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The Hitchhiker's Guide to IR35: Part three - Eva

21st Dec 2016
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David Kirk explores how the public sector reforms for IR35 will work for a medical professional.

Following my introduction to the public sector reforms for IR35 contracts, I am examining how the new law, and HMRC’s online tool, Marvin, will operate in practice for skilled contractors. This is the second case study, and I will look at how agencies may react in a later article.  Here is the first case study.

Dr Eva

Eva is a doctor from an EU country who supplements her earnings by doing weekend shifts in the accident and emergency departments of British hospitals. She is on the books of a number of agencies and sometimes does not even know where or through which agency she will be working, when she arrives in London on a Friday. There is always enough work to go round, and in practice she has always managed to fix something up at the last minute, so she is quite happy to fly over to the UK on spec.

Work starts

On 7 April 2017, Eva arrives in the UK and gets a nasty shock: all the agencies seem to be saying that some new tax rule applies and her company will get 30% less. This displeases her, and she asks what can be done about it. Don’t worry, she is told, her accountant will sort it all out: she will end up a little out of pocket but most of the difference will just come from not paying her corporation tax bill at the end of the year.

Deductions made

A bit unconvinced by the explanations, Eva carries on working for the hospitals as it is still good money even with this higher deduction.  Imagine her surprise then when on a visit a couple of months later she is told that a weekend shift at Barset hospital is going to be outside IR35, and she will be paid just what she always was.  What has happened?

Concerned FD

What has happened is that the Finance Director of Barsetshire NHS Trust has been on the case.  Now you may have gathered that NHS finance directors, rather like their local government counterparts, are a notoriously inventive bunch when faced with the need to get around a regulation. The week-end A&E costs at Barset Hospital are a major headache for this FD. They have increased by 10% since the beginning of April, and he has been told that even with this rise the agencies are having difficulty filling the places because of some new tax called IR35. 

The FD is concerned that his trust will be on the front page of the Daily Mail for paying these sharks £400,000 a year, as happened to his friend and colleague in the Wessex NHS Trust not so long ago.  That is clearly not going to be acceptable.

Ask the lawyers

The FD pays a visit to the Trust’s lawyers. For a fee the lawyers suggest the simple expedient of changing its contracts so that the doctors, or the agencies, have a right of substitution, which as all employment lawyers know will put the contracts outside IR35. 

What’s the risk? 

There is no actual risk. The FD is only interested in numbers when it comes to those weekend shift staffing problems, and substitution is not an issue as long as the substitutes are appropriately qualified, which the agency always checks anyway.  It might even encourage the agency to provide substitutes when the Trust gets gazumped, as it sometimes does. 

What about IR35?

By informing the agency that IR35 does not apply the FD not only solves his problem but the agency’s as well.  He has sent his answer so the IR35 liability does not come back on to the Trust, and the agency can rely on the answer so they don’t have to apply IR35. 

The lawyers point out to the FD the bit in the newly-revised Act about fraudulent documents (if the Trust presents a fraudulent document to the agency intended to constitute evidence that IR35 does not apply when it does), but that does not worry him at all: a right of substitution can easily be justified in these cases.

Look out for the next instalment of The Hitch-hiker’s guide to IR35 – coming soon.


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