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Dave Chaplin, CEO of Contractor Calculator, points out that there are husband and wife teams where one is the locum who earns the fees (say £65 per hour) whilst the other takes care of all the administration, accounting, agency liaison and legal contract work.
Between them they jointly own the limited company and share the income they receive. They will now need to raise the rate of the locum by 53 per cent to earn the same money after tax if the locum is now classed as being caught by IR35.
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Mr Chaplin said: “Increasing the locums’ rates is, for Government, actually a tax neutral measure. The NHS hands that extra money to the locums, and they hand it straight back to the Treasury via the extra taxes. Provided the Treasury then circulates it back to the NHS there will be no change.
“And if the Treasury doesn’t hand the money back to the NHS, you’ll see a massive drain on the already stretched NHS. They will be the losers. These IR35 reforms could end up being a massive tax on the NHS.”
More chaos
A report in the Telegraph states that a number of locum doctors have not been turning up for their shifts in protest against the new legislation.
Mr Chaplin said: “The NHS wants to have its cake and eat it. The whole point of temporary working is that it is just that. There is no obligation on either party. They are used on an on-demand basis. If you want people to be available when you want them, then you need to hire them as employees and provide them with all the rights and benefits that come with employee status.
"The NHS is expecting these locums to work when they want them to – which is how employees work – and to make them pay taxes as employees. It is not acceptable and this is just the tip of the iceberg as more chaos will unfold and HMRC’s poor implementation has been the catalyst for that chaos.
"We are seeing a mess unfolding as public sector hirers grapple with the new legislation and contractors and others in the supply chain are being thrown into turmoil due to the uncertainty being created by these reforms. All of this could have been avoided if HMRC had actually listened to stakeholders.”
Further information
More information about the IR35 changes in the public sector is available in the News on IR35 section of Shout99.
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Susie Hughes © Shout99 2017
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