IR35 letters going out to GlaxoSmithKline contractors

[jamesbrown]

A whole sub-industry could disappear.

Every cloud...

[webberg]

HMRC Campaign milestones

The HMRC action on GSK contractors is no doubt going to follow the pattern that they have used elsewhere.

The initial 1500 targets come from lists HMRC has obtained from GSK under their legal powers.

A letter goes to each person.

Some will concede - no questions asked. If so, their names will go on a list looking into 2017/18 and perhaps earlier years.

Some will go back with with an "obviously" outside IR35 set of evidence. These HMRC will concede and mark to look at again in 2019/20.

Some (perhaps most) will go back, with the aid of insurers and advisers, and defend their position. HMRC is likely to sift these in order of gross earners and starting at the top, will grind away. All of these will be on the lists to investigate in 17/18 and earlier and also in 19/20.

[cojak]

Some will concede - no questions asked. If so, their names will go on a list looking into 2017/18 and perhaps earlier years.

Only for the same contract I would think.

Those contractors who have been continuously accepting extensions for years from the same client will be in dodgy territory.

Every contract needs to be viewed separately.

[webberg]

(Though scheme advisers such as yourself appear safe for maybe another decade or so).

Not sure I would describe myself as a "scheme adviser".

I have in the past made a living as a tax planner initially for a couple of well known banks (internal and external) and more latterly with a tax house involved in film, renewables, etc. That ended in 2014.

To the best of my knowledge I have not created, promoted, sold or advised upon any scheme used by contractors and freelancers.

We have certainly not advanced or suggested the use of what HMRC likes to call "loan busters" nor any "scheme to solve a scheme".

If you mean that we are capable of deconstructing schemes, ancient and modern, applying a degree of interpretation to them and suggesting ways in which they might be argued with a disbelieving HMRC, then we are guilty.

In doing so, we also have a strategy which looks to prevent clients from getting involved in schemes in the future. Do we advise on that? Yes, we do.

Doing the above means that we have considerable knowledge on pretty all aspects of contractor life as it relates to finance, legal, tax, accounting, etc. Do we advise on those? Yes we do.

[webberg]

Only for the same contract I would think.

Those contractors who have been continuously accepting extensions for years from the same client will be in dodgy territory.

Every contract needs to be viewed separately.

Perhaps not.

Speaking with HMRC here, the view coming out is that the contract is essentially window dressing and that most (or in HMRC speak -all) contractors actually do the same thing for years and it's only the words around them that change.

This assumption, rather like the reverse (i.e. contractors think that the words of a contract will protect them), is very hard to shift.

[LadyPenelope]

Perhaps not.

Speaking with HMRC here, the view coming out is that the contract is essentially window dressing and that most (or in HMRC speak -all) contractors actually do the same thing for years and it's only the words around them that change.

This assumption, rather like the reverse (i.e. contractors think that the words of a contract will protect them), is very hard to shift.

Then surely they would have to investigate the working practices of each contractor to prove IR35 status? This would be pretty resource-heavy, even for them, so there would be only be a small percentage of contractors who could be investigated in this way in any given year. Working practices may differ between clients also, depending on the terms of the engagement. It would also have to be corroborated by the client, no?

[northernladuk]

Correct and that's not an issue to HMRC if they think they are going to get something out of it.

[webberg]

Then surely they would have to investigate the working practices of each contractor to prove IR35 status? This would be pretty resource-heavy, even for them, so there would be only be a small percentage of contractors who could be investigated in this way in any given year. Working practices may differ between clients also, depending on the terms of the engagement. It would also have to be corroborated by the client, no?

Agreed.

Look at the numbers.

1500 at GSK.

For at least one year, perhaps closer to two.

Average earnings £70k?

Average tax paid outside IR35, perhaps 20% = £14k

Average tax due inside IR35, perhaps 35% = £24.5k

Say £10k pa difference.

Not all 1500 will be caught but HMRC policy says 1350 will.

That's £13.5m.

Multiply GSK by 113 to get to HMRC's number.

Soon you're talking real money.

[BlueSharp]

Perhaps not.

Speaking with HMRC here, the view coming out is that the contract is essentially window dressing and that most (or in HMRC speak -all) contractors actually do the same thing for years and it's only the words around them that change.

This assumption, rather like the reverse (i.e. contractors think that the words of a contract will protect them), is very hard to shift.

My understanding is that HMRC would have to take a contractor to tribunal for each engagement (single or multiple renewals), they could not go to a single tribunal for different engagements across different clients. Is that correct?

[northernladuk]

I've a felling, if GSK is anything like another large pharma in the NW, there could be quite a few people there with 4 years plus behind them.

A very brief search on linked in and the first three people come in at 2 years 2 months x 2 and 3 years 6 months.

Very tasty for HMRC