With a lot of our agency nurses working with us through various means, we’re getting lots of questions regarding the impact of the upcoming introduction of IR35 legislation and how it’ll affect the way our nurses will interact with us and our clients.
HMRC introduced legislation in 2017 that affected all Limited Company contractors working in the public sector such as hospitals, schools and transport. This has been expanded to the private sector and the government has confirmed changes to off-payroll working (IR35) rules, which will come into play from 6th April 2021.
In this post we’ll take a brief look at what IR35 is, who it will affect and the best way to prepare yourself for its upcoming implementation if you haven’t already.
What is IR35?
IR35 is the short name used for the intermediary’s legislation, which is a set of tax rules that apply if you work for a client through an intermediary which can be a limited company or personal service company which is how many contractors operate. The legislation was devised to help identify ’disguised employees‘ and prevent employers from engaging an employee on a contract basis, thereby avoiding paying Employer’s National Insurance Contributions or providing employment rights and benefits.
What does it mean to work inside of IR35?
Working inside IR35 means your contract falls in the off payroll working rules, therefore HMRC sees you as an employee for tax purposes. This means that in the public sector, since April 2017, the decision rests with the public sector body. In the private sector, however, the responsibility for ensuring compliance with the IR35 legislation remains with the intermediary.
If you’re working ‘inside IR35’ your employer (nursing agency) will deduct the necessary, tax and NI contributions from your wages at source.
How will IR35 affect agency nurses?
As of April 2021, IR35 will affect all limited company employees in both the private and public sectors. Previous to this it was limited to the public sector.
Where it is deemed that the IR35 rules apply, MedGen will calculate the relevant PAYE tax and primary NICs, deduct these at source from your PSC’s fees and pay these directly to HMRC on your behalf.
For the majority of MedGen nurses working as individuals for MedGen, there should no impact on the way in which you are paid. Payroll will continue to deduct all the relevant taxes and NI contributions from wages through the PAYE system.
Is it possible to work outside of IR35?
It’s not at your own discretion of complying with the IR35 rules. The new legislation will affect every NHS Trust and every agency supplying staff to the NHS. Therefore, our nurses must comply with IR35 legislation. Working within IR35 means that it’s important you pay tax and National Insurance contributions in the same way as an employee.
Is it possible to work as a Limited Company until April 2021?
You can continue to work as a limited company, but it is important to note that due to the changes in legislation you’ll need to adopt PAYE once the deadline arrives. Trusts are applying IR35 across the board and will not be accepting candidates working as a limited company.
Is it possible to work through an Umbrella company?
Unfortunately, not. As part of our policy, we don’t work with nurses working through umbrella companies.
There are a number of Umbrella companies out there, however, we don’t believe these schemes offer any benefit compared with working through PAYE with MedGen. These companies will deduct a fee on top of your PAYE contributions, often leaving you more out of pocket than if you’d gone PAYE through your agency.
Any agency nurse should heed this warning when it comes to Umbrella companies offering 80%+ take-home pay, if it’s too good to be true it usually is! These kind of offers are a sign that the company is trying to work around HMRC’s tax rules, leaving you exposed to an astronomical tax bill if challenged by HMRC at a later date. A lot of Umbrella schemes have been found to be acting in a non-compliant way and some agency nurses have ended up having to pay hefty fines as well as facing the full force of the law for the criminal offence of tax evasion.
HMRC IR35 Enquiry & Penalties
If you try and work outside of IR35 when you should be working inside IR35 you could land yourself in hot water. If HMRC decides to open an IR35 enquiry, they'll ask you to:
explain why you’ve decided IR35 doesn’t apply to you
give a breakdown of your limited company or partnership’s income for a particular year
provide copies of all your written contracts for work during the specified year
If you’re found to be within IR35 following an HMRC enquiry, you must pay HMRC the tax and National Insurance contributions due, as well as any interest due. If the circumstances show that you didn’t exercise reasonable care in completing your returns you may also have to pay a penalty. Some of the penalties you can expect for not adhering to the rules are:
30% of your unpaid taxes if HMRC finds you were negligent or careless about your IR35 status
70% of your unpaid taxes if HMRC finds you knew you were within IR35 but ignored it
100% of your unpaid taxes if you try to hide your IR35 status
With the extended deadline rapidly approaching, it’s important to be aware of these legislative changes and how they impact the world of agency nursing. The government has provided an extensive guide on IR35 and its impact on contractors and clients.
MedGen is on hand to assist with any queries you may have. Alternatively, it may be a good idea to engage the services of an accountant or tax specialist for further advice or guidance on this matter.