What does IR35 mean for me?
IR35 is a piece of tax legislation that aims to combat tax avoidance including those who are paid through umbrella companies and intermediaries as ‘disguised employees’. Changes to the legislation that came into effect on 6th April 2017 have had major implications in the way in which some locums are paid.
Any work completed through Locum’s Nest will be paid via payroll at the trust at which the work was undertaken. At payroll the tax and national insurance will be deducted and hence IR35 will not apply to any of this work and you don’t have to worry about it. Phew!
Many independent locums choose to be paid through their own personal service company. This allows them to draw dividends from the company rather than being paid directly which reduces their tax bill – this is an example of what the legislation is trying to combat.
- Don’t forget that if you are being paid in this way then none of this income is pensionable under the NHS pension
- Some (if not all) hospitals have stopped accepting personal service companies for locums
The onus is on the employer to ensure that the appropriate tax and national insurance is deducted from any payment made for locum work, whereas previously the emphasis was on the intermediary e.g. the locum or their public service company.
- i.e. if they get it wrong then they are liable to pay the equivalent cost of the tax deductions owed to the HMRC
- NHS Improvement guidance is that assessment on whether IR35 applies is on a case by case (and hence role by role) basis. In the NHS improvements guidance it states ‘This consideration must be conducted fairly, accurately and take into account all relevant factors, including representations which may be provided by the individual.’
- If you are deemed as being truly self-employed then IR35 does not apply to you. The following link allows you determine whether in your role (or potential role) you are self-employed: www.gov.uk/guidance/check-employment-status-for-tax
- With the above point in mind, NHS providers are still able to contract with individuals through public service companies
Simple. Right? For more information on the IR35 legislation then please follow the link to the GOV.uk website https://www.gov.uk/topic/business-tax/ir35 and if that doesn’t answer things then get in contact with an accountant - a good one, but then why would you speak to a bad one? We’ll leave the decision up to you….
An interesting perspective on how this policy is having an affect came recently from the Financial Times and is definitely worth a read https://www.ft.com/content/ea7f623c-8f10-11e7-a352-e46f43c5825d