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NHS employers told: ‘Comply in full’ with tax rules for ‘locum and agency staff’

Published on: 9 Mar 2022

NHS England has told trusts and commissioners to ‘comply in full’ with regulations which mean deducting tax and national insurance from the payments made to some contractors, despite the ‘substantial administrative implications’ this will create.

New guidance  issued last week warned NHS employers that failure to comply with updated legislation relating to the IR35 regulations could make them liable for any pay-as-you-earn deductions HM Revenue and Customs considered should be collected at source.

The guidance confirmed that NHS employers would need to consider whether a contractor working for them was properly self-employed, and therefore not covered by IR35.

It said: “We recognise this rule change has substantial administrative implications for providers. It is expected that all providers comply in full with their obligations by ensuring that all locum, agency and bank staff are taxed appropriately following a proper analysis of the individual’s circumstances.

“Failure to comply with the updated legislation in relation to IR35, and failure to correctly assess the worker contract and/or notify the third party agency of determination, could result in providers being liable to pay the equivalent of [pay as you earn] deductions to HMRC.

“In addition, inaccurate assessments of individual circumstances could lead to unnecessary cost, time and expense.

“With regards to personal service companies, NHS England and NHS Improvement recognises that NHS providers may contract with individuals through such entities.”

NHSE told organisations it could not provide advice on individual cases and should seek “independent advice” where the employers consider it necessary.


The IR35 regulations apply to individuals who provide services through an intermediary, such as a limited or personal service company. Introduced in April 2000, they were designed to identify businesses and contractors who avoided paying the appropriate tax by working as “disguised” employees, or hiring workers on a self-employed basis to obscure their actual employment status.

In April 2017, the tax rules changed so that public authorities, such as NHS organisations, rather than intermediaries, had to determine whether IR35 applied. If they decided it did, they were required to deduct tax and national insurance from payments to the relevant contractors. 

Changes to off-payroll working rules in April 2021 meant public authorities would now also be responsible for deciding the employment status of workers. Before this, a contractor or an intermediary could do this on the public authority’s behalf.

NHSE said the introduction of the rules had made it clear an assessment of whether or not IR35 applies should be carried out in a “fact-specific way,” and applied on a “case-by-case basis, rather than a broader classification of roles”.