Joint statement on HMRC IR35 off-payroll working rules consultation: Community pharmacy sector concerned about new tax proposals

The NPA, alongside the Company Chemists’ Association (CCA), the Association of Independent Multiple Pharmacies (AIM), the Royal Pharmaceutical Society (RPS), Team Locum and Locate a Locum have issued a joint response to an HMRC consultation highlighting our concerns about how proposed changes to tax law might impact the sector.

HMRC consulted on their proposals for implementing changes to tax law known as IR35, or “off-payroll” working rules, between 5 March to 28 May 2019.

From April 2020, medium and large businesses (companies employing more than 50 people) will become responsible for assigning the tax status of locums contracted through their own limited company, to reflect the correct employment status position.

However, there are other changes taking place with HMRC conducting a wider review of the use of self-employed locums which could affect a larger proportion of the sector than the IR35 reforms.

Our response to the off-payroll consultation identified that:

• HMRC need to ensure that the Check Employment Status for Tax tool (CEST), which is being promoted by them as the means of determining tax status, is fit for purpose. We believe that this tool is not refined enough to meet the needs of the community pharmacy sector. Those using the tool need to be confident that it’s accurate and fair in all cases
• We have significant concerns that, following these reforms, the flexibility of the pharmacy workforce may be affected to the extent that it disrupts the necessary supply of medicines and services to patients
• The IR35 reforms are complex changes which will be difficult to embed across the diverse populations of workers that exist across the private sector. We need HMRC to provide a detailed timetable for rolling out the reforms and clear, ongoing, communications about how to prepare

What actions should locums and ‘engagers’ (or employers) take?

 Don’t assume your tax status if you’re self-employed or a locum. If you are an employer, don’t assume the status of those you engage.

• Make yourself aware of what your CEST determination is. Access it here: https://www.gov.uk/guidance/check-employment-status-for-tax
• Visit the government’s website and read about IR35:  https://www.gov.uk/topic/business-tax/ir35
• Read the HMRC’s guide for organisations that sets out what actions they should be taking now to prepare for the changes ahead of April 2020. You can find this on gov.uk https://www.gov.uk/guidance/prepare-for-changes-to-the-off-payroll-working-rules-ir35
• Keep an eye out for further messaging including the HMRC’s publication of draft legislation and the summary of responses to the consultation

IR35 regulations

Many people today choosing to work in a more flexible and diverse way.  This can often determining the employment status of workers who are directly contracted or via third party service providers has become more complex. Employment status can have an impact on the way in which tax and national insurance is paid and, in some cases, the amount paid. IR35 regulations were introduced in 2000 to address this variation and bring equity between the amount of tax paid by employed and off-payroll workers for doing the same role, in the same conditions.

Off-payroll working

Employed pharmacists pay their tax through salary deductions and the pay as you earn (PAYE) system. Many pharmacy contractors use locums to provide ad hoc cover for the duties of employed pharmacists. Locums may be working ‘off-payroll’, either as self-employed individuals or through personal service companies they’ve set up and, currently, they are responsible for determining the employment status of their engagement.

Changes to the IR35 regulations

The Chancellor announced reforms to the IR35 regulations in 2018 to increase compliance and bring the private sector into alignment with the public sector. From April 2020, medium and large businesses (companies employing more than 50 people) will become responsible for assigning the tax status of locums contracted through their own limited company, to reflect the correct employment status position. Read the consultation document here and our full consultation response here.

For more information, please contact the NPA’s Employment Advisory Service on 0330 123 0558 or employmentadvice@npa.co.uk