IR35 and the NHS: What Recruiters Need to Know

The determination of IR35 status across different clinical grades is a long-standing issue for the NHS. IR35 rules are quite complex and at times difficult to navigate, so to help recruiters get to grips with the regulations, Bunmi Adefuye, Solicitor at the REC outlines the current state of play.

In or out?

The IR35 rules apply where an individual works through an intermediary, such as their own personal services company (PSC). The individual’s assignment will be “inside IR35” if it is established that if the intermediary did not exist that individual would be an employee of the hiring client.

Where it is an inside IR35 assignment, the payment to the PSC is treated as earnings/employment income so the intermediary must deduct tax and NICs when payment is made to the individual. In the public sector this has been taken a step further – from 6April 2017, the off-payroll rules require that the public sector client make an assessment of the IR35 status. 

Where the client determines that it is an “inside IR35” assignment, the fee payer closest to the intermediary (such as an employment business) must deduct the tax and NICs before paying the net sum to the intermediary.  Employers’ NICs will also be due.

Most workers are in scope….

There are a number of requirements and constraints when working on an NHS ward, including in particular that there is a high degree of supervision, direction and control. In addition, the right of substitution cannot be freely exercised especially when working with vulnerable people. Therefore it is expected that a large number of roles will be in scope of the rules.

….but the Trust decides

Agencies will no doubt rely on advice and instructions from HMRC, NHS Improvement and the respective framework operators. Whilst most roles are straightforward - especially when they fall under the lower grades - there are other roles that require specific analysis and careful consideration by the NHS Trust, as they have the statutory obligation to make the IR35 status determination.

In an attempt to clarify the position, NHS Improvement published its recommendations for the IR35 status of roles at NHS Trusts and NHS Foundation Trusts. After concerns were raised about Trusts making blanket decisions on IR35, NHS Improvement later confirmed that Trusts must lawfully assess each role on a case-by-case basis to decide whether they fall inside or outside IR35.

HMRC will clamp down

More challenges have arisen as a result of payroll schemes in the sector being used as a means of getting around the off-payroll rules. HMRC have issued a number of warnings against using dubious schemes. Framework operators have contractual provisions that require suppliers as the engager to ensure that the appropriate tax and NICs are deducted and they should not adopt non-compliant tax schemes. There are huge concerns around the NHS attracting and retaining staff and where permitted they have to pay higher rates to maintain and protect patients’ safety.

Due to the ongoing issues with the IR35 rules, the REC will continue to work with government to ensure that our members comply with the rules and can continue to supply temporary workers who help to stabilise the NHS’s workforce and save lives.

Feeding in

The REC is responding to the private sector consultation into IR35, and will be highlighting the lessons learned from the NHS experience.

A rushed implementation would be damaging for the private sector. It is essential that the government does not repeat the mistakes made in the public sector. If you would like to feed into our response or have questions about IR35 in the NHS, please email policy@rec.uk.com or tune into our webinar on Monday, 9 July.