Our guest columnist Graham Smith thinks the real Achilles heel to digital reform across the NHS could be the tax law IR35. Here’s why…

The technology skills gap is holding the NHS back. While the private sector is advancing quickly towards being smart-city-ready, public organisations such as the NHS are heavily reliant on support from external technology specialists, such as IT contractors, to properly embrace the digital era.

Recent reforms to IR35 have created some consternation in the public sector, and the question remains as to whether it could deter IT contractors, further hampering the NHS’s adoption of new technology.

So what is holding back digital progress in the NHS, and could some practical planning around IR35 the problem?

Tech skills and training are lacking

Recently at an event at the King’s Fund, Dr Harpreet Sood, associate CCIO at NHS England had said that NHS was lacking in clinical professionals who could drive this transformational change via technology and informatics.

There is a very real possibility that the NHS could crumble under demand and tight budgets before this can be addressed. So the obvious solution is to engage IT contractors with the right skills to implement new technologies faster.

In addition, the ransomware attack on the NHS in May 2017 illustrates the need to train all staff on IT security. Opening email attachments, clicking unknown email links and out of date virus protection were all highlighted in the investigation. IT contractors with a wide range of experience in security, particularly in fintech, could play a vital role in training staff on the latest threats and ensure the NHS is less vulnerable to attack.

Achilles heel

All other challenges aside, this is where it could all come crumbling down — and it is completely out of the health service’s control. Her Majesty’s Revenue and Customs (HMRC) could carry some blame for the NHS falling behind.

IR35 is legislation designed to combat tax avoidance by workers supplying their services to clients via an intermediary — such as IT contractors.

Such workers become disguised employees, so, technically, an IT contractor working on an NHS project could be seen as an employee of the NHS for the time of the project. However, because they are self-employed, the NHS does not have to pay income tax and National Insurance contributions.

It has been argued by some tax experts that IR35 is poorly conceived legislation, and it can potentially reduce a contractor’s net income by up to 25%. Contractors are even advised by sources such as Contract Calculator to prepare a defence in case HMRC investigates and decides they have not adhered to IR35 correctly.

Prior to April 2017, contractors were responsible for determining their own IR35 status, and they were personally liable for any unpaid taxes and penalties if they were not compliant.

‘Causing headache’

However, reforms that came into effect in 2017 in the public sector shifted the compliance burden and potential liability for unpaid tax to the client or employer.

Because of these reforms, blanket IR35 assessments have been introduced that have made it impossible for people, such as NHS nurses, to secure outside-IR35 status.

This has resulted in unlawful deduction of employer’s National Insurance from nurses’ rates and has limited the amount of assignments they can take and the hours they can work.

The legislation is causing such a headache for the NHS that if the organisation is in any doubt of IR35 compliance they will not work with a consultant or contractor, as highlighted by a case reported on Contractor Calculator.

In the same article it was reported that the NHS refused to hire a locum doctor outside of IR35, even though the consultant had completed eight individual assessments that demonstrated her contract was not under the umbrella of the legislation.

The NHS trust conducted its own analysis with HMRC’s Check Employment Status for Tax (CEST) tool and determined that her contract was within scope of IR35.

The doctor told Contract Calculator, “The NHS’s reliance on a tool which fails to align with the law is costing it desperately needed expertise at a critical time, with patient care suffering as a result.”

The Independent Health Professionals Association (IHPA) is currently calling for an urgent inquiry into IR35’s impact on patient care.

At a time when the health service’s reliance on IT contractors is paramount, it cannot afford to alienate them.

Graham Smith is head of marketing at Curo Talent. 

Note: On 18 May 2018, the government published its consultation on IR35. The lead suggestion is the extension of the public sector reform to the private sector.  Curo Talent, through its membership of The Recruitment & Employment Confederation (REC), will be providing evidence and case studies to the government to advise on this suggestion.