Is pharmacy ready for IR35?

Laura Smith is a Partner at Wylie & Bisset. We kick off a new season of podcasts on Pharmacy in Practice by talking to her about IR35. We have published a number of articles recently on this topic so thought it was time to have a chat with the experts. If you enjoy this episode and the PIP podcast please feel free to leave a review on your podcast player. It helps others to find us.

For tax advice please contact your accountant. Every situation is different and will potentially require advice specific to you.

Previous coverage of the IR35 topic on PIP

Could IR35 be good for pharmacist locums?

Will IR35 change locum life forever?

Is IR35 a potential tax time-bomb for pharmacist locums?

About our guest

Laura Smith CTA joined Wylie & Bisset in April 2016 as a Manager in the WB Healthcare team, was promoted to Head of Healthcare in July 2018, with a further promotion to Director in July 2019 and now partner with effect from 1st April 2021. Until joining Wylie & Bisset in April 2016, Laura spent the majority of her career working with a top 10 accountancy firm in Glasgow. Whilst developing her tax career and experience in the professional services sector, with a particular focus on the healthcare sector, Laura qualified as a Chartered Tax Adviser in 2013. Laura heads up the WB Healthcare team in all aspects of accounting and taxation matters, under the lead of partner Tom McGuire. In addition to the review of accounts for Healthcare sector clients, her expertise covers personal taxation including capital gains tax planning, remuneration planning, and advising on inheritance tax issues and planning considerations.

The Pharmacy in Practice podcast is kindly supported by Glasgow based Wylie & Bisset LLP chartered accountants.

Wylie & Bisset LLP is a leading chartered accountants Glasgow-based practice, with a national reach, whose growth has been organic, through referral and reputation.  They have the background, expertise and extensive resources required to provide your business or organisation with the right solutions when it comes to managing and growing your business. The firm covers the whole of the UK, providing business advisory and support services to clients across a wide range of public and private sectors, ensuring you have access to the best possible accountancy and tax planning advice so your business runs smoothly, is financially sound and complies with regulatory and legal controls.

Their approach is proactive and “hands-on” via a true partner-led service, which they believe is the best way to provide their clients with a first-class service. Their commitment to excellence and efficient service has maintained a reputation for high-quality professionalism and awareness, ensuring ongoing client loyalty and recurring referrals. If you are searching for a hands-on partner-led firm of accountants in Glasgow contact us today to see how they can assist your business.

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Could IR35 be good for pharmacist locums?

 

I have to say I’m getting a bit concerned about the lack of discussion around pharmacist locums and IR35.

 

From the 6th of April, the choice about whether you are working inside or outside IR35 no longer lies with the pharmacist locum trading as a limited company, but with the end-user, i.e. the pharmacy contractor. This will fundamentally change the way locum pharmacists work and trade, so you must understand the extension of IR35 into private companies -similar rules have applied in the NHS since April 2017.

You can access the tool for checking employment status by clicking here.

 

I think the expectation was that the extension of IR35 into the private sector wouldn’t happen, but all indications are that it will. The new Chancellor, Rishi Sunak, has suggested a gently, gently approach, but in my experience, HMRC will see this opportunity to gather more tax money and quickly.

Summary of what’s happening with IR35 from the Recruitment and Employment Confederation

 

What?

 

The Government is extending the off-payroll rules, which have applied in the public sector since April 2017, into the private sector. The new rules will apply to work done by contractors working through intermediaries such as personal service companies. Importantly, the tests for IR35 status is not changing, but the responsibilities for making the status decision and related deductions are.

 

When?

 

The new rules will apply to all payments made to personal service companies on or after 6th April 2021.

 

What’s the difference?

 

From 6th April 2021, the client, and not the contractor, will be responsible for assessing IR35 status. For inside IR35 assignments, the fee-payer will have to make tax and national insurance deductions before paying the personal service company.

 

My advice for all locums is to complete the online test via the link above then talk to your accountant. This is not the time to stick your head in the sand because not spending time to understand your personal position regarding IR35 could leave you with a huge tax bill.

Following the budget on 3rd March 2021, it is clear that IR35 will come into effect on 6th April 2021. The PDA has published a really helpful, considered article on the IR35 issue, which can be found here.

