Blanket IR35 decisions in the NHS

07th August 2018
Written by Nigel Nordone

Effects of IR35 reform on NHS sparks further questions in House of Commons

More questions are being raised by MPs surrounding the impact of IR35 reform introduced last April into the public sector, suggesting some unease around its handling.

Unfortunately, the responses to such questions are somewhat wanting, and demonstrate that the Government are taking a blinkered view to the effect of the legislation. However, the fact that more questions are being asked, demonstrates that this is something MPs are concerned about.

Grant Shapps, Conservative MP for Welwyn, Hatfeld, asked the Secretary of State for Health and Social Care:

“What estimate he has made of the number of NHS Trusts that rely on blanket IR35 assessments of non-payroll NHS staff?”

It has been reported and is widely understood that many NHS Trusts are relying on blanket IR35 decisions, giving many self-employed medical professionals the option to take a cut in their pay, or to provide their services elsewhere. There is a real risk that we could have a shortage of medical expertise in an already fraught NHS. Stephen Barclay, Minister of State for the Department of Health and Social Care, responded to the question by initially stating that:

“No sector wide assessment has been made of the effects of the 2019 Loan Charge and IR35 reforms on the National Health Service. While there was some anecdotal evidence of locum staff shortages when the changes were first implemented, recent HM Revenue and Customs research has identified that 58% of central public bodies have not experienced problems with filling off-payroll worker vacancies and 63% have not experienced an increase in contractor rates payable as a result of the new legislation. There is no reason to suggest that these figures are significantly different for NHS bodies.”

In other words, the Government don’t really know what effect IR35 reform has had on the NHS. The fact that HMRC’s research demonstrates that 58% of central public bodies have not experienced problems with filling off-payroll worker vacancies, indicates that potentially there are 42% who are experiencing problems with filling vacancies.

Although there may be no reason to suggest that the figures quoted above would be any different for NHS bodies, there is equally no reason to suggest that such figures would be the same as with any other public sector body, and because we’re dealing with the NHS, you would have thought that someone might have been inclined to double check – after all, it’s only the entire health of the UK public that’s at stake!

Stephen Barclay went on to say that;

“No estimate of the number of NHS trusts that rely on blanket IR35 assessments of non-payroll NHS staff has been made. However, as per the changes to the Income Taxes (Earnings and Pensions Act) 2003 outlined in the 2017 Finance bill, decisions as to whether or not contractors fall inside or outside of the IR35 rules should be made on an individual basis. Recent HM Revenue and Customs research has indicated that 91% of public bodies are making these decisions on an individual basis and we would expect all NHS bodies to be compliant with this legislation and not applying a blanket decision on IR35 to all their contractors.”

It was reported last year, not long after IR35 reform in the public sector was implemented, that some unions were considering taking legal action against the NHS because they were adopting blanket decisions, and taking the decision not to engage any doctors on a self-employed basis. Qdos have heard this first hand from many doctors.

Stephen Barclay further added that;

“We do not recognise that trusts are operating blanket decisions. While advice supplied by HM Revenue and Customs indicates that a role can be assessed as long as the contractual terms remain the same without the need for assessment on each occasion a worker changes this is not to be confused with a blanket decision - it is a balanced and reviewed decision on the role.”

Role-based decisions are a tricky subject. In theory, should every contractor working within the same role for the end client be subject to equal contractual terms and vitally, equal working practices, it would be acceptable to determine that all contractors working under that role would be classed the same.

In practice however, it is not as straightforward. It would not be possible to ensure that all contractors working under the same role operate with equal working practices without checking each case, unless of course the end client categorically will not accept substitution, and controls all of their contractors (or vice versa) for example. Role-based assessments also don’t factor more specific factors to the contractor, such as being in business on your account. This would be taken into account in an enquiry and could have an impact on the ultimate status of the contract.

Role-based blanket rulings tend also to favour the ‘inside IR35’ result. It is unlikely HMRC would accept this with the same face value for a role-based ‘outside IR35’ blanket decision. There are therefore a number of additional questions which need to be addressed for this approach to be applied fairly, whether inside or outside IR35, and until such time, we would disagree with role-based decisions being applied.

  • What sample size is needed to make the initial assessment of a role-based decision?
  • Will HMRC use clear criteria (other than the decision that was made) for their inspectors to determine if the role-based decision is to be accepted or denied at face value?
  • Will HMRC provide guidance for when a role-based assessment is or is not appropriate for agencies and end clients to use?

In May 2017 an IR35 Update was issued by NHS Improvement (NHSI), which stated that making blanket decisions regarding IR35 status was not the correct approach and that decisions should be made on a “case-by-case-basis”. President of the Locum Doctors Union, Dr Benedict Itsuokor, said at the time:

“Following the U-turn in May, the feeling was that the fair and lawful implementation of IR35 within the NHS had been resolved amicably to all stakeholders’ satisfaction…However, our members are reporting instances of IR35 being applied without the necessary assessments of individuals workers’ status.”

Nigel Nordone
Written by
Nigel Nordone
Nigel Nordone is the Head of Tax at Qdos, after working for HMRC for over 20 years as a tax inspector. We’ve decided to forgive him for this little transgression as his knowledge of how HMRC handle enquiries and compliance checks is really beneficial for both Qdos and our clients. Nigel specialises in employment status and has personally represented hundreds of clients who have been subject to a HMRC IR35/employment status enquiry.

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