NHS hospital trusts are dodging multi-million pound tax bills and lining the pockets of private umbrella companies.

An investigation by the Independent Health Professionals Association (IHPA) has revealed that NHS bosses across the country have exploited a VAT loophole that has allowed private umbrella companies to pocket up to 50% of VAT avoided while at the same time leaving thousands of temporary workers facing huge tax bill hikes.

Huge pay cuts

The tax avoidance scheme is costing taxpayers millions of pounds. Meanwhile locum doctors and nurses are losing up to 30% to 50% of their income. This is as a result of changes to their contracts. This has led to excessive taxation following mass application of the HMRC off-payroll rule, IR35.

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“Whilst we are sympathetic to the trusts who are indeed desperately underfunded, it is rank hypocrisy for trusts to force our workforce into false employment, without the obligatory assessments, aiming to cause doctors and nurses to be taxed more, whilst contemporaneously engaging in arcane accountancy practices in an attempt to dodge their own tax liabilities arising directly from the same actions,” Dr Iain Campbell, IHPA secretary general said. “This would be bad enough on its own, but to then force workers to shoulder the trusts’ employer’s liabilities beggars belief.”

Exploited workers

While the umbrella companies providing staff to the NHS are profiting from the tax dodge, the temporary health workers themselves are facing exploitation. Not only that, they lack the benefits associated with employment. Many, for example, have seen their pay docked to provide their own holidays, sick pay and pensions. In some cases they are being taxed at a rate higher than actual employees.

As a result, trusts are not only dodging their VAT bills, they are also flaunting the law. They are unlawfully passing on the trusts’ employment taxes to the workers themselves. This sees ordinary workers wrongly charged Employer’s National Insurance Contributions and even the Apprenticeship Levy – all meaning an unfair and unlawful 14% hit to the income of ordinary health workers, who predominantly come from ethnic minority backgrounds.

Urgent investigation required

IHPA has issued solicitor’s letters to NHS England and NHS Improvement. In them they highlight the scandal, calling for an audit into these schemes. They also request guidance to be issued to healthcare workers so others are not put in this position. It has also written to HMRC calling for an urgent investigation into the use of the schemes and the involvement of NHS Trusts.

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