Contractors subject to IR35

At least 1500 contractors working at Glaxo SmithKline (GSK) have received a letter saying that HMRC thinks the contract between their personal service company (PSC) and GSK should be subject to IR35 for 2018/19. Contractors at other large companies may also be targeted.

There are many aspects of HMRC’s letter which are wrong or misleading, including:

• HMRC hasn’t examined the facts of the engagement between each PSC and GSK, but has assumed that every contractor has the same arrangement.
• In most cases the contract will be between the PSC and an intermediary employment agency, not directly with GSK.
• The letter states the PSC must operate PAYE every month and pay the tax by 22nd of each month, but the IR35 rules only require an annual calculation of a deemed payment to be made at the end of the tax year.

The HMRC letter gives a deadline by which to respond, and provides a telephone number. However, advisers who have rung that number find they can’t speak to anyone who has any technical understanding of the tax law. What is worse is that the letter is unsigned and there is no named person within HMRC to respond to.

If you receive a similar letter we should review the facts to check that your current contract does not fall within IR35. We can then confidently respond to HMRC to say why the assumption in the letter is wrong, alternatively that we will making an IR35 deemed payment at the end of the tax year as the law requires.

Our firm will be happy to help you with an IR35 review.

Written by the Tax Advice Network