IR35 legislation - changes for PSC workers April 2017
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).
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 claim statutory sick pay, maternity pay etc.
How will I know if I am considered inside or outside IR35?
The IR35 rules themselves didn't change – only the responsibility for making the decision. HMRC released a status tool 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.
Feedback from NHS clients
Since the new legislation was implemented, all assignments we have received from NHS Trusts have been confirmed as “inside IR35” and our processes have been amended to reflect this.
Our NHS clients and the Frameworks have also said that they expect to see support in ensuring that overall rates do not increase due to these changes.
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 assignments 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.
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.
We have received some queries about employee NI where the healthcare worker already works full time. Please refer to the link below regarding reduced employee NI rates which can be authorised by HMRC for additional/secondary employment (at present this can result in a rate of 2% rather than 12%). The form (online or paper) permits more than one additional employer to be noted and should be applied for each year - click here to access the form
We have also received some queries from our healthcare workers about working through umbrella companies. Please 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 or may limit which umbrella companies may be used. Your recruiter will be able to advise you.
Please also note that Holt Doctors operates a free PAYE twice weekly payroll for payments.
Changing my status from PSC to PAYE
If you wish to change your status from PSC to PAYE simply let your recruiter know.
If you have any queries in relation to the above, please do get in touch on 0208 099 6943 or email us here. We will continue to share any further information we can.