NHS U-turn over Blanket IR35 Decisions

NHS Improvement have announced that IR35 decisions will now be made on an individual basis. This replaces their previous stance, which was that all locum, bank and agency staff were inside the scope of IR35. The legislation calls for “reasonable care” in assessing the IR35 status of each contract, and some believe the blanket assessment of all staff as inside contravened this requirement.

NHS Improvement have described a “very organised campaign” by professionals who are aware that safe services cannot be maintained without them, and NHS managers report that doctors have threatened to cancel shifts with little or no notice.

IR35 is designed to discourage “disguised employment” where a worker supplies their services through an intermediary – for example their limited company – but would be an employee if the intermediary was not used. Under IR35, such workers must pay tax and national insurance contributions at the same rate as an employee would.

It’s worth noting that IR35 itself has not changed. The only change is that public sector bodies, like NHS Trusts, must now make the assessment, rather than the contractor making it themselves. The fact that assessments will now be made individually rather than on a blanket basis will not necessarily change the outcome. It’s still possible that the majority of locum doctors and nurses will be assessed as being inside IR35.

It’s reported that some agency doctors have requested rate raises of up to 56% to cover the reduction in their net pay following the assessment that they are caught by IR35. If their IR35 status does not change as a result of individual assessments, they will still be left with this shortfall.  

If they are correctly assessed as inside IR35, some may argue that the higher rate of tax contractors are now paying should have been paid all along. From this standpoint, a rate increase to cover the difference may be difficult to defend. On the other hand, most of us can find sympathy for someone who suddenly faces a 56% pay cut.   

We’ll be extremely interested to see if this U-turn actually results in contracts being assessed as outside IR35, and if pay rates do in fact rise for those assessed as inside.

Those who are caught by IR35 are often better off with umbrella employment rather than trading through their limited company. If you have been assessed as inside IR35, or if Orange Genie can help in any way at all, please contact our expert team on 01296 468483 or email info@orangegenie.com.

 

 

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