Healthcare workers have warned of a backlash of locum workers leaving the NHS if trust push ahead with “unfair” application of IR35. Research published by the Independent Healthcare Professionals Association (IHPA), which represents locums, shows the extent of the damage already being inflicted on the NHS by last April’s public sector IR35 reforms, with 98% of healthcare workers saying that they would look for work outside the NHS if they were deemed inside IR35.
The sweeping changes to the way IR35 operates saw many NHS trusts bring in blanket decisions that all contract staff, including locum doctors and nurses, would be treated as being inside IR35. This meant that they would pay tax and National Insurance as though they were employees, despite not receiving the benefits that come with employment. This leaves healthcare workers – who will often travel long distances to fill in at different hospitals and have expense for legally required medical indemnity insurance and professional training – seriously out of pocket, since they cannot claim these expenses against tax if deemed inside IR35.
Trusts initially made the blanket decisions after NHS Improvement, which sets standards and policies across the NHS, issued guidance in the run-up to April 2017. Locums groups including the Medical Locums Union and IHPA challenged the decision and convinced NHS Improvement to reverse their advice, on the grounds that the law requires a decision based on each contract’s terms and working conditions. Many trusts are still applying blanket decisions however, and the IHPA continues to challenge these.
The new research from IHPA surveyed both locums and the public, and undermines the arguments HMRC uses to support changes to IR35. The taxman explains IR35 as making sure that people doing the same job pay the same tax, and this line has led to public support for their position. The survey found however that 73% of the public did not know that locum doctors do not receive paid holiday, parental leave, or pension rights. When informed of the differences in conditions, a majority agreed that locums should receive higher take-home pay than employed staff.
A second finding shatters the Revenue’s claim that IR35 changes have no impact on public services. 87% of locums surveyed said that they would turn down work if it was inside IR35 on top of this nearly all (98%) would look at working outside the NHS, if they were held to be inside IR35, with many considering working abroad. Faced with this response, trusts could find themselves unable to fill staffing gaps, or having to pay extra to compensate for the tax loss of IR35, either way HMRC’s claim of no impact doesn’t hold water.
Doctors unions will continue to fight against unfair blanket applications of IR35, but the message for government should be clear as they consult on extending the changes to the private sector. Draconian rules that see contractors taxed as employees without getting the benefits of employees risk driving the best talent out of thriving industries, or even out of the country.