Latest news blog

Home / News /
NHS U-turn on IR35- Has anything changed?

nhs uturn on ir35 has anything changed

NHS U-turn on IR35- Has anything changed?

NHS has retracted from its earlier decision of blanket assessing all PSCs as inside IR35. So has anything really changed with respect to the new IR35 rules for public sector contractors with PSCs came into force on 6 April 2017? Unfortunately, the answer is NO. In a memo obtained by ContractorUK, the health service regulator has finally admitted that the NHS’s “previous position” that all PSCs are universally caught by IR35 was “not accurate”, but it hasn’t made any difference in general to the status of contractors working in the public sector, it just means it must not be done in an ‘en masse’ manner.

In an update – released on May 29 by NHS Improvement called Working through intermediaries: IR35 update – the NHS revealed it had “anticipated that providers would need to ensure that all locum, agency and bank staff were subject to PAYE and on payroll for the new financial year.”

Furthermore, ContractorUK reporting on the U-turn of NHS highlighted that “Experts and even HMRC had strongly suggested in recent weeks that NHS Improvement was incorrectly applying the rule, which health officials now agree should be applied on a case-by-case basis. NHS Improvement yesterday declined to say how many workers it has lost due to its misapplication of IR35, as did a London hospital which lost upwards of 30 contractors. However, the NHS’s initial stance (that all non-employees were inside IR35) triggered a legal threat by two health worker unions, whose members reportedly stood to lose up to 50% of their incomes.”

Any worker working on short term or long term basis for the public sector has to be assessed for IR35 status and for determining IR35 status, NHS organisations can take the help of the Government’s ESS tool. However this will certainly put administrative challenge on the NHS trusts as they will be required to assess every public sector worker before they turn up for their shift.  Additionally, there are also many that question the accuracy of the information coming out of this ESS tool.

Claire Billenness, Managing Director, Clarity, told Recruiter that “while medics will likely still be caught by the legislation, applying the rules on a case-by-case basis could yet benefit recruiters supplying non-clinical staff such as IT and procurement, administration, project officers into the NHS as they could fall outside of IR35.”

We hope the industry and workers understand that there is no change in their tax payment. If they fall within IR35, they need to pay NI and PAYE under deemed direct payment model. Having said that, umbrella companies can also be one of the solutions to eliminate the risk of IR35 for contractors, agencies and public sector bodies as a contractor employed by an umbrella company already has PAYE and NI deducted. 

If you are still trying to find a way out of the confusion, let's talk over some coffee to discuss the possible solutions. Connect with our payroll experts for free consultation:

Pom Chakravarti: 07870 678 557 |

Kunal Shah: 0758 4651087 |


Share this post
Related posts

Contact us to know how our recruitment experts can help you achieve better results.