NHS IR35 Changes
New NHS IR35 Changes mean that there will no longer be a blanket ban on locums, agency nurses and contractors using personal service companies.
The Government and HMRC announced rule changes which moved the IR35 decision to fee payers. These would be the agencies contractors use and the NHS departments.
Previously contractors decided their own IR35 status.
Although, if contractors declare themselves outside IR35 when they were really inside they stand the chance of an investigation. They would end up paying lots of back tax, penalties and interest.
However, there is safety in numbers. There is more chance of lightning hitting them than being under investigation for IR35.
NHS Improvement’s IR35 Advice
According to NHS Improvement, who give advice to NHS Trusts and Departments “The purpose of these HMRC rules is to ensure that individuals who provide services in this way are paying the correct amount of tax”.
They therefore “sought to support NHS providers by offering advice to ensure that locums working throughout the NHS pay the correct amount of tax that reflects their individual status”.
In practice the advice they gave meant that NHS trusts and departments made all locums, agency nurses and IT Contractor jobs inside IR35.
That meant whoever took those jobs had to pay tax as if they are permanent employees.
This was even if they were really outside IR35 and the job they were doing was outside IR35.
This was obviously unfair.
No IR35 Law Changes
The ridiculous thing was that the IR35 laws had not changed.
Parliament didn’t pass new law. There was no court decision that changed matters.
This is just a new Government rule and it only applies to the public sector.
However, the NHS overstepped the mark by declaring all contract jobs to be inside IR35.
This was never the intention.
The intention was to judge people individually.
HMRC IR35 Self Employment Test
HMRC created a new online IR35 Self Employment test to help departments.
However, we heard of 5 IT Contractors who sat the test together with their manager. They had the HR woman sitting behind them vetoing decisions they and their manager made as regards the questions.
According to NHS Improvement “Our previous position before 6 April 2017, was that we advised providers of this impending rule change.
“On our understanding that many individuals currently providing services to the NHS through intermediaries fall within IR35, we anticipated that providers would need to ensure that all locum, agency and bank staff were subject to PAYE and on payroll for the new financial year.
“This was not accurate”.
So, they have been forced to change their position.
Assessment of IR35 in NHS
They now advise that “the introduction of the rules has made clear that an assessment of whether or not IR35 applies should be carried out in a fact-specific way.
“That is, it should be applied on a case-by-case basis, rather than by a broader classification of roles.
“Therefore, NHS providers, and all others categorised as public authorities, will need to consider whether or not an individual in their particular situation is self-employed when they determine the application of the IR35 rules in that case.”
Reassessment of Locums and Nurses for IR35
So, NHS departments and trusts will have to go back and assess locums, agency nurses, bank staff and IT Contractors individually.
They will use the new HMRC test but will also look at the circumstances of individuals.
They continue by saying “We expect all providers to comply in full with their legal obligations by ensuring that all locum, agency and bank staff are taxed appropriately following a proper analysis of their individual circumstances.”
Contractors Using Limited Companies
As regards contractors using limited companies they now say “With regard to personal service companies, NHS Improvement recognises that NHS providers may contract with individuals through such entities.”
That will be good news for some NHS freelancers.
However, it doesn’t mean that they can all go back to using limited companies.
One agency whose contractors took the HMRC IR35 test for different Government departments found that 40% of their contractors who used limited companies before, were now inside IR35. They would now have to pay PAYE income tax and National Insurance.
Still these NHS IR35 Changes are overall good news for NHS contractors.
Big Consultancies Advice to NHS
One has heard that the big consultancies advised the NHS and its departments that they should make all contracts inside IR35 to ‘be on the safe side’. They said that the Test might change in the future making them liable.
Of course, they should have recused themselves from giving advice as they stood to benefit from it.
It was they who advised the Labour Government to bring in IR35 in the first place.
They would like to get rid of contractors altogether and force companies and public sector departments to use their young graduates at over £1,000 a day.
Still these NHS IR35 Changes are better for contractors than what has been going on recently with the blanket ban.
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