 

The NPA has also published guidance that is more geared to pharmacy owners and operators but it’s useful to understand the challenges that IR35 brings for pharmacies too. You can access this article here.

 

What now?

 

It’s really important that you take the time to understand your obligations and risks. You need to remember that you need to consider each arrangement you have with pharmacies individually.  After consideration of the increased complexity, it may be that you decide that locuming is no longer the right choice for you.

 

The irony is that the way locum pharmacists have worked and been booked has always been an anomaly when you compare it to other healthcare professions. The way that multiples have classically covered vacancies and holiday cover has never really made sense to me.

 

Why would you book locums by the day and not on longer-term, temporary contracts?

 

After all,  the pharmacy gets the consistent cover and the pharmacist can earn a premium for this consistency and earn holiday pay too? It may be that IR35 is the catalyst for change that benefits locum pharmacists in the long run.

 

Shaun Hockey is the Managing Director of Medacy Healthcare Support Solutions.

 

Please note that this article is not advice. You should seek advice from registered tax professionals or accountants who are qualified to give such advice.

 

Read more

 

Will IR35 change locum life forever?

 

Is IR35 a potential tax time-bomb for pharmacist locums?

Will IR35 change locum life forever?

 

Typically, locums have been treated as if they are self-employed, giving them certain advantages over employees who are taxed on a pay as you earn (PAYE) basis.

 

However, the status of locums throws up a number of issues.

 

Calling a pharmacist a locum does not automatically confer self-employed status on a pharmacist. A few years ago, HMRC investigated a number of pharmacy businesses that had treated locums as if they were self-employed. There were particular issues over locums who had worked in the same pharmacy for a long time; or if they worked a regular pattern, such as every Wednesday. HMRC took the view that these locums were really employees and even if the locums had paid their income tax and National Insurance, the owners were exposed to the risk of penalties and interest on the tax they had not deducted.

 

The new IR35 legislation will be implemented on 6th April 2021. Locum pharmacist Andrew Jukes has taken some time to write the article below to highlight a number of pressing issues that are now swiftly emerging.

 

Before continuing it is important to note that no individual or organisation can advise you on your own specific tax circumstances unless they are qualified and authorised to do so. This article seeks to provide a summary of the background issues that locum pharmacists will shortly face as the new IR35 tax arrangements are implemented in April 2021. Andrew also provides some helpful signposting to qualified and appropriate sources of advisory support.

 

What is IR35?

 

IR35 is an item of tax legislation aimed at addressing perceived tax avoidance, in the main via limited company contractors, such that contractual or locum workers taxation, is aligned to that of employees.

 

So what is the relevance and impact to locum pharmacists after IR35 is implemented from April 6th 2021?

 

The first aspect is that only medium to large companies as defined by Her Majesties Revenue and Customs (HMRC), will be subject to the applied legislation. This is the first thing to check if this applies to you in your locum activity (see table below).

 

If you are contracting to companies that are subject to the legislation, then you will no longer receive your earnings without any tax deducted. Many contracts from 6th April 2021 will be deemed inside IR35 and that will mean that PAYE taxation and national insurance will be deducted at source by the end client (i.e. agency or hiring organisation).

 

This essentially presents a situation from April 2021, that locum pharmacists may not be able to use their limited companies as before and will end up being renumerated via ‘PAYE’ or ‘direct engagement models’. This can represent a significant reduction in locum pharmacist salaries, as the tax-efficient operation of limited companies will not be permitted.

 

The legislation does not apply to those locums working as sole traders or via umbrella companies as appropriate taxation will occur. However, the designation of employment status may still be affected, as this is closely related to IR35. You will have to check how this may affect terms and conditions.

 

The burden of responsibility for assigning IR35 status will be via the ‘end client’ or hiring firm, utilising the HMRC IR35 tax assessment tool (‘CEST’=Check Employment Status for Tax). This will cause companies a higher administrative burden to implement and oversee.

 

What might you need to consider?

 

Every situation is different and requires early preparation for the changes that are coming. I will signpost you to some recognised sources of advice and support in the table that follows. The impact could be potentially significant in terms of salary reduction. This will largely be because you will not be permitted to operate via a limited company.

