Tax planning around IR35 for doctors and dentists

Chris Street

11th November 2017

By Simon Misiewicz

Article relevant to the tax year 2017/18

Are you up-to-date with IR35 rules and regulations?

Our team of medical professional accountants are focused on creating greater revenues for your medical professional business such as GPs, locums and dentists, whilst being tax-efficient.

A large part of our accountancy advice for medical professionals includes helping clients to understand the rules and regulations around IR35 – which means we keep a close eye on developments, news, and issues.

According to a recent article published by the CIPD, two unions are bringing a case on behalf of locum doctors and healthcare workers, arguing that they have been unfairly treated by the NHS’s uniform applications of the IR35 rules.

The Locum Doctors Union and the Healthcare Professionals Union – which claims that their members have lost 30-50% of their pay because of the way the IR35 rules were enforced across the NHS – has instructed a solicitor to start an application for judicial review.

Since April of this year, public sector organisations including the NHS have been responsible for determining the employment status for tax purposes of their contractors. Those deemed to be ‘inside’ IR35 are taxed in the same way as employees, even though they may not be eligible for certain employment rights.

NHS Improvement (NHSI) – which is responsible for overseeing NHS foundations and trusts – stopped applying blanket IR35 decisions to contractors in May.

However, the unions claim locums have been penalised by “unqualified, unsupervised” NHS admin staff, who have conducted assessments of workers without supervision, training, or knowledge of the up-to-date guidance from NHSI.

The unions also allege that, despite the U-turn, NHSI has continued to encourage NHS Trusts to treat many contractors as being within the IR35 rules.

This may just be the beginning of contractors heading to the courtroom over IR35 regulations.

From a tax perspective, providing services through a Limited company can mitigate or defer income tax and national insurance contributions (NICs) for their owners.

The government has long disliked these arrangements, and the IR35 rules were introduced in April 2000 to try to counter this perceived avoidance. HMRC estimated that the cost of non-compliance in 2016/17 was £440m.

As HMRC does not have an appeals process for anyone deemed to be wrongly inside IR35, legal action is the only option. I predict that this initial case could be the tip of the iceberg for medical professionals.

There are question marks about whether the NHS is taking reasonable care in assessing IR35 status, as the law requires them to do, so I encourage medical professionals to ensure that their NHS Trust has a clear internal appeals process.

Some additional research suggests that medical professional contractors have decided to vote with their feet.

A survey by the Association of Professional Staffing Companies, for example, highlighted that 70% of recruiters had seen a fall in overall public sector contractors since April, while 45% had also seen evidence of contractors increasing their rates since the rule change.

What is abundantly clear is that this is a complex period of change for NHS trusts and medical professionals, and it’s critical for locums, doctors and dentists to utilise effective tax planning advice.

By now you would have noticed that the number of tax changes means that you need to plan for the future to ensure that you keep more of what you earn.

Book your wealth planning session. Let’s address your finance/tax issues and build family wealth that’s sustainable for your future generations. 

Property investors: How does Section 24 (mortgage interest relief) affect you? How are your properties going to perform once Section 24 (mortgage interest relief) comes into full effect?

Doctors/Dentists: Have you incorporated your private practice work into a Limited company? Have you structured it to ensure that you and your family takes advantage of the tax breaks?

Stephen Covey said that “people climb to the top of the ladder, only to find out that it is set against the wrong wall”.

Many people go about their business and at the end of the year they feel that they have not moved forwards.

The finance, tax and wealth sessions have been designed to review your financial and tax plans for the next five years by reviewing your income streams, lifestyle costs, investment returns, and legacy and estate planning needs.

Learn more about my Finance, Wealth and Tax Planning service – Click Here. 

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