The regulator for NHS trusts and foundation trusts has revised its guidance on the application of IR35 tax rule changes for NHS agency staff, including doctors and nurses, stating that each case should be treated on an individual basis.
The IR35 tax rule changes, which came into force on 6 April 2017, shifted the responsibility for assessing whether IR35 applies from individuals to providers, meaning that for the first time public sector bodies, including the NHS, fire service and police, would have to treat contractors as PAYE staff.
Following weeks of dispute over the new payment arrangements, the regulator, NHS Improvement, has now changed its guidance on IR35.
‘Our priority is to help encourage NHS providers to ensure that agency staff pay the correct tax, and following conversations with the sector we’ve updated and amended our guidance. This is to ensure that there is no ambiguity in what trusts are expected to do,’ the NHS Improvement guidance for NHS trusts states.
‘You should not assume that all agency staff will fall inside IR35; please assess whether or not the IR35 rules apply on a case by case basis.
‘Where there are cases of ambiguity you should seek expert advice or approach HMRC, who also have an easy online toolkit for guidance.’
The changes to the tax rules only affect public sector contractors at this stage, although the last government did not rule out extending the scope of the rules to the private sector.
IR35 rules are complex and all NHS trusts will have to review their current policy.
Stephen Usher, Director at KPP, said: ‘If IR35 is found to apply, income tax and NICs will be deducted from the contractor’s payroll as if they were a PAYE employee. The tightening of rules around intermediaries means that employers’ NICs in particular will have to be paid where it was probably not before.
‘In addition to this while workers falling under IR35 are currently allowed a 5% allowance deduction to cover expenses and additional costs incurred when running a business, from the April implementation date this will no longer apply to public authority contracts.’
Under the intermediary rules, where the intermediary provides a worker to an end client who is defined as a public authority then that end client, or employment agency, will be responsible for the operation of PAYE/national insurance contributions (NICs) on any payments made to the intermediary, HMRC guidance states.
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