• HMRC and NHS Improvement say there will be no retrospective action following IR35 tax changes
  • Locums say they are being taxed without receiving employment rights
  • NHS Improvement asks trusts to complete operational pressure situation reports

Locum doctors and temporary NHS staff hit by new tax rules will not face retrospective action over their previous tax arrangements, HM Revenue and Customs has confirmed.

NHS Improvement said it would work with trusts to reassure staff who are concerned they could be affected by tax investigations after IR35 regulations came into force this month. The new rules mean the responsibility for paying national insurance and income tax for temporary staff has shifted to the trust. For some locums who organised their tax affairs to limit their liabilities this has meant a significant reduction in their income.

The regulations apply to any temporary staff being paid through a personal service company and could reduce income for temporary staff by more than 20 per cent.

Hospitals have been affected by locum doctors and other staff refusing to show up for shifts as a result. In some trusts, such as Blackpool Teaching Hospitals and University Hospitals of North Midlands, around a dozen medics refused to work under the new rules.

Lincoln County Hospital had to turn to neighbouring trusts after its emergency department was said to be “just hours from closure” when locums refused to work.

An HMRC spokesman said: “The off-payroll reforms took effect on 6 April 2017, and apply to payments made on or after that date.”

An NHSI spokeswoman added: “We understand from the HMRC that the IR35 reforms concerning off-payroll are not designed to be retrospective in their application. This is a helpful and important clarification for NHS agency staff.”

HMRC said an individual earning £100,000 would normally pay £34,000 in tax but through a personal service company could reduce this to £13,000. For someone earning £50,000 they could pay as little as £2,000 in tax.

HSJ has seen emails from some locums demanding more than 50 per cent increases in their pay. HSJ has not identified any trusts that have agreed to demands to pay more.

A number of trusts have said their relationships with locums have ended after they sought higher pay but were refused. Sandwell and West Birmingham Trust told HSJ it had turned down a request for more money from a locum who then left the trust.

Diane Wake, chief executive of the Dudley Group Foundation Trust, said there had been “a small number of gaps” in rotas that were planned. “In order to mitigate the risks we have worked with individuals to either bring them on to our own staff bank, a temporary fixed term contract or substantive posts,” she added.

However, some locum staff told HSJ the NHS was wrong in applying a blanket approach to all locums and they were being forced to pay similar levels of tax to permanent staff without similar benefits and employment rights.

A speech therapist locum said she planned to return to Australia after doing the job for seven years in the UK.

She said: “I work hard as a locum and fill positions local staff don’t want. I often work twice as hard as permanent staff. I get paid less than third of what locum doctors get and I am unable to negotiate higher rates to account for decisions around IR35. This leaves the job financially untenable given the high cost of expenses and maintaining my professional status as a speech therapist.

“Needless to say, my house is on the market and I will return to my native Australia as soon as feasible.”

NHSI has been asking trusts to file situation reports linked to the IR35 regulations, including whether providers have concerns about safety and the ability to fill shifts.

A spokeswoman said: “We are offering trusts support and advice if they’re facing challenges with locums increasing rates to counteract the tax rule changes – a practice we have said is unfair and unacceptable.

“We’re helping trusts with securing support for shifts from elsewhere in the local area, as well as supporting shared banks, workforce planning, and increasing the use of e-rostering. Some locums and agencies are working with us and medical directors to make sure the locum market works well for staff and patients, tackling the culture that’s behind locums charging high rates. Our priority is to ensure services for patients continue as normal and we will review what support is needed on an ongoing basis.”