The only grounds for HMRC’s belief that each and every PSC it has written to is caught by IR35 is the following statement:
“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’.”
HMRC appears to have put little effort into ascertaining the facts of a particular engagement, giving no firm opinion before sending the 1,500 letters.
The PSCs that have been contacted appear to have all been providing services via an intermediary such as an agency and therefore do not have a contract directly with GSK. So, the small amount of substance to this letter is fundamentally flawed.
The letter states that a PSC that is caught by IR35 must operate PAYE every month, although this is not how IR35 works in the private sector. The application of IR35 involves a ‘deemed payment calculation’ at the end of each tax year, not monthly PAYE deductions.
The letters are common tactic from a team known as the “nudge unit”. This does not mean that they should be ignored.
Although light on detail, PSCs should be exploring and embracing the detail so that they are able to defend their position should HMRC follow up on its threat.
The letters fall short of a full enquiry letter or a formal information request and therefore there is, in our opinion, no compulsion to respond.
What we suggest PSCs do as a matter of urgency is get their ducks in a row and assess their contract and facts for IR35.