Due to the dispute over the new payment arrangements, the NHS regulator has revised its guidance on the application of the IR35 tax rule changes for NHS agency staff that includes doctors and nurses.
The NHS Improvement Guidance stated that their priority is to help encourage NHS providers to ensure that the agency staff pay the correct tax. This ensures that there is no ambiguity in what trusts are expected to do. They also mentioned that it is not right to assume that all agency staff will fall inside IR35 and that an assessment is needed as to whether or not the IR35 rules apply on a case by case basis.
NHS trusts will need to review their current policy as the IR35 rules are complex. If IR35 is found to apply, the income tax and NICs will be deducted from the contractor’s payroll as if they were a PAYE employee. The changes in the rule for intermediaries would mean that employers’ NICs will have to be paid whereas it wasn’t paid before.
Additionally, NHS agency staff are currently allowed a 5% allowance deduction to cover expenses and additional costs incurred when running a business but when the IR35 applies to them, this will no longer be the case.