Hospitals ordered to cease payments to PSCs

Hospitals ordered to cease payments to PSCs

The tumultuous time contractors are having in the public sector has continued this week after reports indicated that hospitals have been ordered to stop paying external managers through personal service companies (PSC).

A report from The Times says that the orders came in a letter sent to hospital leaders from Jim Mackay, chief executive of NHS Improvement, a health service regulator.

The letter purportedly says that interims in leadership roles can be hired only if they are set clear goals and held to account for failure to achieve them. The letter also includes comments around a lack of evidence of the need of such interims, and that their leadership qualities do not justify their daily rates. This would undoubtedly be argued by many contractors who have worked in leadership roles in the public sector.

Mackay’s motivation ostensibly centres around the notion that PSCs can be used to avoid paying tax – something which if true would wrangle with taxpayers and staff at the NHS. This is, of course, is an erroneous notion in the main, with PSCs in charge of their own tax payments. If they fail to make the necessary payments, HMRC will be quick to act.

The timing of such comments is interesting given the recent changes to IR35 in the public sector, as outlined in the autumn statement. From April 2017, hospitals will be liable for deciding whether the PSCs they use are akin to employees, and if so, should have their income tax and national insurance deducted from their payments accordingly.