IR35 - Top Questions and Answers
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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.
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:
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.
The determination of which roles are 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. These changes 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.
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.
There is no obligation on you to move to an umbrella company as a result of IR35. You need to seek advice on which payment model works best for you and provides you with the optimal outcome.
It is simply not a case of you having a choice of complying with the IR35 rules. If your falls within IR35 by the ultimate public body (NHS Trust or Health Board), then the relevant taxes and National Insurance contributions are deducted.
If you are a Global Medics candidate, you can get in touch with your consultant.
No, these rules are forced on the public sector by HMRC. The determination for whether IR35 applies rests with the NHS, and all NHS Trusts and Health Boards apply these rules as set out by HMRC.
These changes impact 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 an NHS direct engagement model.
You need to consult with your accountant on what this means for you as they are best placed to explain how this tax legislation impacts on your position and which method of working provides you with the optimal outcome.
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 is subject to the determination of the public body (NHS Trust or Health Board) and is enforced as such, which ensures consistency.
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 is the most impacted by the changes in legislation.
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.
There is no onus on you to going permanent with the NHS and you are still able to work in the locum market. There is still a demand for locum doctors in the NHS.
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.
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.
You can still work for multiple agencies as this has no impact on IR35. The question of whether IR35 applies to a working arrangement is viewed on a contract by contract basis. Each engagement is viewed independently so IR35 only applies to any specific contract it is deemed to apply. Taxes and National Insurance contributions are also only 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 they will be settled at that time.
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.
The HMRC assessment tool can be accessed here - www.gov.uk/guidance/check-employment-status-for-tax
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.
For additional information regarding IR35, please visit one of the following pages:
IR35 - Top Ten Questions