GSK Contractors Accused of Being “Disguised Employees”

September 2, 2019 / Business News

Many contractors are still confused as to how exactly the IR35 tax changes for the private sector will impact their income and their business. The new changes are due to come into effect in April 2020, but recently UK pharmaceutical giant GlaxoSmithKline (GSK) has become the centre of a tax crackdown on so-called “disguised employment”. 

Letters sent to contractors 

HMRC has targeted close to 1,500 GSK contractors with letters questioning their self-employment status, and accusing them of being “disguised employees”. 

According to a report in the Financial Times, the letters were sent to contractors in various departments, asking them to review the tax status of their dealings with the pharmaceutical company for the 2018-2019 tax year. They have been sent as a response to evidence that contractors in the pharmaceutical sector are failing to correctly categorise their employment status.

The IR35 rules are of course designed to end tax avoidance from those who provide a service to clients through a limited company. And who therefore pay less tax than those classed as employees.

Each of the identical letters sent, advise the workers to use HMRC’s Employment Status Tool to check if they should be taxed the same way as salaried employees (inside IR35) or as off-payroll workers (outside IR35), for their work with GSK. 

Retrospective reviewing

If any of the contractors who reclassify their engagements as inside IR35 will then need to work out their employee payroll tax and national insurance contributions for the 2018/19 tax year. And make a payment by 22nd September. Any who dispute this will need to provide evidence to HMRC to support their claim by 19th September. 

HMRC has come under criticism for this aggressive targeting of contractors. However, the upcoming IR35 changes in April 2020 will make it easier for them to police the rules. When they come into effect, any company with over 50 employees or £10.2m annual turnover will be given the responsibility of assessing employment status of their contractors. They will also be liable should they make the wrong assessment. 

This latest tax crackdown is fuelling fears that HMRC plans to pursue retrospective tax avoidance investigations, as they can investigate anything up to six years in an IR35 enquiry. Even with HMRC publishing a guidance on how companies and agencies can prepare for the changes, many contractors remain extremely concerned. 

If you’re looking to close down your limited company, it’s best to speak to a qualified accountant to discuss your options. It may be the case that a Members’ Voluntary Liquidation (MVL) is the best solution for you, if your company is solvent. 

For free confidential advice – contact Clarke Bell today.