What is IR35?
IR35 is tax legislation that is designed to combat what the government see as tax avoidance by workers that supply their services to clients, via an intermediary (such as a limited company) but who would be an employee, if the intermediary was not used.
Basically, if you are a limited company contractor, working very much like a permanent employee of your client as opposed to having more of a business to business relationship, then the HMRC sees it that you should be paying the same tax as a permanent employee.
How do I know if I am “inside” or “outside” IR35?
HMRC’s much awaited ‘digital tool’ has gone live. The tool is HMRC’s attempt to make it easier for everyone to assess whether IR35 applies to a particular contract and can be found at https://www.gov.uk/guidance/check-employment-status-for-tax (please note this tool is still showing as “BETA” stage so could be subject to amendments).
However, as it stands, the NHS Trusts are all signing up to state that they feel, ALL contractors in the NHS are “inside IR35” and therefore should be paying PAYE Tax and National Insurances.
The main criteria they have seemed to use to assess this is:
- The Contractor is supervised to some degree (Clinical Lead/Clinical Director/Medical Director/Consultant/Nurse Manager/Ward Manager)
- The Contractor would not be able to send a replacement in to provide the same service, if they fell ill or took leave from the contract
- The Contractor has to use the tools, systems and equipment provided to them by the NHS
Does this mean locum workers should go into permanent roles?
By taking a permanent role you would lose the advantages of being a locum. These advantages include:
- Being paid well for the hours you are happy to work and agree to work not the NHS contracted hours for permanent staff.(ie choose your own rota)
- Having control of your own salary and when you are paid (ie weekly instead of monthly)
- The flexibility of choosing where, when and how frequently you work;
- Greater and faster access to try new specialities,
- The chance to progress up the career ladder using your experience, not NHS defined training programmes
- The chance to try new hospital environments and life in new cities
- The chance to try a hospital and department as a locum, before considering if you could work their permanently (Temporary to Permanent)
- Shorter notice period (typically 1 week) if you want to leave a post and try something new
How much money will be deducted from my pay, after April 6th, in tax and National Insurance?
We won’t know that until we receive further clarification from the government next month. However PAYE and National Insurance contributions will need to be deducted. These rates will depend on your annual income and tax code.
Click below to view some example take home pay options:
What happens if, in my current locum contract, I am paid by the NHS using one of their many Direct Engagement models?
The vast majority of NHS Trusts now use Direct Engagement models to pay locum workers. There are a variety of these models and they include, but are not limited to, 24/7 Time, Staff flow, TempRE, LMS, Brookson, Comensure, NHS Professionals, Talent, HCL Skill Stream and Medacs Envoy.
These Direct Engagement models, where the NHS Trust pay you, have all advised that they will deduct PAYE and National Insurance from locum worker payments from the 6th April. These NHS Trusts and Direct Engagement Models have a duty to inform you of these deductions. If you have not heard any information from the Trust please let us know and we can find out when they are planning to inform you.
What happens if I send a timesheet in, after 6th April, for work done prior to 6th April?
HMRC have stated that Tax and NI needs to be deducted from any timesheets paid after 6th April, regardless of when the work was completed.
We urge all locum workers to go through any outstanding timesheets for work completed prior to 6th April, and ensure they are submitted to National Locums (or the Direct Engagement portals) no later than Friday 31st March.
What happens if I use an Umbrella Company
Contractors that use an Umbrella Company already have NI and Tax deducted when paid, so nothing will change for you
Do the new rules apply to all recruitment agencies?
Yes. Any agency providing contract workers to the public sector have to deduct Tax and NI.
What can National Locums do to help me?
National Locums have been working with a number of PSC and Umbrella providers in order to ensure you continue to maximise your earnings and career.
We have been able to negotiate preferential rates with the following providers. Click on each logo for more information: