One year on from the GSK IR35 debacle

This time last year approximately 1,500 hard working contractors woke up to a very nasty surprise. They had been written to by HMRC and told that, in the opinion of the tax authority, they had failed to comply with the IR35 rules in the tax year 2018/19. What did these contractors have in common? They had all provided services to pharma giant GlaxoSmithKline (GSK) in that tax year.

When it comes to contractors and GSK, IPSE has a proud history. Back when we were called PCG, we supported our member Phil Winfield all the way through a protracted IR35 investigation into his contract with GSK.

HMRC was convinced that IR35 applied, despite the mounting evidence that we presented to the contrary. The case went to tribunal, which we won convincingly – putting an end to an eight-year ordeal for Phil. Without IPSE’s support, the legal bills alone would have crippled him – they amounted to over £50,000. Here’s what Phil said after the verdict:

“It has been a trying time and I would not have had a hope in continuing the defence without the support of PCG.”

Like Phil, many of the contractors that were singled out last year came to IPSE for advice. Those that were not already members promptly joined. We are delighted to have them on board. It seems to us that GSK contractors were being picked on by HMRC, for no good reason, and the more contractors we can protect from that kind of pressure, the better as far as we’re concerned.

The reality was that HMRC had no idea whether IR35 applied because it hadn’t thoroughly reviewed the working practices of each of the 1,500 engagements. Our experience from the Phil Winfield case (and many others besides) told us that just because HMRC say IR35 applies, that doesn’t make it so.

Next year IR35 in the private sector is changing – for the worse. Clients will now have to make IR35 determinations and it is they, or the agency if there is one, that will be held liable. Having been spooked by HMRC writing to the 1,500 individuals, GSK has predictably caved in and imposed a blanket ban on contractors, terrified of incurring the wrath of the Revenue.

It is a terrible decision by GSK and they are by no means the only big client that has taken this over-zealous approach. It is well beyond the realms of possibility for all of those contractual arrangements to be inside IR35, which means that thousands of perfectly compliant, mutually beneficial business engagements have been terminated for no good reason – exactly what the economy doesn’t need as we stare into the depths of the worse recession since records began.

IPSE’s activity around IR35 will now focus on three areas:

  • Continue to lobby against the private sector changes
  • Ensure our members are as prepared as best they can be to cope with the new rules
  • Persuade big end clients of the same maxim we’ve always stood by – just because HMRC say IR35 applies, that doesn’t make it so. Clients can continue to engage contractors outside IR35 and do so fully compliantly.

This last one won’t happen overnight, but we are confident we can get there, with your help. Contractors can educate their clients about IR35 and IPSE will provide them with the tools to do so over the Autumn (watch this space).

Contractors must also be aware that they remain liable for the IR35 status of their engagements over the previous six years. Your IPSE membership covers you for this period and it helps to fund our lobbying to make policy improvements for all contractors, including doing away with IR35 altogether. If you’re not already on board, then join IPSE now to get protected.

On their own it’s very difficult for a single contractor to stand up to HMRC or to large hirers who have got their IR35 determination wrong. But together, as IPSE members, it can be done – just ask Phil Winfield.

Meet the author

Andy Chamberlain

Director of Policy and External Affairs

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