Posted by Steve Tucker on May 29, 2017
NHS watchdogs have backed down in a row with locum doctors, performing a u-turn over new tax rules.
The NHS, like other public bodies, is having to grapple with new rules introduced from 6 April 2017 that force it to judge whether any third party contractors they engage are caught within the “IR35” rules, designed to tackle disguised employment.
Before April, individuals providing their freelance services to the NHS through their own companies could decide for themselves whether the rules applied - but have now lost this say on their employment status.
But the NHS has effectively now been saddled with a task for which it has no prior technical knowledge or expertise. IR35 is a complex set of rules concerning employment status that have evolved under case law over the last 100 years. To help with the task of determining employment status, the tax office has provided an online status tool.
The complexity of the rules led NHS managers to ‘play it safe’ and deduct PAYE and NIC in most circumstances, in accordance with guidance from the regulator, meaning many contractors felt unfairly taxed.
This led to a backlash from locum doctors, threatening to withdraw their services unless they were compensated with increased pay to offset the tax. In addition, there had been legal threats from unions representing locum doctors and nurses.
The NHS regulator has now been forced to perform a U-turn on its earlier guidance.
NHS Improvement has issued new guidance advising trusts to examine each case on an individual basis, before deciding whether agency workers were caught by IR35.
Earlier this year locum doctors were warned that they could be struck off if they cancelled shifts in an attempt to force the NHS to pay them more.
The General Medical Council issued guidance after agency workers threatened to cancel shifts at late notice, in what was dubbed a “Mexican standoff” over rates of locum pay.
This is an ongoing issue, and we will keep an eye on how it develops.