Following the referendum result, a wave of uncertainty regarding the United Kingdom’s future is in the air and a large part of the country is still reeling from the decision. However, all businesses are gearing themselves for a prolonged period of readjustment under the leadership of new Prime Minister Theresa May and Chancellor Philip Hammond.
Recent communication rolled out by the NHS
In a dramatic turn of events, several NHS trusts have started circulating letters directly to doctors who work through PSCs. The written communication emphasizes on IR35 compliance and proposed changes from April 2017 suggesting: “either not to contract with personal service companies or to deduct tax at source on all payments to those companies. The current option of paying gross would lead to an unacceptable risk for the Trust”.
Government’s response on the Committee of Public Accounts conclusion
We are aware of the consultation on IR35 reforms is to close by mid-August. But if we review the Treasury Minutes published yesterday, it seems the government has accepted the committee’s recommendation to implement the new changes from April 2017.
Page 13/21, point 4.1 states:
“Departments should immediately review whether their off-payroll staff should be on PAYE and, after April 2017 that departments review the calculation of tax for a sample of any temporary staff who continue to be contracted as a company.”
This means the government is encouraging public sector bodies such as NHS trusts to make use of deemed payment model and collect supporting assurance/evidence from the Personal Service Companies (PSCs) as requested by the Trust Development Authority in February this year. So yes, the deemed payment model is definitely the “road ahead”!
Tax investigation: crack down on IR35 compliance
Till some time back, it was rather uncommon to hear about doctors getting investigated by HMRC – but not anymore. The most prominent case, perhaps, was of NHS consultant Dr. Samadian who lost the Upper Tribunal hearing in regards to his tax relief expenses a few years ago.
And in the last 2 weeks, we have had several incoming inquiries from doctors who received IR35 investigation notices with a tax bill including penalties for locums dating back to 2011. Even though we kept ourselves abreast of the potential threats to both locum workers and recruitment agencies since 18 months, such HMRC investigations are becoming a reality now.
As always, Bradleys Accountants Ltd will keep you updated regarding any firm news or information we have which directly affects our area of business. But if you would like to have a discussion at any point, please do not hesitate to contact the team on 020 3507 0087.