Doctors’ unions launch legal challenge to IR35 guidelines

Campaigners claim ‘shambolic’ trusts ignore rules on temporary workers

Two unions have launched a formal judicial review on behalf of locum doctors and healthcare workers, claiming that NHS trusts’ blanket application of the IR35 rules is unlawful.

The Independent Health Professionals Association (IHPA) – formerly the Locum Doctors Union (LDU) – and the Healthcare Professionals Union (HPU) have jointly created a crowdfunding page to pay for a test case against individual NHS trusts they claim are ‘refusing’ to comply with guidelines from NHS Improvement (NHSI).

The unions say trusts have breached the law by ignoring guidelines issued in September requiring them to lawfully assess locum medical professionals on a case-by-case basis to decide whether they fall within or outside the IR35, which determines whether contingent and agency workers are paid through PAYE or are technically self-employed.

NHSI – responsible for overseeing NHS foundations and trusts – stopped applying blanket IR35 decisions to contractors in May, after unions won a legal ruling that a blanket application of rules was unlawful because it failed to allow an assessment of each individual worker’s contract.

But union members say several NHS trusts have continued to ignore these guidelines.

Dr Benedict Itsuokor, president of the LDU, said: “The IR35 guidelines set out by NHSI were designed to help locum healthcare workers and NHS providers work together to achieve an amicable and fair solution to the IR35 tax rule. Sadly, the situation on the ground has not improved because of certain NHS trusts simply ignoring this guidance.

“To make matters worse, the NHS is attempting to impose further caps, or ‘pan London’ rates, which ensure agency pay rate consistency across London trusts, to locum contracts… we have no choice but to pursue further legal action against these trusts.”

The NHS has operated an agency cap since 2015, and since March 2017 it has been impossible to hire agency staff who are also NHS workers.

Union members – including NHS locum doctors, nurses and allied healthcare workers – are attempting to crowdfund £45,000 for the campaign. Part of this will fund a judicial review of the caps on agency workers.

The IHPA said the vast majority of locum workers in the NHS were deemed to be inside the IR35, irrespective of the circumstances of their contract.

These locums lost between 30 and 50 per cent of their income by being taxed as fully employed, despite not being entitled to rights such as maternity leave and sick pay. Locum medical staff are also required to personally cover necessary expenses – such as long-distance travel and indemnity insurance – which can total thousands of pounds, the union claimed.

Itsuokor said: “There are real concerns, especially in London, that locum workers will be unable to contract in the NHS because of it being economically unviable, creating severe shortages as we head into winter. Because of this, there is the real and present danger that patient safety and care will be put at risk.”

The IHPA told People Management the legal proceedings would progress regardless of the amount that was crowdfunded, as the IHPA already had lawyers and financial backers in place. Solicitors have issued Pre Action Protocol letters to two NHS trusts, and a reply is legally required within 28 days.

Julia Kermode, Freelancer & Contractor Services Association chief executive, claimed HMRC had said its policy would only affect non-compliant personal service companies operated by contractors, “but this does not appear to be the case in reality”. The association supported union action for inappropriately taxed members, she said.

“Having initially imposed a blanket ban on the use of contractors, NHS Improvement decided that each decision would be taken on a case-by-case basis, so it is disappointing to hear that this is not happening on the ground,” said Kermode.

Describing the reforms’ implementation as “shambolic”, she said the real impact was “now being felt, as we are reading about its failings on a near-daily basis.

“The chancellor will see an increase in his coffers from the tax take, which will create the impression that the policy has been successful, but the reality is that genuine self-employed workers should not be put on the payroll in the first place. 

“HMRC does not even have an appeals process in place for anyone deemed to be wrongly inside the IR35, so legal action is the only option available for such cases. We warned HMRC that this would happen and it is now proving to be the case, but it is likely to be the tip of the iceberg as more and more individuals and unions take HMRC to task.”

HMRC has previously defended the IR35 in a People Management blog, claiming that contractors had underpaid hundreds of millions of pounds in recent years that could otherwise have funded the NHS.