IR35 Legislation: How It Affects Health Workers

If you’re a healthcare worker, new IR35 legislation will affect you. We’ve gathered all the information you need so you’re aware of the upcoming changes and what they mean.
On 6th April 2021, the UK government will extend off-payroll working hours brought into effect in April 2017. This legislation which impacts those working in the public sector is known as IR35.
For health workers, these new changes may cause some confusion in regards to the application. We’ve covered all related FAQs for you to review below, of course, if you’re still unsure as to whether you’re affected contact HMRC.

An Overview of IR35
For those that work in the public sector, IR35 legislation is important. Known as off-payroll working rules, the legislation sets out information about the prevention of disguised remuneration. The legislation was made to ensure that anyone who works as an employee through their own service company will pay equal tax and NI as employed directly.

Off-payroll Working Rules
The rules can apply to any health worker (or contractor) who provides their services as a limited company or intermediary type. An intermediary is generally the worker’s personal service company but can be any of the following:

  • An individual
  • A personal service company
  • A partnership

You will be affected by IR35 if you:  

  • Are a health worker who provides a service via an intermediary
  • A client who receives services from a worker via their intermediary

An agency that provides worker’s services via their intermediary

Changes to IR35 in 2021
Rules that were originally brought into effect in 2000 are set to change in April 2021. The original rules were due to change in April 2020; however, due to COVID-19, HMRC delayed the rule change to give businesses time to deal with economic loss due to the pandemic.
HMRC has made estimations that many people are not complying with the current legislation. In fact, it is believed that only 10% of service companies apply IR35 legislation to their working arrangements. Therefore, the changes set to come into place are going to increase compliance. Responsibility for where the rules apply is due to be changed from the intermediary to the body paying the fee of the intermediary health worker.

Who Decides If IR35 is applicable?
The decision on whether IR35 applies to a working agreement will sit with the client where work is being conducted. Therefore, it is not the responsibility of the intermediary worker to provide evidence of whether IR35 is applicable. Instead, it is the end-user who decides whether the worker is classed as an employee or not.

How Is the Decision Made?
When it comes to deciding who should apply IR35, there are a specific set of rules to follow. Put simply, IR35 applies in the case of a worker providing services to a client under circumstances that if not for an intermediary would be regarded as employment. This is regardless of contract length, which should be noted. HMRC uses an online assessment tool to determine who the legislation should apply to.

Who Will This Impact?
Changes to the legislation will impact health workers who are not currently paid via PAYE. This means whether you’re a public or private sector worker, it is important to abide by the new rules.
The change also affects those who are being paid via any of the following:
     • You work through your own personal service company
     • You work via an intermediary for an umbrella company
     • You are paid gross as self-employed.

What Happens When the Rules Are Deemed Applicable?
Health boards, NHS trusts, and private sector clients are all responsible for informing workers and locum agencies if their role falls within IR35 legislation. Should your health worker role fall within the rules, the fee payer (the last entity to make a payment to you) will have to deduct relevant NI and tax. These deductions are withheld from payment to the intermediary and instead sent across to HMRC.

What To Expect From 6th April 2021
From the 6th April, the way in which rules for IR35 are applied is due to change. This means that all public sector authorities and medium to large-sized private sector clients will be responsible for identifying when the rules apply.
If you’re a worker who provides services to a smaller client in the private sector, your intermediary will remain responsible for deciding your employment status and whether the rules are applicable.