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NHS Improvement clarifies advice on tax for agency and bank staff

NHS Improvement has reined back on a blanket approach to enforcing new tax rules for bank, agency and locum staff.

NHS Improvement has reined back on a blanket approach to enforcing new tax rules for bank, agency and locum staff.


NHS Improvement say that bank, agency and locum staff should now come
under the new IR35 tax rules and switch to PAYE rules. Picture: Alamy

The organisation, which oversees all NHS trusts, issued guidance that all bank, agency and locum staff should come under the new IR35 tax rules which came into force on 1 April.

This means all temporary staff would switch to pay as you earn (PAYE) rules and have tax deducted at source.

Income reductions

Front-line staff warned moving to PAYE would result in income reductions for bank, agency and locum staff.

Now NHS Improvement has issued updated guidance to trusts, stating employers should now instead decide the tax status of employees on an individual basis.

The new guidance, published on 30 May, states: ‘On our understanding that many individuals currently providing services to the NHS through intermediaries fall within IR35, we anticipated that providers would need to ensure that all locum, agency and bank staff were subject to PAYE and on payroll for the new financial year.

‘This was not accurate.

Case-by-case basis

‘The introduction of the rules has made clear that an assessment of whether or not IR35 applies should be applied on a case-by-case basis, rather than by a broader classification of roles.

‘This consideration must be conducted fairly, accurately and take into account all relevant factors, including representations which may be provided by the individual.’

It also directs trusts to an HMRC tool designed to ensure employees are paying the correct level of tax.

An RCN spokesperson welcomed the update, and added: ‘It’s clear this was an ill-judged move that seems to have been rushed through with insufficient consultation and little thought to the impact it would have on staff.

‘Earlier this year we sent out guidance to members we thought may be affected by the change, and we have always said each case should be considered on its own merits.’


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