 

So what new arrangements will you be subject to?

 

You will need to be prepared for how your working benefits will present themselves.

 

After 6th April 2021, will you receive any form of holiday, sick pay and pension benefits, under the new contractual arrangements?

 

It is the case that expenses will not be paid to the same level, as was the case via previously limited company operation. You need to conduct a financial comparison of pre and post April 6th 2021 as a locum pharmacist that are applicable, in your circumstances.

 

The table below provides a route to answering your questions, and each individual locum pharmacist will need to take responsibility to ensure they have prepared for the changes and mitigated any risks they may face. The sources below serve to provide clarity on specific tax aspects and related issues, in order to support locum pharmacists.

 

Potential sources of official advice and support for locum pharmacists and pharmacy operators to engage with in advance of the IR35 roll out from April 6th 2021.

 

This list is not exhaustive.

 

1. End Client.

 

  • The organisation or company engaging you as a locum should confirm if IR35 applies to them (as per ‘HMRC’ definitions).
  • If so they should inform you of your assigned IR35 status.
  • Cannot provide you with specific personalised overall tax advice as they are not authorised to do so.

 

2. Your own certified accountant.

 

  • They know your working pattern and history.
  • They can advise on IR35 and specific personalised tax matters.

 

3. Locum agency.

 

  • If you make a contract via a locum agency, they will be able to give some general level advice about your work assignments and IR35 taxation, however, they cannot provide you with specific personalised, overall tax advice as they are not authorised to do so.

 

4. The Pharmacists’ Defence Association Union.

 

  • Can advise members on issues involving work-related scenarios, regulation, disputes professional issues or signpost as appropriate. ‘PDAU’ cannot provide you with specific personalised overall tax advice as they are not authorised to do so.
  • Click here to access the PDAU website.
  • 0121 694 7007
  • advice@the-pda.org

 

5. Pharmacist Support charity

 

  • Confidential support and advice provided in many areas including stress, financial assistance, debt and employment law etc. However, they Cannot provide you with specific personalised, overall tax advice as they are not authorised to do so.
  • Click here to access the Pharmacsit Support website.
  • 0808 168 2233
  • info@pharmacistsupport.org

 

6. Her Majesty’s Revenue and Customs

 

  • Can advise on your IR35 status and determination.
  • Useful if ‘end client’ determination in question, especially if you don’t have an accountant.
  • A useful source of general advice on preparation for IR35 implementation. However, they cannot provide accountancy services. You will have to oversee your overall tax affairs and submit the relevant documents (seek advice), or via an authorised tax specialist or accountant.
  • General TAX advice via their website that you can access here.

 

7. National Pharmacy Association

 

  • Support membership to achieve professionally and commercially in the interest of patients.
  • Can advise members commercially or professionally on aspects of IR35.
  • Cannot provide you with specific personalised overall tax advice as they are not authorised to do so.
  • You can access their website by clicking here.
  • 01727 858687
  • npa@npa.co.uk

 

8. The company chemists’ association

 

  • Represents the interests of its larger multiple pharmacy operator members, from the community pharmacy sector.
  • Can advise pharmacy operators on various aspects relating to the implementation of IR35 in April 2021.
  • Cannot provide you with specific personalised overall tax advice as they are not authorised to do so.
  • You can access their website by clicking here.
  • 02037418254
  • office@thecca.org.uk

 

9. Contractor calculator

 

  • Expert advice (across all business sectors) on aspects related to contracting (i.e., working as a locum).
  • The ‘go to’ experts on all facets of IR35. There is a wealth of resource on the website and various publications on the topic and current developments.
  • Cannot provide you with specific personalised overall tax advice as they are not authorised to do so.
  • You can access their website by clicking here.

 

A respectful reality check, and a call to action

 

There are many thousands of Locum Pharmacists engaging in the private sector (i.e community pharmacy/private hospitals), that could potentially be impacted by the implementation of IR35 on 6th April 2021.

