NHS IR35 Court Challenge over Blanket Assessment – Locums / Nurses

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NHS IR35 Court Challenge
NHS IR35 Court Challenge

NHS IR35 Court Challenge

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It now appears that there is going to be an NHS IR35 court challenge over the blanket assessment that all locums and agency nurses are inside IR35 by some NHS Trusts.

The Government and HMRC conspired to frighten many of those NHS trusts into making an assessment that all locums and agency nurses in their NHS Trusts were inside IR35.

The result was that they had to pay the same tax as if they were permanent employees.

Locums Pay Cut by 30%

Some locum doctors told as that this cut their take home pay by 30%.

It more than doubled the tax that they would pay.

It was a double whammy by Theresa May’s Government and HMRC.

The Government took away from freelancers, including locums and agency nurses, the right to determine their own IR35 status.

The NHS Trusts hiring them would determine this.

Whoever would pay the contractors would be responsible for deducting PAYE and National Insurance from the contractors and sending that on to the taxman.

NHS Trusts Would Have to Pay for IR35 Mistakes

However, the Government also stated that if the Government department got this assessment wrong, they would have to stump up the taxes of the locums and agency nurses plus interest and penalties.

So, many NHS Trusts decided that this was a risk not worth taking for them.

They would simply decide that all locums and agency nurses that they hired would all be inside IR35.

Then there was no potential comeback on them.

Locums Couldn’t Use Personal Service Companies

Locums and agency nurses would no longer be able to operate through personal service companies (limited companies) but would have their tax deducted as if they are an employee.

That was quite sneaky by the Government.

They must have known that there would be unfair outcomes to this.

And indeed there were.

HMRC’s Online Employment Status Test

In conjunction with this new Government approach in its own departments HMRC devised a new IR35 Status test.

Although, the IR35 law hasn’t changed and this test only represents HMRC’s views of what is inside IR35 and outside, many Government departments took this test as gospel.

They made their contractors sit the test.

If they passed the test, the contractors would continue to be able to use their limited companies.

If they failed the test, the departments hiring them would deduct their PAYE and National Insurance from their income before the departments paid them.

Personal Service Company Contractors

One agency told us that 60% of their personal service company IT contractors who sat the test failed it.

We know of NHS freelancers who they assessed as being outside IR35 but are treated by the NHS Trust, for tax purposes, as being inside.

Indeed we know of other NHS IT contractors who they assessed all together using the new HMRC IR35 status test.

It was done by the project manager with the HR woman in attendance.

It seems that in several instances, when the project manager deemed that the three contractors had answers that were outside IR35, the HR woman intervened to insist that the project manager changed it to make them inside IR35.

This is all very relevant as there have been budget leaks from the Government suggesting that they would now roll this out to private sector contractors in the budget on November 22nd.

IHPA NHS IR35 Court Challenge to IR35 Changes

Now, the Independent Health Professionals Association (IHPA) are preparing a legal challenge to the blanket assessment of contractors as being inside IR35.

They are going to crowdfund to find the money to fight this.

They are putting together test cases of locums and agency nurses who are being forced to pay the IR35 tax despite independent assessments (or even HMRC’s IR35 tool) showing them to be outside IR35.

The great majority of locum doctors and agency nurses are now considered inside IR35 for tax purposes.

It means that some locums have had an effective pay cut of 30%.

They are paying more than double what they used to pay in taxes and national insurance contributions.

And this is coming to the private sector too if budget leak reports are correct.

With contractors group IPSE not as effective as it could be in lobbying the Government, this NHS IR35 Court challenge from IHPA may be freelancers last stand before the government effectively destroy its own flexible workforce.

This may be freelancers Pass of Thermopylae.

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