In IR35

Following news that broke last week concerning the NHS’ dramatic reversal of its blanket decision to re-designate all locum clinical staff and contracting professionals as inside IR35, the Association of Independent Professionals and the Self-Employed (IPSE) has been exploring what lies behind the U-turn. The answer wasn’t difficult to find: too many locum doctors and contractors are, as predicted, refusing to work for the NHS under its drastic and undiscriminating new IR35 regime.

The blanket policy followed new IR35 rules that came into effect in April. These revised regulations shifted responsibility for determining a freelancer’s IR35 status from the contractor (as had previously been the case and remains so in the private sector) to the public sector body (PSB).

During the legislation’s consultation phase, the proposed change attracted trenchant and widespread opposition from professional bodies representing the staffing industry and contracting professionals. Those condemning it as “unworkable” and “unfair” included Umbrella Company trade associations PRISM and the Freelancer and Contractor Services Association (FCSA) as well as IPSE itself.

IPSE raised serious concerns about how PSB end clients would respond to the change. Its Deputy Director of Policy, Andy Chamberlain, explained: “With hundreds of IR35 decisions to make and the threat of being held financially liable should insufficient tax be deducted, it seemed very likely public sector bodies would take a risk-averse approach.

That is exactly what happened at the NHS. Faced with hundreds, possibly even thousands, of engagements to assess, the NHS decided the only way to ensure compliance was to apply a blanket decision – all engagements are caught, end of discussion. In many ways, it is an understandable position to take.”

Many of the locums and contractors who became subject to the NHS blanket policy had already had their contracts carefully reviewed and had taken steps to ensure that their relationship was purely business-to-business (beyond the scope of IR35) and not employer-to-employee (within IR35). It is likely that some had already received assurances from PSB end clients prior to April that their contracts were outside IR35.

Faced with the blanket approach, many refused to work for the NHS. Following a protracted stand-off, the NHS reconsidered its decision and announced the U-turn, declaring that each contract must be assessed on a case-by-case basis.

The legislation is proving immensely damaging to the public sector, Mr Chamberlain said, exposing how heavily reliant PSBs are on independent contractors to help deliver vital pubic services. Without these contractors, such delivery is jeopardised.

IPSE has now called on the next Government to review the impact that the IR35 reforms has had on the public sector “as a matter of urgency.”

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