PSCs to abandon NHS IT project over IR35 changes

Thirty PSC contactors will abandon an overrun £16.5million health service IT project after a NHS trust said it would declare them all inside IR35 from April 6th, ContractorUK has learnt.

Rather than stay and accept the trust’s decision, or avoid it but pay more tax by becoming PAYE umbrella staff, the 30 are set to move as one team to an end-user outside of the rules.

Their imminent exit is a blow to Guy’s & St Thomas’ (GSTT), the London NHS trust where they work, which has told agencies its “view…that all [PSC] positions...will fall within IR35”.

‘None of us are contemplating staying’

In fact, the trust has already overrun with an XP to Windows 10 migration project, meant to have been live in October 2016 but, at the time of writing, it is only about 30% complete.

“XP is no longer stable and no longer supported by Microsoft,” said a techie familiar with the trust’s project. “GSTT needs a Windows 10 rollout to protect their networks and operations.”   

However, “none of us are contemplating staying” one PSC on the project said, even referring to the project’s senior team leaders, all of whom are understood to operate via their own PSC.

‘Reviewed the timetable’

The trust, which has spent £10.6m of the project’s £16.5m budget, yesterday told ContractorUK that the migration will finish this autumn, having now “reviewed the timetable”.

But two other actions that Guy’s & St Thomas’ have taken appear to have jeopardised its chances of retaining PSC workers and their IT skills that the project desperately needs.  

Firstly, it curtailed the existing contracts some of its PSCs were on from a few months beyond the rules’ commencement date (April 6th), to just before -- March 31st.

Secondly, added a GSTT source, it brought a second agency into the contractual chain, to transfer PSCs through it -- away from their original agency -- and via an umbrella company.

Supervision, Direction, Control

In a blow to PSCs wanting to be outside IR35 at the trust until April 5th, the transfer was to be actioned by a new contractual clause stipulating ‘Supervision, Direction and Control’ applied.

Less strict than HMRC’s Supervision, Direction ‘or’ Control (perhaps the contract’s intended wording), the clause would have had the effect of strongly indicating an inside IR35 position.

But it never came about. Documents obtained by ContractorUK show that collective resistance by PSCs and, in part, by the original agency, led to the SDC clause being retracted.

‘No change until April’

“We are pleased to [say that GSTT/the second agency] have agreed to allow… contractors to remain on their current contracts with no change until April”, the first agency said in a memo.

At that point, however, the new agreement (bar the SDC provision) with the second agency is set to take effect, meaning all PSCs who do not leave the NHS trust will become umbrella staff.

The other option that should exist is for the PSC to stay at GSTT but administer the deemed employment rules so, in essence, accepting IR35 applies and paying PAYE and NICs.


But the original agency, which may be unable to process deemed payments, is more exercised by how the trust has decided that rules some 40 days away already apply to its PSCs.

“How this has been concluded ahead of the HMRC tool going live we are not sure and we have sought clarification,” said the agency, sounding distinctly left out of the loop by GSTT. 

But a GSTT spokesman responded last night: “The trust has a legal duty to fulfil HMRC requirements, which take effect from April 2017, and to protect the interests of a publicly-funded service which exists to provide the best care to patients.

“The IR35 rules are not changing; it is the responsibility for enforcing them which switches to public bodies. Ahead of this change, and in response to concerns raised with us by contractors and agencies, it was important to provide clarity and certainty about our approach to enforcement.”

‘Not ideal, worse’

But that approach is ‘not ideal’, a recruiter at an affected agency says, and is ‘worse’ than the approach of other public bodies, a contractor chimed in, alluding to TfL, UK HO and DE&S.

The contractor has been told by his agent that “many” PSCs in the public sector are switching to umbrella companies, although the agent was careful not to explicitly recommend such an action.

The agent said that ‘going brolly’ not only heads off IR35 from April 6th, but also claimed that it heads off HMRC investigating “your [IR35] status for periods worked prior to April 6th.”

A former tax inspector has criticised the positioning of umbrella companies as the only solution for public PSCs post-April 6th, but a new analysis for ContractorUK today shows that such payroll firms are (marginally) the most financially attractive vehicles.  

‘Grinding halt’

But contractors don’t seem convinced -- or at least, they are opting for self-termination over being strong-armed into using a certain umbrella company.

“Our third line IT support [department] are [facing] losing 60 per cent of their workforce who are contractors,” a GSTT insider claimed.

“Quite simply, the trust’s rollout of [Windows 10] will come to a grinding halt in a few weeks because [those teams that can’t migrate wholesale elsewhere] are already looking for alternate roles in the private sector.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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