The NHS has cancelled its decision to place all NHS contractors in IR35 by default. The new IR35 regulation came into effect at the beginning of April, and the law has made recruitment agencies and public bodies responsible for ensuring that contractors comply with the IR35 legislation. The Treasury aims to raise close to £185 million in the current fiscal year by bringing public sector contractors under IR35 legislation.
NHS Improvement, which oversees the functioning of the NHS trusts, had stated earlier that the trusts have to ensure that all NHS contractors and agency and bank staff are placed on payroll and enrolled in PAYE for tax purposes.
However, NHS Improvement has now acknowledged that the blanket decision used by NHS trusts to determine the IR35 status of contractors and locums was inaccurate. Hence, it has advised all trusts to carefully scrutinise each contractor rather than going with the blanket decision.
Reasonable care dilemma
Qdos Contractor Chief Executive Seb Maley pointed out that the IR35 regulation had explicitly mentioned that public sector bodies had to ensure reasonable care while determining the IR35 status of contractors working in this sector. Hence, public sector bodies could not take a blanket decision on the status of all contractors.
The legislation also stated that if public sector bodies do not demonstrate reasonable care while determining IR35 status of contractors, they would be held liable for deducting National Insurance and PAYE, and also for the Employer National Insurance instead of the contractor.
Earlier in the year, 30 NHS contractors had stopped working for an NHS IT project after the trust informed them that the contractors would be placed inside IR35 from 6th April.
The blanket decision to place NHS contractors inside IR35 has affected the NHS negatively as many contractors are stopping work and walking out of projects. An industry expert stated that the blanket decision would have taken a financial toll on the already beleaguered NHS.