NHS ‘turning a blind eye’ to IR35 remedy schemes

Contractors on the NHS look like the next batch of scheme or loan arrangement victims that were warned about, thanks to devious promoters peddling ‘2017 IR35 reform’ solutions.   

That deviousness is so acute that such ‘umbrellas’ and ‘intermediaries’ are now fobbing off NHS framework providers with “manufactured pay-slips”, if they check for compliance.

And it is a big ‘if’ according to Orange Genie, because the NHS is “not pushing” framework providers to bring in “realistic measures” to combat the “rogue” providers or their solutions.

'Correcting the inside IR35 decision'

“The NHS and even HMRC are fully aware of these schemes…designed to avoid the worker paying the correct taxes,” says the firm’s chief executive Graham Fisher.

“Some schemes are based on loans, some on offshore mechanisms, others on intermediaries 'correcting' the 'inside' IR35 decision.”

All the schemes prey on a desire to both maximise take-home pay and work outside of a reformed IR35, which hit the public sector in April 2017. And many have top sales teams.

'Mighty marketing powers'

“One thing you can say for these sort of providers, they may not be great at anything legal relating to tax, but they’re damn good salesmen,” says Carolyn Walsh, a former tax official.

“My answer to HMRC, when it insists taxpayers knew what they were doing is… ‘You have never been subject to the mighty marketing powers of these providers, have you?’”  

Meanwhile, a law firm’s answer to HMRC in reply to its 2020 plan to extend the IR35 changes  – which inspired the schemes –  to the private sector, is; ‘expect more of the same.’

'Seduced'

“Judging by what happened in the public sector in 2017,” says Osborne Clark, “and on the basis of anecdotal evidence in the private sector already, many contractors will be seduced into alternative aggressive tax avoidance schemes”.

But the firm’s submission might be news to HMRC, because any link between IR35 and the loan charge – the in-force tax designed to tax disguised remuneration from ‘schemes’ – has been denied by HM Treasury.

At Orange Genie, Mr Fisher believes that enforcement of existing legislation, although not necessarily the loan charge, is the answer to stamp out the “proliferation” of IR35 reform-inspired schemes set up avoid contractors paying their lawful amount of taxes.

'Turn a blind eye'

“We are deeply concerned that the NHS is refusing to take responsibility for its supply chain…[by] merely asking for copy pay-slips, not understanding that these rogue providers are simply producing manufactured pay-slips.

“This behaviour would stop instantly if the end client – the NHS -- were responsible and liable for all tax avoidance and evasion in their supply change and reinforce adherence using the 2017 Criminal Finances Act and its offence of ‘Failure to prevent the facilitation of tax evasion.”

He added: “But to change enforcement tack would cost the NHS. It’s far easier for the NHS to just sacrifice the compliant agencies and intermediaries, and turn a blind eye.”