Spike in IR35 reviews in wake of NHS 'off-payroll' probe
A flurry of requests for IR35 reviews from contractors working in the public sector was yesterday reported by an accountancy firm.
ClearSky Contractor Accounting attributed the sudden increase in demand for such contract reviews to fresh controversy over the use of ‘off-payroll’ arrangements within the NHS.
An investigation by Monitor, the body that regulates health services in England, found that 86 individuals working at NHS foundation trusts could be investigated over their use of personal service companies.
That’s because although the 86 have been asked by the foundations they work at to provide assurances over their tax position, as guidance obliges them to, the workers were yet to give such assurances as of January 2014.
Seeming aware that the taxman could investigate them and the 21 different trusts they work at, in order to reclaim any dodged income tax and NICs, other public sector contractors appear to be taking steps to avoid the same fate.
“National media coverage of Monitor’s findings seems to have jolted many public-sector contractors into action,” said ClearSky’s Mairi Bowen, reflecting on the spike in requests for IR35 reviews.
“A lot of assignments in the public sphere are reaching the six-month point. Contractors in this situation, who earn more than £220 a day and work at a non-board level, should be looking to provide assurances to the government department or public body that is engaging them.”
Similar to Monitor, which suggests its probe shows a respectful awareness of the off-payroll rules and guidance, Bowen believes contractors being “pro-active” shows they are “getting to grips” with their obligations.
They may also be seeking to protect themselves out of fear: HM Revenue & Customs can impose interest on top of any tax it deems to have been avoided, additional to penalties of up to 100% for deliberate concealment.
The workers’ contracts can also be cancelled by their end-user outfit – in this case NHS trusts, which themselves are being subject to enforcement action by Monitor.
In particular, the regulator said that of 23 trusts it found to have at least one board member or senior member of staff with "significant financial responsibility" still operating via their own PSC, nine will face action.
These trusts have been ‘named and shamed’ by Monitor in its report, but the identities of the 47 PSC users involved have been kept under wraps due to data protection regulations.
Of those trusts yet to meet their obligations, all 14 of them told the regulator they plan to end their off-payroll engagements within the next six months, such as by recruiting afresh or moving the worker onto the payroll.