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Written by Larsen Howie
The response to HMRC’s private sector IR35 consultation has been widespread. Many companies, both international corporations and local businesses, have sent in varying recommendations for the taxman. The Company Chemists’ Association (CCA) is one such respondent, and what their document says is enough to cause concern.
In short, the UK-based pharma group has confirmed that IR35 will almost certainly disrupt the way they do business, and could impact schedules for medication deliveries for NHS and private patients alike.
You can read the full CCA private sector IR35 consultation response here.
Will there be CCA contractor rate rises thanks to IR35?
The CCA highlights that the threat of being caught by IR35 could prove a strong deterrent for taking on pharmaceutical work within the UK, particularly when it comes to specialists that can choose from contracts all over the world. Our Head of Tax Andy Vessey ATT comments on the CCA’s consultation response, after having written and submitted one himself on behalf of Larsen Howie (which you can also read here).
“The CCA says that imposition of the ‘off-payroll’ rules may lead to an unwillingness of people to work within the pharmaceutical sector,” Mr Vessey says. “They will, therefore, be faced with either having to increase the rates for contractors to compensate for the PAYE tax and National Insurance Contributions (NICs) deductions suffered by the contractor or work with a firm like Larsen Howie to find potential solutions to preserving their workers’ self-employed status, where possible.”
Mr Vessey also reflects on HMRC’s lack of action when it comes to clarifying the boundaries between contractor and employee, especially in regards to the subject of locum medical staff. He says:
“It is interesting to note that even after discussions with HMRC about locums, HMRC has still not produced any clear guidance on their employment status that satisfies the CCA.”
“The CCA has suggested assessing status by role as a solution to their headache but, again, HMRC has not given any clear position on this. Given that this is something that the consultation document was suggesting, I can only assume that there were too many self-employed roles being suggested that the Revenue were not keen on accepting!”
How can the CCA minimise the impact of IR35?
As seen in recent high-profile cases such as that of Lorraine Kelly, there are many aspects taken into consideration during an IR35 tribunal. It may be in this that lies some alleviation for the CCA’s concerns – particularly as any medical contractor is subject to relatively high levels of control by nature.
“It seems that the document focused on the control aspect of status but this is only one factor, albeit a most important one,” Mr Vessey continues. “There are other tests that could help place a locum in the self-employed category. The Atholl House decision – more commonly reported on as Loose Women’s Kaye Adams’ employment status tribunal – is a recent example of this.”
There are also ways to pre-empt an employment status determination, such as to get a professional contract review, so changes can be made before the private sector off-payroll reform. Mr Vessey gives some practical advice on the matter:
“CEST comes under much criticism, despite HMRC having vowed to improve it. Regardless, it is clear that the tool cannot be relied upon in all circumstances.”
“There is a suggestion for the reforms to be delayed beyond 2020 to allow businesses more time to prepare and get to grips with the proposed changes, which has support from the likes of the Institute of Chartered Accountants in England and Wales (ICAEW). It will be interesting to see if this idea has enough support from MPs to pressure the government to postpone implementation to 2021, albeit I think it unlikely.”