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IR35 Legislation

The intermediaries legislation (known as IR35) is ‘a set of rules that affect your tax and National Insurance contributions if you’re contracted to work for a client through an intermediary’ i.e. limited company or personal service company. The Government is implementing new legislation coming in to effect on Friday  6th April 2017 which moves the responsibility such that the public sector client decides whether your assignment will be inside or outside of IR35. 
 
If you operate as a limited company or a Personal Services company, the changes to the legislation will affect you.
 
For timesheet deadlines inside IR 35, click here.
 
How will the changes to IR35 legislation affect me?

The Government is implementing new legislation which moves the responsibility such that the public sector client decides whether your assignment will be inside or outside IR35.
If the IR35 rules do apply, the public sector client, agency or third party responsible for paying the PSC (“Fee Payer”) must deduct and pay the associated employment taxes and NICs to HMRC on your behalf. HMRC has advised Fee Payers to apply the basic rate tax code (using a starter declaration C form (as this will be considered a secondary employment)).

The Government will also be removing the 5% deduction currently allowed to PSCs for notional expenses.

What has not changed is that the legislation does not create any new pension or employment related obligations for the Fee Payer. For example, you won’t be able to start claiming statutory sick pay, maternity pay etc.

How will I know if I am considered inside or outside IR35?

The IR35 rules themselves haven’t changed – only the responsibility for making the decision has. However, HMRC has also released a status tool: https://www.gov.uk/guidance/check-employment-status-for-tax which is intended to help parties decide IR35 status.

Factors seen as relevant to whether the rules apply include whether the healthcare worker:
  • has to work at the client’s office/location;
  • is required to work specific shift patterns; 
  • uses the client’s equipment for the assignment;
  • is in charge of leading a team or part of a team.
Also of particular importance is whether there is a right of substitution of the healthcare worker by the PSC. Our clients all select “specific” healthcare workers based on cvs/experience/compliance and would not accept a substitution by their PSC – relevant to bringing the healthcare worker inside IR35.

Another key test is whether the client has the right to supervise, direct or control the healthcare worker – all Frameworks under which we supply healthcare workers confirm this is the case – again, relevant to bringing the worker inside IR35.

The online tool also includes a question around whether expenses may be claimed and how this might indicate being outside IR35. As the tool specifically states that this doesn’t include any expenses (food/accommodation for example) incurred by being away from home for the engagement, or commuting costs, this would be irrelevant to the majority of our healthcare workers.

What feedback have you received from your NHS clients?

To date, all communications we have received from NHS Trusts confirm that temporary healthcare workers provided through a PSC will be considered “inside IR35” for all payments made after April 5th 2017 and they have asked us to amend our processes to reflect this.

They have also stated that there will be no increase to overall rates paid.
 
Timesheet deadlines IR35 - NHS Clients
 
What if I disagree with an NHS Trust about the IR35 status of an assignment?

The NHS Trusts we work with have, to date, been very clear on how they view a temporary healthcare worker assignment and the online test and other guidance do support the view that the majority of assignments will fall within IR35. However, if you have a particular circumstance which you think places your assignment outside of IR35 you will need to advise the client. Please contact us in the first instance and we can advise you how to contact the Trust directly.

What next?

We will still be able to offer you all of the same great job opportunities and we are continuing to work closely with all of our NHS clients, other agencies and DE providers to ensure we make the transition as smooth as possible for you. We will advise you of any further updates we receive which will affect your assignments.

For those of you working solely on temporary contracts in the public sector, you may feel there is less incentive to continue working as a PSC, especially with all the associated administration, inability to claim travel and subsistence relief etc. Please do discuss this in more detail with your accountant so you can make an informed decision. You may also wish to review the information HMRC provides on their website as regards off-payroll working: https://www.gov.uk/guidance/off-payroll-working-in-the-public-sector-personal-service-companies.

We have also received some queries from our healthcare workers about working through umbrella companies. Again, please do discuss the advantages and disadvantages of this option with your accountant and ensure you obtain detailed information from any umbrella company as to their charges, and what is included. In our experience, umbrella companies still operate PAYE but there is also an additional weekly fee to pay. Do bear in mind also that some clients (such as those operating DE) may choose to operate via their payroll only and will not accommodate umbrella companies. Your recruiter will be able to advise you.

Please also note that Holt Doctors will be operating a free PAYE twice weekly payroll for payments made after 6th April 2017.

Changing my status from PSC to PAYE

If you wish to change your status from PSC to PAYE please let your recruiter know as soon as possible.

For Direct Engagement contracts
If we have not received any such notification from you by 26th March then we will assume your healthcare worker wishes to continue being paid as a PSC for payments made after 5th April 2017.

For non Direct Engagement Contracts
If we have not received any such notification from you by 2nd April then we will assume your healthcare worker wishes to continue being paid as a PSC for payments made after 5th April 2017

A final reminder...
Remember - all payments made after 5th April 2017, regardless of when the work was completed, will come under the new legislation. Please continue to send your authorised timesheets as quickly as possible.

If you have any queries in relation to the above, please contact your recruiter on 0208 099 6943. In the meantime, we will continue to share any further information we can.