 

My personal motivation for creating this supporting article is that I was totally unprepared for the public sector roll out in 2017 of IR35. It did a lot of damage and compromised the financial position of many locum contractors (not just pharmacists). The effects are well documented in the public arena.

 

The reality

 

The legislation is confirmed, and IR35 will be implemented in the private sector on 6th April 2021. There is no longer a chance to lobby or circumnavigate what is coming on the horizon. If you prepare and establish the facts you can plan for the situation more readily, or make changes. If you do not plan or become aware of this issue then you could be in for a change in financial circumstances that are unexpected that have detrimental impacts on you personally.

 

Call to Action

 

I would advise taking the time now to seek the advice you need. Please be aware that each situation is different and you need to utilise any sources of advice that apply to your given situation. It may be the case that you engage services for several companies or have a portfolio style of working. All of this has to be considered. Please act to ensure you have the information you need in advance and factor in the time it may take to clarify everything. Taxation issues are seldom plain sailing.

 

A Final word and reflection

 

IR35 has caused significant impacts in many sectors. Alongside the personal finances which are a valid consideration and concern, there are also ‘secondary effects’. You cannot predict the future, and it is beyond the scope of this article, but you may wish to consider how such implementation may affect workforce dynamics if locum pharmacists consider changing to permanent roles or leave altogether, and how continuity of services may be affected? How would this impact on remaining staff in these workplaces?. The whole viability of being a locum could be called into question with far reaching consequences.

 

I saw all this ‘play out’ in the public sector, in 2017 and felt the impacts personally. I hope with a little forward planning, awareness and a realisation that this change will need to be faced, it can be approached and tackled more effectively, with less stress.

 

Andrew Jukes is a locum pharmacist. 

 

Read more

 

Is IR35 a potential tax time-bomb for pharmacist locums?

 

Could IR35 be good for pharmacist locums?

 

Is IR35 a potential tax time-bomb for pharmacist locums?

 

The employment status of locums has been a potential tax time-bomb for many years. Typically, locums have been treated as if they are self-employed, giving them certain advantages over employees who are taxed on a PAYE basis. However, the status of locums throws up a number of issues.

 

Calling a pharmacist a locum does not automatically confer self-employed status on a pharmacist. A few years ago, HMRC investigated a number of pharmacy businesses that had treated locums as if they were self-employed. There were particular issues over locums who had worked in the same pharmacy for a long time; or if they worked a regular pattern, such as every Wednesday. HMRC took the view that these locums were really employees and even if the locums had paid their income tax and National Insurance, the owners were exposed to the risk of penalties and interest on tax they had not deducted.

 

The way to avoid a dispute over the status of locums has often been to structure a proper contract between the owner and the locum. One of the hallmarks of self-employment is the entitlement of the locum to send a substitute if the locum cannot or chooses not to work on a particular day. However, a locum with a contract that allowed for substitution succeeded in claiming holiday pay from Paydens in 2013. The Employment Tribunal held that the entitlement to send a substitute was a fiction because if the locum could not attend the pharmacy on a particular date, Paydens, not the locum, would have found an alternative pharmacist.

 

Some years ago, I acted for a pharmacy owner who had entered into a contract with a limited company. This company agreed to provide the services of a superintendent pharmacist. The superintendent owned the company. When the superintendent quit, she claimed compensation for unfair dismissal. The Employment Tribunal decided that the superintendent was my client’s employee and that she was entitled to compensation.

 

Arrangements under which an owner enters into a contract with a company to supply the services of an individual are the very thing that IR35 is intended to tackle. The Treasury considers that someone who supplies their services through a company should not be in a better position than someone who enters a contract directly with the owner of the business.

 

If a locum’s services are provided through a company, that company will have to undertake an assessment of the pharmacist’s status. If an individual enters into a contract directly with the pharmacy owner, the pharmacy owner has to undertake the assessment. The assessment must be given to the locum with reasons. There must be a process that enables the locum to challenge the assessment.

 

Getting the assessment wrong can mean that the owner will become responsible for the locum’s tax and National Insurance.

 

David Reissner is a lawyer and also chair of Pharmacy Law & Ethics Association.

 

Read more

 

Will IR35 change locum life forever?

 

Could IR35 be good for pharmacist locums?