IR35

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IR35 FAQs for doctors

What is IR35?

IR35 legislation which is also known as the ‘intermediaries legislation’ is a set of rules that aid in the determination of the tax and National Insurance a locum doctor working through an intermediary should pay, based on the substance of that working arrangement. These rules were originally introduced in April 2000.

What is a personal service company?

A personal service company (PSC) is a term first used by HMRC following the introduction of IR35 in April 2000. Although there is no clear legal definition of what exactly constitutes a PSC, in most freelancing circles it is widely regarded as the following:

  • A UK registered limited company.
  • The contractor acts as director of the company.
  • The contractor is the sole shareholder (sometimes split 50/50 with their spouse).
  • The contractor manages and controls the company’s bank account.
  • The contractor supplies professional services to agencies/clients via the PSC.

What is an umbrella company?

An umbrella company is a company that acts as an employer to agency contractors who work under a fixed term contract assignment. Using an umbrella is the main alternative to setting up your own limited company. They serve as an intermediary between the contractor and their client (either an employer or an agency), with their principal responsibility of arranging payment for your work.

Exactly which roles are affected?

The determination of which roles will be affected is up to the NHS Trust or Health Board where the worker is ultimately engaged. This determination is made under the rules set out by HMRC and guidance by the relative frameworks under which they work. Based on current interactions it seems that these changes will impact any NHS locum doctors whether paid by an agency or through any NHS direct engagement arrangement who are not currently being paid via PAYE. It is crucial to speak to your accountant to understand how you will be impacted if these rules apply to you.

Can I still work for the NHS?

The simple answer to this question is YES! These are changes to tax legislation and do not place any restriction on your ability to work for any employer.

Do I need to start working for an umbrella company?

There is no obligation on you to move to an umbrella company as a result of what is happening. You will need to seek advice on which payment model will work best for you and provide you with the optimal outcome.

What if I don’t follow the IR35 rules?

It is simply not a case of you having a choice of complying with the IR35 rules. If your role is deemed to fall within IR35 by the ultimate public body (NHS Trust or Health Board), then the relevant taxes and National Insurance contributions will be deducted.

Who can I contact if I have any questions?

If you are a Global Medics candidate, you can get in touch with our support desk on +44 20 8566 4111.

Is this being promoted by agencies so that locum doctors can work for umbrella companies?

No, these rules are forced on the public sector by HMRC as IR35 is due to become law from 6 April 2017. The determination for whether IR35 applies rests with the NHS, and all NHS Trusts and Health Boards will apply these rules as set out by HMRC. This has nothing to do with the agencies and agencies will take the lead from government on this.

Global Medics is preparing for all scenarios in the way that you may wish to contract and we will be able to process your payments accordingly. It is up to you as the worker to determine the best way for you to contract which will result in the best outcome for you. We will still be able to pay you whichever choice you make.

Am I affected if I work through an agency?

These changes will impact on any worker that ultimately engages into the NHS that is not currently paid via PAYE. This is the case regardless of whether you work through an agency or through NHS direct engagement.

I was considering starting up my own limited company, what does this mean for me now?

You will need to consult with your accountant on what this means for you as they will be best placed to explain how this tax legislation will impact on your position and which method of working provides you with the optimal outcome.

I have spoken to several accountants and got different answers. Why is this?

This might be due to the fact that there was uncertainty about how these rules were going to be applied prior to all the guidance notes being released. What is clear is that application of these rules is something which will be subject to the determination of the public body (NHS Trust or Health Board) and will be enforced as such, which will ensure consistency.

The question to your accountant should thus not be whether this applies to you (as this will be decided by the public body) but you may need to ask how you will be impacted if this is deemed to apply to your working arrangement.

Most locum doctors I have spoken to are looking at working as a limited company, so I assume that this route is acceptable?

Working as a limited company is a route that a large group of doctors currently choose to work through. It does need to be noted that this specific route is the one that will be mostly impacted by the changes in legislation.

Do I have to sign a new contract with my locum agency if I want to continue working for them?

Depending on whether you contract with your agency through an intermediary, you might need to sign a new contract. It is the responsibility of your agency to provide you with a new contract where necessary to do so.

Can I work as a sole trader instead of a limited company?

IR35 will apply to all off-payroll working arrangements, so working as a sole trader will not get you around these rules.

Do I need to go back to working permanently with the NHS?

There is no onus on you to going permanent with the NHS and you will still be able to work in the locum market. The new rules are unlikely to reduce the current demand for locum doctors in the NHS.

When is the latest I can submit a timesheet?

If you believe that you will be impacted by these changes, all payments received from 6 April 2017 will be impacted by the new rules. This means that you will have to have your timesheet submitted, approved and paid by 5 April at the latest.

To support our doctors, Global Medics will run a payroll on 5 April 2017 to get the last payments out before the cut-off date of 6 April 2017.

Will my pay decrease from April?

If you are deemed to be working through an intermediary and ‘inside of IR35’ you might find that your rate will be reduced by the National Insurance contributions that the party paying your fees will have to pay over to HMRC. To understand any impact on your tax position you may wish to speak to your accountant.

If I see a reduction in my pay, what is the benefit of staying with an agency?

It is highly likely that working through an agency will still secure you a better rate, preferable working arrangements and the flexibility you might desire.

How does working for multiple agencies affect IR35?

You can still work for multiple agencies as this has no impact on IR35. The question of whether IR35 applies to a working arrangement will be viewed on a contract by contract basis. Each engagement will be viewed independently so IR35 will only apply to any specific contract it is deemed to apply. Taxes and National Insurance contributions will also only be deducted for the specific contract they are deemed to apply to. Also remember that at year end, HMRC will take a holistic view at the time of submission of your tax return, so if there are any under- or overpaid taxes it will be settled at that time.

What if I am ‘outside IR35’ but get taxed as though I am ‘inside IR35’ regulations? What should I do?

If you are not deemed to work ‘within IR35’, no taxes should be deducted and if any taxes are deducted you should take it up with the party paying your fee.

However, the determination of whether IR35 applies is solely up to the public body (NHS Trust or Health Board) into which you contract. If you disagree with the decision they have arrived at, you can appeal the outcome with the Trust. Based on the guidance notes to the relevant legislation, it seems as though they will make the deductions of tax and National Insurance contributions and you will have to claim it back from HMRC and make the relevant representations directly to HMRC.

If I am working through a limited company when do I need to get my invoice in so I get paid before the new rules?

The new rules will take effect from 6 April 2017. All payments made after that date will be subject to the relevant deductions if IR35 is deemed to apply. You will need to have your timesheets submitted, approved and paid by 5 April 2017.

When is the HRMC assessment tool going to be live?

The HMRC assessment tool is now live and can be accessed here – https://www.gov.uk/guidance/check-employment-status-for-tax 

How can I make sure I am IR35 compliant?

It is not up to you to make any representations about whether your intermediary is IR35 compliant. This decision rests with the public body (NHS Trust or Health Board) which needs to determine whether your engagement falls within or outside of the rules relating to IR35.

What is MSC legislation and does it apply to me?

MSC legislation is for Managed Service Companies and should not apply to you.

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