Tax Legislation IR35 Guidelines

As you may be aware, the Government together with HMRC, have started the process of introducing new rules in relation to compliance with tax requirements that will take effect from 6 April 2017.

Although it is not 100% clear what all the rules will be, there has been a lot of coverage in the media about these changes and so we wanted to give you an update on how we are interpreting the evolving legislation.

These changes will impact any NHS agency workers (whether paid by an agency or through any NHS Direct Engagement (“DE”) arrangement) who are not currently being paid via PAYE. If you receive a payslip each week from either Global Medics or the NHS that clearly shows that tax and National Insurance (NI) have been deducted from your earnings, then you are a PAYE worker and this email does not apply to you.

If you are being paid through any of the following arrangements, this change will affect you and you will need to take action:

  • You work through your own Personal Service Company (PSC).
  • You work through an Umbrella Company.
  • You are paid gross as a Self Employed Worker.

The Current System

Legislation known as IR35 was introduced in April 2000. It requires any worker in any of the above categories to ensure they pay the correct rate of tax and NI.

IR35 applies if a worker is providing services to a client under circumstances that, if not for the involvement of the intermediary, would be viewed as employment. This is currently self-assessed by workers, though HMRC can challenge assessments they consider to be incorrect and recoup any tax that should have been payable.

It is HMRC’s view that there is widespread non-compliance with IR35 and that this must be addressed. You need to be aware that the HMRC can also apply penalties and, in more serious cases, workers can be prosecuted for fraud.

New Rules

Although we are still awaiting clarification from HMRC around a number of areas, we expect that from 6 April 2017, NHS Trusts and Health Boards will have new responsibilities to inform agencies and candidates if the role required falls within or outside IR35 legislation.

If a candidate decides to fill a role/job that is deemed to be within IR35, then they will have to provide personal NI and Tax code information so the necessary tax can be deducted before any payment is made by the NHS Trust, Health Board or agency. The rules for determining whether a role will be IR35 compliant are scheduled to be released by HMRC in the New Year.

These changes are being introduced as a result of new Government legislation and are not being driven by any Employment Agency.

The latest Framework Agreements for supply of agency workers into the NHS by Employment Agencies already includes requirements for the Employment Agencies to assist NHS Trusts and Health Authorities in discharging their legal obligations.

Impact

If you are not currently being paid via PAYE, we would strongly recommend that you contact your accountant or Umbrella Company early in the New Year for advice on how the changes are likely to impact you.

Over the coming months HMRC will be releasing more details around the assessment rules, but their impact will be very individual and will include a number of considerations such as grade, roles that you are eligible to fill.

Your accountant is in the best position to understand your particular situation and how the rules will impact you, as well as giving you advice on the cumulative impact of other changes that have been introduced. These include prohibiting PSC or Umbrella Company workers from claiming tax and NI relief on travel and subsistence expenses for an ordinary commute from home to work, and recent dividend payment restrictions.

We are already seeing signs that NHS Trusts and Health Boards are starting to build compliance with IR35 into their selection processes and, as we move closer to the April 6 2017 implementation date, this will become even more evident.

The sooner you have a sound understanding of your own position, the better placed you will be to continue to work uninterrupted.

Assuring you of our best attention at all times.