The Government and HMRC have recently implemented changes to the IR35 legislation that affect the way people working for the NHS and other public bodies are taxed. This affects candidates working via PSCs/limited companies.
Roles that fall within IR35 are subject to PAYE income tax and National Insurance contributions. There are a few important things you should know about the recent changes:
- The NHS trust will determine whether or not a role falls within IR35. Recently released guidance from NHS Improvement clarifies that trusts must assess a worker’s IR35 status on a case-by-case basis.
- For roles falling within IR35, it will be necessary to deduct tax and NICs at source, prior to payment being made to your PSC (similar to PAYE).
- These changes will apply to all payments processed on or after 6th April 2017, regardless of when the work took place.
- Subject to each trust’s agreement, you will still be able to be paid via a PSC, but most of the current tax benefits will be lost.
What is ID Medical doing about IR35?
It is likely that, for many candidates, these changes will increase tax and National Insurance liability and could therefore significantly impact pay. As a result, we are:
- Working with a number of PSC and umbrella providers to explore what terms could work best for you moving forward.
- Working with our NHS clients to minimise any impact to your pay.
- Liaising with our industry lobbying group to ensure your best interests are represented to Government.
Trusts have received guidance from NHS Improvement clarifying that they must conduct case-by-case IR35 assessments. We are working with our candidates to deliver HMRC Employment Status test results to their trusts to facilitate this process. While trusts are not able to apply a blanket IR35 rule, we do expect that many roles will fall within IR35 after an individual assessment has been performed.
Please be aware that this legislation will affect every NHS trust and every agency supplying staff to the NHS. If you have questions about your specific situation with relation to IR35, we recommend seeking the advice of an accountant with IR35 experience.
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Frequently Asked Questions
What is IR35?
IR35 is a series of tests that determine the tax status of contractors working through personal service companies (PSCs) like limited companies. These tests include whether there is financial risk to the worker, whether they have the right of substitution, and whether the role is subject to supervision, direction, and control. IR35 is designed to ensure that workers pay the correct amount of tax and National Insurance Contributions (NICs).
How do I know if I’m caught by IR35?
Although trusts are expected to assess roles individually, we expect most, if not all, temporary healthcare roles are caught by IR35. Your trust will make a determination about the role’s IR35 status for each individual.
What happens if I am caught by IR35?
If your position falls within IR35, you will no longer be able to be paid gross into your PSC. Instead, you will be paid net, after the deduction of applicable tax and NICs. You can also choose to be paid PAYE by ID Medical or via an umbrella company. There is more information about these options below and here.
What if I don’t agree with a trust’s assessment of my IR35 status?
Your first step should be to complete HMRC’s online Employment Status Test, available here. Make sure to answer the questions as honestly as you can, as responses could be challenged. If your test results show that you aren’t caught by IR35, you will be able to appeal the trust’s decision.
What will ID Medical do to help me if I want to appeal against my IR35 status?
We are committed to supporting all of our candidates and will provide whatever assistance we can with reasonable appeals. The first thing you’ll need to do is to forward your recruitment consultant a PDF of your Employment Status Tool results. They will get in touch to further discuss the details.
Why should I keep working through an agency?
Working through an agency offers a wide range of advantages over substantive or bank working – even after IR35 has come into effect. Agency workers earn on average 40-50% more than their substantive equivalents (PAYE). Bank working may offer rates that are initially comparable to agency rates, but many banks only offer these as a joining incentive. Bank workers also frequently experience payment difficulties. Agency work offers the best selection of shifts and much easier payment. Additionally, ID Medical is always negotiating on your behalf to improve your rates. With agency work, you retain the flexibility of working where you want, when you want, while having the opportunity to grow your pay and improve your work-life balance.
Working with ID Medical offers benefits above and beyond most agencies. From a dedicated recruitment consultant ready to help you to support with CPD courses and revalidation, we offer some of the best perks in the business.
I want to continue working as a limited company. What happens next?
Trusts have received very clear guidance from NHS Improvement encouraging them to no longer allow working through PSCs. Should the trust you work with allow you to work via a PSC, we will deduct PAYE tax and National Insurance, and Employer’s National Insurance contributions in accordance with IR35 prior to making payment to your PSC.
Should I go with an umbrella or PAYE?
Both of these are options for you moving forward. For more information on working via an umbrella company, we recommend you request a call back from one of the companies on our Preferred Supplier List. If you work in a many trusts, working via an umbrella company may simplify your year-end accounting. Working PAYE guarantees your IR35 compliance, meaning you will be able to work in any trust. Most candidates working PAYE will also benefit from our daily pay runs and in-house query resolution.
I want to move to PAYE. What do I do next?
Get in touch with your recruitment consultant to let them know. We’ll send you an email requesting updated bank details and get everything arranged for the 6th April changeover date. Keep in mind that if you close your limited company bank account, we will not be able to pay your limited company up until the 6th of April.
I have seen some amazing umbrella deals online that claim to make it possible for me to take home as much as 90% of my gross pay. Is this true?
We would urge you to be cautious when choosing an umbrella company. There are umbrella companies utilise methods like loans, “marketing credits”, “profit sharing” bonuses, and other questionable practices to promise such high pay. HMRC is pursuing these companies, which could mean big unpaid tax bills for individuals working through them. HMRC can also apply these penalties retrospectively.
I have chosen an umbrella provider. What do I need to do now?
Let us know your choice. If they are on our Preferred Supplier List, that’s all we need. Otherwise, please ask your umbrella provider to send us their welcome pack.
While we encourage you to select a provider from our Preferred Supplier List, we do understand that you may wish to work with another umbrella supplier. In order to ensure the best possible service and compliance, ID Medical reserves the right to refuse to work with umbrella suppliers who do not meet a minimum standard.
What will happen with my pension?
If you are paid PAYE through ID Medical you will, after three months of active working, be automatically enrolled in our pension scheme. You can always opt out if you would prefer not to participate. If you would like more information on the ID Medical pension scheme, please email us on IR35.firstname.lastname@example.org.
If you choose to work through an umbrella company, we encourage you to request pension information from them directly. If you currently have an NHS pension, we recommend you contact your pension administrator to get the best advice on your available options. NHS pensions can be frozen and reopened at a later date.
What about my expenses?
You will still be able to claim valid expenses under IR35. Your accountant will be able to tell you which expenses you can claim and how best to do so.
If you have questions, please contact us on IR35.email@example.com
What comes next?
The new legislation came into effect on 6th April 2017. We continue to work with industry bodies to clarify existing IR35 guidance and represent our candidates’ needs to trusts across the country.
If you have questions, please contact us on IR35.firstname.lastname@example.org