Agency Nurses Pay & IR35 in the Private Sector

Last week HMRC announced its plans to push ahead and roll out the IR35 off payroll rules into the private sector from April 2020. These rules came into the public sector in April 2017 and have had a huge impact on agency nurses pay and agency healthcare professionals pay.

IR35 Rules

Pre April 2017 contractors working through their personal service companies could decide if the IR35 rules applied to them and make their own IR35 status decision. Post April 2017 the new rules moved the IR35 decision away from the contractor to the PSB ( Public Sector Body). This for most agency nurses and healthcare workers means the NHS decides if a healthcare worker falls inside IR35 meaning tax and national insurance must be deducted at source when the agency worker is paid. This in turn has had a huge impact on agency nurses pay in the public sector.

To aid the IR35 decision making process HMRC released an online tool called CEST ( check employment status tool). There has been wide spread criticism of this tool as it does not take into account all relevant scenarios, is far to simplistic or align with current tax case law. The tool in many cases is unable to make an IR35 status decision.

As a result of CEST not being fit for purposes many agency workers have been forced onto payroll and deemed inside IR35 when in fact they could be genuinely be self employed and fall outside IR35.

So how do the proposed April 2020 rules effect agency nurses pay and healthcare workers pay  in the private sector?

If the IR35 rules are rolled out as planned into the private sector any agency nurse or healthcare worker working for a private company ( medium or large in size ) through their PSC ( personal service company) will have their tax status decided by the end client. The contractor or agency nurse will no longer be able to make their own IR35 status decision. This will mirror what is now happening in the public sector since April 2017.

Will the agency worker working in the private sector be able to challenge the end clients decision?

This is currently one of the major issues with the public sector and with the proposed new rules. Under the proposed plan the contractor will  have to receive an IR35 status decision and the reasoning behind the decision. The contractor may challenge the decision and the end client will have 45 days to reply. The issues is there is no appeal process if the contractor is still not satisfied with the end result or they feel the incorrect IR35 tax status has been determined. There is also a worry that end clients in order to avoid any potential tax risk or tax exposure they will blanket contractors inside IR35 forcing them into an employment status without any employment rights. Nursing Personnel has seen this happen in the public sector.

If you are working for a private medium or large company as an agency nurse or agency healthcare worker and being paid through your PSC  this proposed new legislation could have a high impact on your business and earnings. You would be advised to take professional advice from your account or tax adviser. If the proposed legislation is passed the new rules will have a big impact on your earnings and the way you are currently being paid.

For more information on the new rules visit the government website by clicking here.