Blanket IR35 assessments for IT contractors are holding the NHS back and creating a digital skills gap.

These are the words of Graham Smith, head of marketing at Microsoft recruitment agency Curo Talent. In an article for Recruitment International, he explained why the Achilles’ heel to digital reform across the NHS could be tax law, IR35.

“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,” Smith wrote. “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.”

Digital skills shortage

According to Smith, a lack of digital skills and training is the root cause. He recounted an article run by The British Journal of Healthcare Computing, which reported on 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.”

As demand grows, an obvious solution is for the NHS to engage IT contractors with the skills to implement new technologies faster. But reforms to IR35 in the public sector – designed to combat tax avoidance by workers, such as IT contractors, supplying their services to clients via an intermediary – are putting them off.

Shifting the burden

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

The trouble began in April 2017. Before then, contractors were responsible for determining their own IR35 status. They were also personally liable for any unpaid taxes and penalties if they were not compliant. However, since the reforms came into effect, the compliance burden and potential liability for unpaid tax shifted to the client or employer.

This has led to blanket IR35 assessments, making it difficult for 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,” Smith explained.

Bodies like the Independent Health Professionals Association (IHPA) are calling for an urgent inquiry into IR35’s impact on patient care. In April 2018, IHPA revealed that 98% of respondents to its survey  said they would consider seeking work outside the NHS due to the reforms.

Put contractors’ minds at ease

In his article, Smith recommended that the NHS must do everything in its power to keep IT contractors onboard.

“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,” he said. “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.”

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