ir35 implications for NHS agency nurses

The IR35 is a change to tax legislation that came into effect from 6th April 2000. This legislation was brought in to combat tax avoidance and identify those who are not paying the tax they should be paying.

The most common form of intermediaries are employment agencies – they provide people with regular hours, but due to the 0 hour contracts and agency nature of the work, employees have the flexibility to accept and decline the shifts they want. As businesses increasingly use intermediaries to get high quality skilled workers at short notice, employment agencies have an important role in the UK’s economy.

NHS agency staff and the IR35 reformation

The NHS is the largest and oldest publicly funded health organisation in the world, and was first founded on 5 July 1948, catering to a population of 54.3 million. It is the biggest part of the UK’s system, and employs roughly 1.2 million people. Due to the ever increasing patient demand and turnover, the NHS started employing agency workers to help cope with staff shortages. By utilising agency services, they were then able to maximise their workforce at incredibly short notice, and agency staff could pick and choose their shifts suited to their own availability.

As of April 6th 2017, the IR35 constitution was reformed in order to identify those claiming to be freelance or self-employed whilst obtaining work through an intermediary. Between 2015-2016 the NHS spent £3.7 billion on agency Doctors, Nurses and other ad-hoc staff to fill in the gaps. Since 2015, caps had been introduced in order to decrease the NHS’s spend on agency staff, whilst maintaining a strong skillset.

What does the new reformation entail?

The reformation means that PSC contractors working in the public sector no longer get a say if the IR35 ‘intermediaries legislation’ applies to them and, as a consequence of this, those contracted under freelance or self-employed tax codes will receive less take home pay. It is thought that those who have been using the former loophole are now expected to take 30% less in their take home pay. Those who formerly stated they were freelance in order to defer and claim back taxes whilst using intermediaries to get work are no longer able to do so.

Moving forward, employment agencies are now responsible for deducting and paying employment taxes and National Insurance contributions (NICs) to the tax authority, as they are now treated as employers. However, agencies are not obliged to provide employment rights such as sick pay.

Who will be affected by the IR35 reformation?

Those public sector will feel the most impact of this reformation, and it is predicted that we will see a shift in agency staff working public services going private, as private tax works on different bandings. The change in taxes will affect the following:

  • Transport for London
  • Police
  • Armed Forces
  • Central and Local Government
  • NHS

The NHS will be the public service most affected by the reformation, due its magnitude and the scale of agency staff working for them. However, for agency staff already complying with these regulations, they will not be affected.

What is being done about it?

With the upcoming election, it leaves very little time for the complex changes the IR35 requires to be fully audited. This means the focus is only on “essential” measures, and processes that should take days will be squeezed into one.

A government petition received over 37,000 signatures, as agency employees are concerned that they will not only lose out on take home pay but will not receive any rights or benefits of a staff employee. It will be interesting to see just how the IR35 reforms affect future agency employees working for the NHS – will it have a big impact? Or are more agency staff claiming under the correct tax bracket? Could this have an effect on nursing courses in the future? It will be a while until we can truly measure the impact of the IR35 reformations, but one thing is for sure – the NHS will always need agency nurses.