New rules on off-payroll working could impact medical service companies
Doctors who provide services to the NHS via their own company have been concerned by new off-payroll working legislation published in the Finance Bill in March.
Last year the government announced plans to reform the way in which those working for public sector bodies, such as the NHS, via their own companies will be taxed under ‘intermediaries’ legislation’. Several high-profile cases involving the BBC were reported in the media, where television presenters were asked to close their own personal service companies to become members of staff. This was to ensure that the individual and the employer paid ‘the correct level’ of national insurance and tax if they are deemed to be contracted to one organisation.
This new legislation has now been introduced formally in the Finance Bill and could have implications for doctors who provide any services, whether clinical, research or clerical to the NHS via their own company.
In March 2016, a technical note from HMRC stated: ‘The government announced at Budget 2016 that it will reform the intermediaries’ legislation for public sector engagements. Liability to pay the correct employment taxes will move from the worker’s own company to the public-sector body or agency/third party paying the company.’
Many doctors took this statement from HMRC to mean that private practice income would now be subject to tax and national insurance at source as opposed to the current system of individuals or groups raising invoices, dealing with their own expenses and tax position.
In general, it appears this amendment is directed at high-profile public servants whose main employment was, for example, predominantly with the BBC but who were paid via a service company. This meant the BBC did not deduct any tax or national insurance at source, nor did it pay employers’ national insurance contributions or make a pension contribution.
We do not believe this has an impact on normal private practice models. However, where medics conduct NHS ‘choose and book’ or ‘waiting time initiatives’ privately and invoice for their services via a limited company, this practice will be impacted.
Any individuals, particularly locums, who feel they may be affected by this legislation should seek advice without delay and check the opinion of the public body that is paying them for their services.
Is your medical business structured efficiently? For detailed advice, please speak to one of our advisers on 020 7636 7006.