IR35: taxman warns 43,000 firms over workers’ employment status

HM Revenue & Customs (HMRC) is issuing approximately 43,000 private sector businesses across the UK with letters warning them to consider the employment status of their contractors ahead of reforms to IR35 off-payroll working rules in April.

The taxman told New Model Adviser® it would be issuing letters to approximately 43,000 private sector businesses who engage with contractors before the planned reforms to IR35 in April, which will bring the legislation to the private sector.

In an example of what one of the letters from HMRC may look like, which you can view below, the taxman states that ‘whether a worker is employed or self-employed is not a matter of choice’ and that it is ‘important’ to get a person’s employment status ‘right’.

The letter says, ‘It is important that the employment status of every worker is fully considered and we’d like you to check that you are getting the employment status of all your subcontractors right.

‘Whether a worker is employed or self-employed is not a matter of choice. Instead, we need to take a rounded view of how the work is provided by a worker.’

If, on completing checks, an employer determines that one of their contractors should be an employee, they are required to calculate the appropriate PAYE tax and national insurance contributions due and report the details of pay and deductions for these new employees in their Full Payments Submission (FPS).

A spokesperson for HMRC said, ‘HMRC has put various measures in place to help businesses and other organisations get the status of the contractors they engage right.

‘We have dedicated teams providing education and support to all businesses, public bodies and charities affected. 

‘This includes one-to-one support for 2,000 of the UK’s biggest employers and direct communications to around 40,000 medium-sized businesses and is supported by workshops, guidance, online learning, round tables and an enhanced online tool that will help them make the right decisions.’

Direct communications

IR35 is tax legislation that is currently used to assess whether public sector contractors should be taxed as full-time employees. It was brought into the public sector in 2017, and will be applied to the private sector from April this year.

Since 2017, HMRC has cracked down on contractors who it feels are working as ‘disguised employees’, and has been issuing both companies and contractors with various letters regarding concerns of the employment status of some contractors. The letters usually give a timeframe for the employer or contractor to carry out checks or respond to HMRC.

Last week, New Model Adviser® revealed HMRCwrote to at least one TV presenter issuing determinations regarding their income tax and national insurance contributions under IR35 in 2019 despite having ‘no sufficient facts’. 

The TV presenter’s tax adviser said HMRC is taking a ‘guilty until proven innocent’ approach to contractors and employers, who are being placed under a lot of stress to provide evidence to prove they are not breaching IR35 rather than HMRC finding them guilty of doing so.

HMRC also issued approximately 1,500 GlaxoSmithKline (GSK) contractors with identical letters last year accusing them of wrongly operating outside of IR35 in the tax year 2018–2019, despite not having actually reviewed the cases, according to a Financial Times report.

‘My wife is seeing aliens’: Five terrible tax return excuses

It is that time of year again!  Correct, HM Revenue & Customs (HMRC) has announced its annual list of terrible excuses for non-submission of self-assessment tax returns.  Every year the taxman seems to receive only the most imaginative, bizarre, and – if this year is anything to go by – supernatural claims about why people have been unable to fill out their forms on time.

Angela MacDonald, HMRC director general of customer services, said that people should get in touch if they are having trouble.

‘Each year we’re making it easier and more intuitive for our customers to complete their tax return, but each year we still come across some questionable excuses, whether that’s blaming a busy touring schedule or seeing aliens. However, help will always be provided for those who have a genuine excuse for not submitting their return on time.’

‘We also receive absurd expense claims from vet fees for a rabbit to room service at a hotel. It is unfair to make honest taxpayers pick up the bill for other people’s spurious claims, so HMRC will only accept sincere claims such as legitimate expenses for a job.  If you think you might miss the 31 January deadline, get in touch with us now – the earlier we’re contacted, the more help we can offer.’

1. Aliens exist…

Despite various space agencies, scientific research projects and even amateurs investing their time and energy on space exploration, the answer to the question ‘do aliens exist?’ seems to have come from an unexpected source.

Never one to overpromise and under-deliver, the revenue has said that one customer’s excuse for not filing his tax return on time involved strange creatures from out of space.

‘I couldn’t file my return on time as my wife has been seeing aliens and won’t let me enter the house,’ was apparently one excuse they received.  Not entirely sure what he meant by ‘seeing’, but we can only hope that if the couple were asked to take the creatures to their leader, that HMRC permanent secretary and chief executive would have been top of the list!

2. Thespian Theatrics

We all know the type of person who would try and get away with not submitting their tax return on time with an imaginative excuse.  This one, however, seems to be a bit different.

When questioned by the revenue about why he had not filed on time, one thespian answered:

‘I’ve been far too busy touring the country with my one-man play.’

We love this excuse so much, not least because whoever made it must have been deadly serious! The show must go on!

Alas the poor star struck actor was not able to use this excuse to get out of paying the tax man.

3. The ex-wife, vertigo, and some stairs

Of all the events that could combine to create a toxic concoction of inability to send one’s tax return in on time, this has to be one of the best.

So you get divorced, and in a bid to make everything really difficult for you, your ex-wife (knowing full well that you suffer from Vertigo), leaves your tax-return upstairs! What are the chances of that? How could she?!

‘My ex-wife left my tax return upstairs, but I suffer from vertigo and can’t go upstairs to retrieve it.’

Maybe call her my friend, it is probably worth it to avoid the fine.

4. ‘My business doesn’t really do anything’

Of all the excuses submitted to HMRC for non-submission of tax returns, this one seems to be far too candid for the person’s own good!

‘My business doesn’t really do anything.’

Unfortunately, however true this may or may not be, it probably does not mean that the party involved does not have to fill in a self-assessment form. Even if you earn £0.00, you still need to tell the tax man.

5. I spilt coffee on it

There’s no point crying over spilt milk, but what about spilt coffee?

Well one person was certainly very upset when they spilt coffee all over their lovely tax return. So upset in fact that they were unable to get a new one to send to the taxman in time.

Sadly for the individual HMRC did not accept this excuse for their latte return.   (Sorry!).