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Kirk Rice Blog

Be Aware – HMRC Launches Fresh IR35 Attack On ContractorsWritten on September 12, 2019 by Kirk Rice LLP

Be Aware – HMRC Launches Fresh IR35 Attack On Contractors

It has come to our attention that HMRC have started to issue letters on a speculative and potentially scaremongering basis. We would advise any clients receiving such letters to contact us immediately.

Those of our clients who provide services through their own personal service companies will hopefully already know of the changes to IR35 that have happened and continue to be imposed. Those working in the public sector saw the ‘rules of engagement’ change in 2017, whereby their public-sector engagers assumed responsibility for determining workers’ tax status. This resulted in many public sector bodies taking an overly prudent view and ceasing engagement of contractors on a wholesale basis, seeking to move many on to payroll, or terminating contracts when not required. Similar changes are being brought in for the private sector shortly, for those engaging with large/medium ‘employers’–for those working with small companies, the rules will remain as they are for now.

However, as mentioned above, we have been made aware that approximately 1,500 contractors working for GlaxoSmithKline have received virtually identical  letters from HMRC, stating “After looking at the information we have for the 2018 to 2019 tax year, our view is that the contract between your PSC and GlaxoSmithKline (GSK) comes under the off-payroll working rules ‘IR35’.”

The letter appears to be a speculative effort, where no review of particular circumstances has taken place. Often, we also understand, the contracts are not always directly with GSK, proving that it has issued the letter on a broad-brush basis. The letter also gives incorrect advice on how IR35 should be implemented in the private sector, if it applies.

Could your business be eligible for R & D Tax relief?

The R&D Tax Relief Scheme is an HMRC incentive designed to encourage innovation and increased spending on Research and Development activities by companies operating in the UK.

 

It is highly unlikely that the shotgun-approach and ill-informed letters have been sent out without the intention of causing a panic.  It would appear they are starting to target select groups of contractors and issuing letters indiscriminately with a hope of raising some income on a minimum of effort. That is not to say you should ignore these letters–they clearly carry as much weight as a normal enquiry. However, if you receive a letter of this nature, contact us immediately to consider a response. Equally, all contractors should be aware that their working circumstances could be under scrutiny in the near future. It is therefore important to ensure that we take regular contract reviews (at each renewal), that working circumstances mirror contracts, remaining akin to regular contractors with the attached risks, and not those of an employee.

Also, please remember that insurance is available to cover the costs of our time in dealing with tax enquiries.

Please speak to us if this affects you, or you have concerns about IR35 matters by emailing info@kirkrice.co.uk to arrange a call with one of our specialists.

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Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. We base the information on current tax legislation which may change in the future. The FCA does not regulate tax and trust advice.

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