NHS Digital owe £4.3 million for getting IR35 wrong

[krytonsheep]

"Up to December 2018, we assessed all contractors using the toolkit supplied by HMRC. From January 2019, we are now making an initial assessment internally. Any contractors considered to be outside of scope are then being assessed by an external provider.

Following the implementation of the new rules for IR35 introduced for the public sector in April 2017, we undertook a considered assessment of the status for each individual contractor which we believed met the HMRC requirements. However, HMRC have challenged our assessment. We have been in extensive discussions but now consider it appropriate to acknowledge their position and create an accrual covering the period from 1 April 2017 to 31 December 2018. This accrual is £4.3 million including interest and penalties.

Page 103
NHS digital annual report and accounts 2018/2019

[SimonMac]

I suppose it’s just going to fuel the blanket inside assessments, why take the potential hassle of a HMRC claim when they can make it all go away with a single determination

[TwoWolves]

NHS Digital just took one for the team I guess.

Awaiting more show executions.

[krytonsheep]

I suppose it’s just going to fuel the blanket inside assessments, why take the potential hassle of a HMRC claim when they can make it all go away with a single determination

Yep, in this case they've obviously tried to do everything right, but HMRC weren't happy with the assessment.

When it says "we assessed all contractors using the toolkit supplied by HMRC. " I wonder if it means the CEST tool? Might half explain why they're bringing out a new one.

[swamp]

Did NHS Digital engage contractors directly, or via agency?

If the latter then surely no liability on NHS Digital?

[krytonsheep]

Did NHS Digital engage contractors directly, or via agency?

In the document it doesn't really say, except for their Chief Commercial Officer. "...is a contractor and the salary is calculated based on the day rate he receives from the recruitment agency"

[JoJoGabor]

So money gets taken from the government (NHS) to go to Government (HMRC) - can anyone see the idiocy in this? Its all for show to scare companies into caving into the IR35 risk

[SimonMac]

Did NHS Digital engage contractors directly, or via agency?

If the latter then surely no liability on NHS Digital?

They come through Hays, unless they are Outcome based through the DOS framework where people can apply direct via Statement of Works

[Sparky25]

Did NHS Digital engage contractors directly, or via agency?

If the latter then surely no liability on NHS Digital?

I can tell you with absolute certainty that NHS digital had to go through captia and any agency engaging with NHS digital had to deal with capita and the framework they had in place, then there is a very convoluted process to go through. Several contractors rejected the contract multiple times and had to have it changed. the CEST tool was then run. Normal IR35 checks carried out and working practises altered to compensate. Some people just accepted the contract they were given at first.. That was a mistake. They also used Mastek to get people in and sometimes contracts were sold to them to administer.

[krytonsheep]

Did NHS Digital engage contractors directly, or via agency? If the latter then surely no liability on NHS Digital?

This is the bit I didn't understand.

But having a read of an article on contractor UK

IR35 liability from April 2020: Who’s liable, for what and when?

It says

"Let’s take the four-party chain in Example A, but this time, if the end client fails to inform the employment agency as to what they have determined about the worker's IR35 status to be, unless and until they pass on that information, the end-client will be responsible for operating PAYE, rather than the agency.

The same applies to longer chains, with liability resting with the entity that fails to pass on the IR35 determination message."

That sounds like if the client gets the IR35 assessment wrong, then they are liable, not the agency ( as it was the end client who passed on the wrong message).