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Could IR35 be the NHS’s Achilles’ heel?

Graham Smith, head of marketing at Curo Talent, explains why the Achilles’ heel to digital reform across the NHS could be tax law, IR35.

The technology skills gap is holding the NHS back. While the private sector is advancing quickly towards being smart tech ready, public organisations like the NHS are heavily reliant on support from external technology specialists, such as IT contractors, to properly embrace the digital era.

Recent reforms to IR35 have created some consternation in the public sector, and the question remains as to whether it could deter IT contractors, further hampering the NHS’s adoption of new technology.

Tech skills and training are lacking

The barrier is the lack of digital skills and training in the NHS. This is something that has been the focus of many debates.

For example, The British Journal of Healthcare Computing ran an article recounting a meeting at The King’s Fund, London ahead of UK e-Health Week. During this meeting, Dr Harpreet Sood, associate CIO of NHS England, said, “The key observation was that we are lacking in clinical professionals who could drive this transformational change via technology and informatics.”

There is a very real possibility that the NHS could crumble under demand and tight budgets before this can be addressed. So, the obvious solution is to engage IT contractors with the skills to implement new technologies faster.

In addition, the ransomware attack on the NHS in May 2017 illustrates the need to train all staff on IT security. Opening email attachments, clicking unknown email links and out of date virus protection were all highlighted in the investigation. IT contractors with a wide range of experience in security, particularly in fintech, could play a vital role in training staff on the latest threats and ensure the NHS is less vulnerable to attack.

Achilles’ heel

All other challenges aside, this is where it could all come crumbling down — and it is completely out of the NHS’ control.

IR35 is legislation designed to combat tax avoidance by workers supplying their services to clients via an intermediary — such as IT contractors. Such workers become disguised employees, so, technically, an IT contractor working on an NHS project could be seen as an employee of the NHS for the time of the project. However, because they are self-employed, the NHS does not have to pay income tax and National Insurance Contributions.

It has been argued by some tax experts that IR35 is poorly conceived legislation, and it can potentially reduce a contractor’s net income by up to 25 %. Contractors are even advised by sources such as Contract Calculator to prepare a defence in case HMRC investigates and decides they have not adhered to IR35 correctly.

Prior to April 2017, contractors were responsible for determining their own IR35 status, and they were personally liable for any unpaid taxes and penalties if they were not compliant. However, reforms that came into effect in 2017 in the public sector shifted the compliance burden and potential liability for unpaid tax to the client or employer.

Because of these reforms, blanket IR35 assessments have been introduced that have made it impossible for people, like NHS nurses, to secure outside-IR35 status. This has resulted in unlawful deduction of employer’s National Insurance from nurses’ rates and has limited the amount of assignments they can take and the hours they can work.

The Independent Health Professionals Association (IHPA) is currently calling for an urgent inquiry into IR35’s impact on patient care. At a time when the digital skills shortage in the NHS is in such a state, reliance on IT contractors is paramount. The organisation cannot afford to alienate them.

The NHS needs to plan for IR35 assessments to put the minds of IT contractors at ease and reduce the risk of alienating them. This can’t be taken for granted if the NHS is ever to realise its potential as part of the future smart city.

Picture courtesy of Pixabay

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