IR35
IR35 Information for Healthcare Professionals
- What is IR35?
IR35 is also known as the off payroll working rules. It applies to workers providing services through their own limited company (Personal Service Company – PSC) but who would be classed as employees if they worked directly for the client.
- Why was IR35 introduced?
IR35 introduced in 2000, is a tax legislation designed to address disguised employment, where individuals work as contractors but, in the eyes of HMRC, operate in a manner similar to employees. Unlike traditional employees, contractors are considered self-employed and are taxed differently, often benefiting from lower National Insurance Contributions (NICs) and receiving income through dividends from their Personal Service Company (PSC). IR35 ensures that those who effectively work as employees pay the appropriate tax and NICs, closing loopholes that allow for tax avoidance.
- Who Does IR35 Apply To?
- Agency Nurses & Healthcare Workers working through a limited company (PSC).
- Independent Contractors in the public and private healthcare sector.
- Key IR35 Rules in the Public & Private Sector
- 1. Public Sector (NHS, Local Authorities, etc.)
- The end client (e.g., NHS Trust) determines your IR35 status.
- If inside IR35, tax & National Insurance (NI) are deducted at source (PAYE).
- If outside IR35, you can receive gross pay through your PSC.
- 2.Private Sector (Care Homes, Private Hospitals, etc.)
- Large & Medium Companies – The client determines your IR35 status.
- Small Companies – The contractor (you) determines IR35 status.
- Inside vs. Outside IR35
- Inside IR35: You are considered an employee for tax purposes, and PAYE deductions apply.
- Outside IR35: You are considered self-employed, and you can manage your own taxes.
- How to Determine Your IR35 Status?
Factors include: Supervision, Direction, and Control – Are you told how, when, and where to work?
Mutuality of Obligation (MOO) – Is your employer obliged to provide work regularly?
Substitution – Can you send a substitute in your place?
The HMRC CEST Tool (Check Employment Status for Tax) can help assess IR35 status:
https://www.gov.uk/guidance/check-employment-status-for-tax
- What Should Agency Nurses and Health Professionals Do?
- Consider Working Through an Umbrella Company – To avoid IR35 risks, many agency nurses use umbrella companies that handle tax and NI deductions.
- Get Professional Advice – Speak to an accountant or tax specialist to assess your IR35 status.
- Review Contracts Carefully – Ensure contract terms align with your working practices.