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NHS u-turns on blanket IR35 policy
When the responsibility for determining whether a contractor is subject to IR35 rests, in the main, with the end-user client, there is always the risk that organisations will take the path of least resistance. That they will, in order to minimise the risk of being held financial liable should insufficient tax be deducted, deem all their PSC contractors inside scope, to be paid via PAYE.
Which is exactly what the NHS did to its entire PSC workforce, following the introduction of the new IR35 rules in April.
However, legal threats from locum doctors and nurses have resulted in the NHS reversing this blanket approach. Instead, NHS Trusts have been instructed to review each contractor on a case-by-case basis.
This u-turn is clearly good news for contractors whose status will be determined on the basis of their specific engagement, ensuring the correct amount of tax and NI is paid, for them.
This begs the question though – how feasible is it for large public sector organisations like the NHS, or rail, to manage IR35 for the thousands of contractors they have in their employ?
And what implications does this have for the wider business community once, as seems likely, this legislation is applied to the private sector?