The imminent IR35 deadline has thrown up a lot of questions for both healthcare locums and healthcare companies alike. The upcoming changes to off-payroll working were introduced in the public sector four years ago and are now set to be extended to medium and large companies in the private sector.
What is IR35?
IR35 is a piece of legislation designed to tackle tax avoidance from ‘disguised employment’ – where self-employed contractors set up limited companies to pay themselves through dividends, which are not subject to National Insurance. Determining IR35 status can be complex but in basic terms, if a worker is engaged and behaving like an employee, they are “inside IR35” and they have to pay roughly the same tax as an employee would.
Is IR35 just for public sector healthcare companies?
In 2017, the Government and HMRC introduced the IR35 legislation that affected all Limited Company contractors working in the public sector such as hospitals, schools and transport. Now in April 2021 (one year later than planned due to the Coronavirus pandemic), the Government is set to introduce this into the private sector impacting those that work as a Limited Company Contractor or employ independent workers within the private care/ private care home sector.
From 6 April 2021, medium to large businesses engaging independent workers will become responsible for determining and setting the workers’ employment status for tax purposes. In addition to this, the tax liability will also transfer from the contractor to the fee-paying party in the supply chain, which is typically the recruiter or the company that directly engages the individual. ‘Medium or large-sized applies’ to businesses with more than 50 employees and more than £10.2M of revenue – meaning most care homes which are part of a larger organisation will fall into this category.
There is rising concern within the healthcare sector, as many saw in 2017 public-sector clients making sweeping decisions, forcing all their contractors inside IR35, rather than making individual assessments. The resulting drop in income led to many contractors seeking alternative contracts, which led to skills shortages all over the Public Sector. It was reported in 2017 that following the introduction of IR35 to the public sector, locum nurses saw their net income decrease by a third after the blanket IR35 assessments made it impossible for NHS workers to secure outside-IR35 status. A November 2017 study of healthcare locums by ContractorCalculator and the IHPA found 25% to have left the NHS following the IR35 reform, again pinning it on the blanket assessments by NHS trusts.
To avoid this situation, it is important you make the correct decision when placing your health and social care workers insider or outside of IR35. To help with this we have created a dedicated IR35 Hub to guide you through the process which will give you access to:
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Designated IR35 Account Manager
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Free SDS tool access
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Free webinars and training
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360 support in assessing the best options for your business
If you would like one of our team members to get in touch, please email ir35@themcggroup.com.
