HMRC letters to GSK contractors add to IR35 confusion

Towards the end of last week, nearly 1,500 contractors working at the pharmaceutical firm GlaxoSmithKline (GSK) started to receive identical letters from HMRC about their IR35 status.


The letters begin by saying HMRC is “writing to you because you told us you were self-employed when you worked for, and received payments through, your own company”. It goes on to state that “our [HMRC’s] view is that the contract between your PSC (Personal Service Company) and GSK comes under the off-payroll working rules ‘IR35’”, and that if you do not agree with this assessment “you must write to us to tell us why and give us evidence” or otherwise contractors will need to work out their appropriate PAYE tax and Class 1 NICs for the work they have undertaken for GSK in the 2018/19 tax year.

Although the letters are only an informal request for information and do not have a legal underpinning (for more on this see here), their accusatory tone and the broad-brush nature of HMRC’s compliance activity have understandably caused a lot of confusion and concern. They also raised a number of initial questions, from how HMRC have got these individuals’ details to why GSK’s contractors have been singled out. It is also inconceivable that HMRC has done enough due diligence on each of these 1,500 cases to so strongly imply they fall inside IR35.

Inevitably, this action has raised fears in some quarters that HMRC is conducting a ‘fishing exercise’ and setting out its stall ahead of the 2020 IR35 changes in the private sector. As soon as it became aware of the letters, IPSE asked HMRC for an explanation. A spokesperson said only that the agency’s “compliance activity spans a variety of industries and is focused on specific areas based on our analysis of where current risks to the tax system lie.”  

IPSE has criticised HMRC on its IR35 activity in the press, including the FT and The Times. We also raised our concerns that this activity is very unhelpful directly with HMRC officials at yesterday’s IR35 Forum, where the message was repeated to us that this was not a new approach. HMRC agreed to further engagement on compliance activity at future Forum meetings, so we can better understand their approach. IPSE will continue to challenge HMRC on these tactics.

In the short term, IPSE members who have received this letter should not ignore it. You can access our advice on how to respond and the contact details for our expert advisors here. If you are not currently a member you can join IPSE now and we will be able to offer comprehensive assistance on this. 

Longer term, this latest move simply adds to the confusion and chaos in our tax system. The fundamental problem with such blanket approaches is this: at a time when HMRC is about to roll out the IR35 changes to the private sector, these tactics send out exactly the wrong message.

With only a few months to go until end-clients will become responsible for assessing their contractors’ employment status for tax, HMRC should be engaging positively with businesses and contractors to inform them about, and support them with, the upcoming changes. It should not be undertaking activity targeting thousands of people with a ‘guilty until proven innocent’ approach.

Ultimately, confusion over IR35 has deeper roots than these letters. With so many contractors raising the alarm – and with strong evidence of the damage it has caused in the public sector – it’s time for an urgent rethink. IPSE will keep pressing for this.

Meet the author

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Alasdair Hutchison

Policy Development Manager