Off-payroll rules have landed

NHS IR35 malpractice

Proper assessment of workers’ status required

NHS Improvement, the health service regulator has recently released a document to providers entitled ‘Working through intermediaries:  IR35 update’.

The document seeks to redress the practice of viewing all contractors as falling inside of IR35 for the purposes of the ‘off-payroll’ rules.

Position pre-April 2017

NHS Improvement advised providers of the rule changes and informed that many contractors were caught by IR35 and should be placed on the payroll. They now accept that this was wrong and have sought to remedy their erroneous advice. However, there have already been casualties of the NHS’s previous IR35 diagnosis, with a London hospital losing up to 30 contractors. NHS Improvement has  not however revealed the true number of freelancers who deserted them because of their negligent attitude.

So what now?

Hereon in, NHS providers are to undertake a proper IR35 assessment in a fact-specific way on a case-by-case basis, rather than by a broader classification of roles. This is to be conducted fairly, accurately and take into account all relevant factors, including representations which may be provided by the worker.

Although the document refers to the use of HMRC’s ESS tool it is made clear that this does not negate the necessity for judging each case on its merits.

Whilst NHS Improvement will not provide advice on individual cases, providers are urged to seek independent advice, where appropriate, to resolve issues that may arise.

Failure to take reasonable care

It is likely that one of the reasons for this change of heart has come about because of the newly introduced s. 61T(6)(c ), Chapter 10, ITEPA 2003 (IR35 off-payroll rules), whereby the operation of PAYE can be passed to an end client who does not take ‘reasonable care’ in assessing a worker’s IR35 status. However, there can be no liability passed to an end client for incorrectly and unreasonably concluding that IR35 applies as there is no tax and NIC to transfer where IR35 does not apply! In these cases, therefore, end clients will be seeking to avoid the burden of having to be accountable for the actual operation of PAYE rather than the fee-payer.

The other point regarding ‘reasonable care’ is that without a proper definition of these two words, it becomes a subjective test and maybe easy for end clients to circumvent. Presumably, it will be similar to the Self Assessment definition for ‘careless’ penalties, where HMRC expect each person to make and preserve sufficient records to enable them to make a correct and complete return. If so, this would require the end client to demonstrate, by reference to some document/record, that they had properly considered a worker’s IR35 status.

With NHS resources already stretched to breaking point, do they really have the time and money to undertake this exercise? It could be less of a headache for them to adopt a policy of only using agency or umbrella staff, with the exception of highly skilled contractors who may not be willing to go down this route.


  • Andy Vessey says:

    I have since discovered the NHS’s actions were as a result of locum doctors complaining about the NHS’s blanket approach taken to IR35 & threatening to practice in Germany if this was not addressed.

    • Steve Hunt says:

      Doesnt surprise me in the least. And, they’re a lot more scared by the BMA than anything else. Curiously, although the locums are no more permanent resources than interim IT contractors are, the ones that I spoke to seem to think that they are not subject to supervision, direction, control, etc or any of the other matters that are used against IT contractors in order to bring them under the IR35 umbrella.

      You’re either a permanent resource in a permanent established slot or you are a hired gun. I see nothing that brings IT under IR35, but not locums.

    • bolshiebastard says:

      Hardly a surprise that this was about locums and not IT Contractors, is it? After all, the NHS is about clinicians and administering health care, IT services are back office.

      As Ive said before IR35 is Government FUD to get more tax from IT contractors in particular.

      In the next 2 years, do not be surprised if PSB contract terms change such that you cannot get an outside determination.

  • william shand says:

    I was subject to the blanket panic when IR35 raised its head from my recruitment company , I completed a questionnaire which cost me £70 pounds ,some of the questions seemed irrelevant ,leaving me to answer no ,as I could not send a replacement , I worked for myself under a Limited company within the N H S capital project officer , I agree that there needs to be a more individual approach to IR35 but it is to late for me as I have had to dissolve my company May 2017 , I am now paid from my recruitment company. P A Y E .THIS GOVERMENT AND THE HMRC DO NOT KNOW WHAT THEY ARE DOING. the have affected my livelihood twice now by changing the rule’s, I was VAT registered ,I also paid cooperation Tax , if the issue was national insurance why did they not raise the level? H M R C ARE A LAW UNTO THERESELVES NOT THOUGHT OR DISCUSSION HOW SUPRISING

  • Andy says:

    For years I worked as a limited company moving between contracts of 3 months, 6 months and sometimes a year contract. There are almost always gaps between the contracts, but as a self employed person I was able to continue to pay myself while working on getting the next contract. Last year I moved to an umbrella company as ( I have no element of risk being a 6 month contract)
    Now my contract finished at the start of May and I have not yet got another contract. So where as before I was able to continue to pay my self, now when I finished with the last contract and got my last wage I had nothing coming in and no way to pay myself. So the government are getting a bit more tax and NI but now they have to pay me unemployment benefits, child tax credits and rates relief etc while I’m waiting for my next contract. Id say that’s an element of risk in itself as this will likely happen once or twice a year for a month or 2 each time. So the extra NI they get from me they pay it back when I’m between contracts. I don’t get the logic of this. They gain nothing more from me as I simply have to claim money to live between contracts. Its just made everything more difficult all round.

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