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 Opening email attachments, clicking unknown email links and out of date virus protection were all highlighted in the investigation.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.
24 July 2018 @ 14:07
It hugely inflates temporary staffing costs where monopolistic market manipulation is not in use.
Blanket IR35 decisions, not being taken with Reasonable Care and failing to assess individual contractors are a danger to patient safety. It increases Rota gaps.
IHPA is calling for an urgent review into 10,500 excess deaths in the first 7 weeks of 2018….coinciding with the first peak demand period since the reforms. It isn’t due to an aging population, the weather or influenza (from the data). IR35 and austerity are elefants in the room.
19 July 2018 @ 15:25
It’s essential that this is changed. IT contractors, whether Developers, Engineers or Project Managers, have a much wider choice of employer and industry than healthcare staff, and IR35 impacts upon their net pay so heavily that the NHS has to offer a much higher gross pay than the market rate in order to compete.
The NHS cannot afford IR35.
24 July 2018 @ 13:57
Actually, if everyone paid their correct taxes, maybe the NHS could afford this!
24 July 2018 @ 14:08
It hugely inflates temporary staffing costs where monopolistic market manipulation is not in use.
Blanket IR35 decisions, not being taken with Reasonable Care and failing to assess individual contractors are a danger to patient safety. It increases Rota gaps.
IHPA is calling for an urgent review into 10,500 excess deaths in the first 7 weeks of 2018….coinciding with the first peak demand period since the reforms. It isn’t due to an aging population, the weather or influenza (from the data). IR35 and austerity are elefants in the room.
14 July 2018 @ 10:34
I agree with the substance of what ex techie is saying mostly but he clearly isn’t a locum doctor as much as I’m not an IT contractor. Every case needs assessed on its individual merits and with reasonable care. He does correctly point to a number of factors that would help to place many IT contractors. Outside IR35.
That one staff group shouldn’t he compared with another is correct (indeed even between candidates for the same role individual assessments are a legal requirement).
To clarify the locum misconceptions here (which in and of themselves are misleading – although the commentator likely doesn’t intend this):
As a locum doctor :
1. NOBODY a’dictates’ hours to me. Id terminate the contract and leave on the spot if anyone tried.
1. Not all locums fill rota gaps some are for initiatives.
2. Most locums do not accept a slot in the Rota but rather negotiate which offered shifts they are and are not willing to undertake. Many will refuse to work weekends or night shifts there is no obligation upon them to accept offered work or upon the hospital to offer it and they can be dismissed or terminate the contract on as little as one hour’s notice (patient safety considerations permitting). There is usually no irreducible minimum of MOO.
Having also worked to achieve deliverable transformation goals, with payment milestones, under a statement of work I do understand and have experience of the mode of working that many IT contractors will likely employ and those who are not caught by IR35 shouldn’t be blanketed.
14 July 2018 @ 11:41
Fair comment, my example was over generalised.
My own limited experience with hiring locums was for backfilling sessions where the usual clinician was unavailable through illness.
11 July 2018 @ 10:12
Whilst I agree with much of this article, it would be misleading to conflate locum doctors and agency nurses, whose hours of working are dictated by the NHS Trust’s need to fill gaps in a roster, with independent IT contractors contracted to deliver specific outcomes be that project management, repairs, upgrades or training..
The CEST tool is pretty basic but it does compare the following with IR35 legislation and is a good guide as to what should and shouldn’t be in a contract. Many contractors now bundle their expenses into their charges to avoid receiving expenses directly from the NHS:
the worker’s responsibilities
who decides what work needs doing
who decides when, where and how the work’s done
how the worker will be paid
if the engagement includes any benefits or reimbursement for expenses
Let’s face it, in the past many contractors were taken on by the NHS as “ghost” employees to artificially keep the headcount low. NPfIT was a prime example where some “contractors” carried out very senior management roles within an NHS organisation for many years, had NHS job titles, appeared on NHS organisation charts, but were exempted from the very NI payments from which the NHS is in part funded.
14 July 2018 @ 12:02
Not to worry – I knew what you intended – just important to make sure such things are clarified to help the locums.
It’s complicated until I spoke to a lot of the BBC presenters I didn’t realise the nuances of some of their arrangements either.
There’ll likely be some doctors, some nurses, some IT contractors, and some BBC presenters caught by IR35….but the current blanket assessments are forcing many many genuinely self employed people in all of the above categories into false employment without rights.
Anyway Ex NHS Techie, the message from us at IHPA is one of support and solidarity for all of those forced into false employment by unlawful blanketing, deliberately misleading advice, and contrived clauses never seen by the workers which do not reflect the working realities and are not seen by the workers….
We stand as one self employed unit in solidarity. IHPA will shortly put forward a rallying call across all public sector contractors to unite against this injustice.
Please spread the word and forward any evidence you have of unlawful IR35 blanketing to ir35help@ihpa.org.uk
Soon it will be time to take a stand.