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Where Taxpayers and Advisers Meet
NHS Under the Microscope over the Operation of Off-Payroll Rules
21/11/2019, by RSM UK, Tax News - Business Tax
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RSM UK's Susan Ball reports that HMRC has been reviewing public sector engagements, with possible implications for the private sector from April 2020.

Over recent months we have been hearing about HMRC activity in reviewing the current operation of the off-payroll rules in the public sector ahead of the new changes from 6 April 2020, which will impact both the private and public sectors. It has also recently emerged that NHS bodies are within the scope of this.
 
Back in April 2017 we learned that the likes of Transport for London decided to halt the use of Personal Services Company (PSC) contractors. The ban was aimed at shedding risk to head off problems further down the line. The NHS also began making blanket decisions on types of workers. However, neither stuck with this approach for long. 
 
Interestingly the same trend appears to be happening now in the private sector with banks and some large corporates also opting to place contractors on the payroll.
 
However, in the public sector HMRC have actively started checking that the public sector off-payroll rules have been operating correctly. What is becoming apparent is that despite around half of public sector bodies claiming in an IFF survey in May 2018 that the off-payroll working reforms were easy to comply with, perhaps this is not the case. 
 
There is a sense that many public sector organisations are beginning to realise the rules are not as easy to operate as perhaps they first thought. 
 
A clear recent example can be found on Page 103 of NHS Digital's annual accounts which says: 

"Following the implementation of the new rules for IR35 introduced for the public sector in April 2017, we undertook a considered assessment of the status for each individual which we believed met the requirements. However, HMRC have challenged our assessment. We have been in extensive discussions but now consider it appropriate to acknowledge their position and create an accrual covering the period from 1 April 2017 to 31 December 2018. This accrual is £4.3 million including interest and penalties." 

NHS Digital stated that they had determined certain contractors to be outside IR35 when HMRC had a different view. As a result, they have made a £4.3m accrual for a period of 20 months. But just think what the number would have been if we were six years down the line – this could have reached some £15.5m! 
 
Hopefully, NHS and other public sector bodies are gearing up for the further changes from 6 April 2020. And if they haven’t already been subject to a review by HMRC, this change should be an opportunity to strengthen current processes and procedures and to improve practices in order to avoid future liabilities or accruals. 

About The Author

RSM is a leading audit, tax and consulting firm to the middle market with nearly 3,500 partners and staff operating from 35 locations throughout the UK. For the year ending 31 March 2017, RSM generated revenues of £319m. RSM UK is a member firm of RSM International - the sixth largest network of audit, tax and consulting firms globally. The network spans over 120 countries, 813 offices and more than 43,000 people, with a fee income of more than $5bn.

(W) www.rsmuk.com

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