A number of NHS contractors are set to quit before the new IR35 reforms come into effect from 6th April 2017. However, industry experts are worried that this is just the tip of the iceberg and there will be a mass exodus of healthcare contractors.
Even though the UK public sector was warned that 85 per cent of contractors would quit if they were deemed inside the IR35 legislation, the NHS has stated that all its healthcare contractors would fall under the purview of IR35.
NHS Improvement said that locums and agency staff will be on payroll and will be covered by PAYE from the first week of April before the new tax laws come into effect.
HMRC has published a new set of rules that clearly state that public sector bodies have to take “reasonable care” whilst assessing the IR35 status of their contractors. This means that NHS contractors can no longer be covered by a simple blanket assessment.
According to tax experts who know the new legislation well, by informing contractors that they are in scope, the NHS is attracting the wrath of HMRC and may have to face repercussions. However, at the same time, these experts believe that it is impossible for the NHS not to know of the risks involved, as besides paying tax penalties, NHS trusts would also end up turning into fee payers.
Agencies that are involved in the staffing process have the right to ask the NHS to give an explanation as to how it determined that contractual staff fall under IR35 legislation. If the NHS does not respond to the agency within 31 days, it will have to take the responsibility for deductions and also pay Employer’s National Insurance contributions.
One tax expert believes that the NHS may not have a complete understanding of the IR35 legislation and is therefore placing its healthcare contractors on-payroll from April 2017.