outside IR35?
- Should contractors get an independent IR35 status assessment?
- What should GSK do to help its contractors?
- How will the GlaxoSmithKline HMRC IR35 raid affect GSK?
Why are HMRC Acting Outrageously
This goes beyond all natural justice which says someone is innocent till they are proved guilty. It’s like a judge staring a trial by saying that he is sentencing the accused to 5 years in jail unless he can provide him or her with irrefutable evidence that he or she hadn’t done it.
It also goes against HMRCs own instructions that companies shouldn’t blanket test contractors. Here they are finding all contractors guilty – even though they haven’t even sat the Check Employment Status for Tax test that HMRC set up and believe to be the definitive test for a contractor’s IR35 status.
After all, more than half of contractors pass the CEST test when they sit it.
If GlaxoSmithKline’s contractors are typical then more than 750 of them are really outside IR35. The last I hear was that 54% of those who sit the test pass it, with 31% failing it and the other 15% indeterminable.
What Does the HMRC Letter to Contractors Say?
Here’s part of the letter:-
“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’s a standard letter to all GSK’s contractors. So, how do HMRC know if the individual contractor is inside or outside IR35? All of them have different contracts, as they have different agencies, and there are several different working practices, e.g. between IT contractors and medical contractors.
What Should GSK Contractors do?
GlaxoSmithKline Mangers have advised contractors to talk to their tax advisors. It seems they are reluctant to get involved.
We spoke to one GSK contractor who got the letter. He said that he sat the test and passed it – that he is well outside IR35. However, it seems that the fact that management at GSK are reluctant to get involved is hurting his ability to be able to prove this to HMRC.
What Can Contractors Do to Prove to HMRC They Are Outside IR35
What contractors could so is to sit HMRCs own Check Employment Status for Tax online test and provide the details to HMRC.
After all, HMRC believe that this is the definitive test for IR35 – even though it has been shown to be deeply flawed.
HMRC is telling companies that if a contractor passes the CEST test then the company won’t be pursued for the contractors tax and NI if it is subsequently shown that the contractor is inside IR35. That’s provided that false data has not been entered.
So, they could hardly tell the contractor that the test must be flawed. They would have to accept that.
Should Contractors Get an Independent IR35 Status assessment
Another option for the contractor would be to get an independent IR35 assessment from some of the firms that are expert in the IR35 area. HMRC might, and might not, accept this – but they have lost so many court cases when contractors have been represented by these expert IR35 advisors that the may be resultant to waste time fighting the contractor.
After all there are plenty of other contractors among the 1,500 who would either be inside IR35 or would quietly acquiesce. After all, it would be like shooting fish in a barrel for them.
What Should GSK Do to Help Its Contractors
We published an article recently called How Companies Can Help Contractors Stay Outside IR35
It has got some great advice on how GSK could help their contractors by:-
- Changing their standard contracts with contractors
- Changing their contractors working practices
It is worth contractors passing it on to the companies they provide services for.
However, it seems that management have been told by GSK not to get involved in this. This is no time for GSK to be saying “Its nothing to do with us. Talk to your tax advisor”.
How Will the GlaxoSmithKline HMRC IR35 Raid Affect GSK
If GSK simply acquiesce in this it is going to hit their profits in the future for two reasons:-
- When it happened in the NHS locum doctors cost to the NHS rose sharply as they were able to pass on some of the extra costs that they now have
- GSK will no longer have the choice of the best and most productive contractors in the future if they are effectively paying less than their rivals for the best contract talent.
They need to be proactive now and assist contractors to prove to HMRC that they are outside IR35.
And you can rest assured that, if HMRC can get away with this, that a lot more contractors at a lot more companies are going to get this letter.
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