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Tax reforms could lead to reduction in locums, pharmacy bodies warn

HMRC's changes to off-payroll working are due to come into force from April 2020
HMRC's changes to off-payroll working are due to come into force from April 2020

Employers may “shun” employing locums, while locums may be put off working in community pharmacy, because of ambiguous IR35 tax reforms, pharmacy bodies have warned.

Government plans to implement changes to tax law known as IR35 – or “off-payroll” working – could have a significant impact on the flexibility of the community pharmacy workforce, including discouraging locums from working in the sector, pharmacy bodies have warned Her Majesty’s Revenue and Customs (HMRC).

The changes are intended to ensure that individuals who are in essence employed when providing services are paying the correct amount of tax. From April 6, 2020, the responsibility for assigning the right tax status for a locum pharmacist will fall to their employer.

However, employers “may shun hiring workers on a temporary basis, because of the ambiguity that exists around HMRC’s definition of a true locum”, the Company Chemists’ Association (CCA), the National Pharmacy Association (NPA), the Association of Independent Multiple Pharmacies (AIMp), the Royal Pharmaceutical Society (RPS) and locum organisations Team Locum and Locate a Locum warned.

Under the current plans, locums working in community pharmacy could be mistakenly defined as “employed” for employment tax status, the organisations claimed. This would make working as a locum “untenable” because they would pay the same tax as employees, but without the same access to employee rights, the bodies stressed.

They have “significant concerns” that the changes would have a detrimental impact on the pharmacy workforce, “to the extent that it disrupts the necessary supply of medicines and services to patients”.

Businesses won’t be ready

With less than 12 months to go until the reforms come into force, “there is still much work to do” and “businesses will struggle to put the required changes in place on time”, the pharmacy bodies warned.

Malcolm Harrison, chief executive of the CCA – which represents the UK’s largest multiples and supermarket pharmacies – said: “HMRC [is] challenging the norms that have existed around the use of locums and self-employed pharmacists and everybody needs to be attuned to change.”

The pharmacy bodies advised employers and locums to read HMRC’s guide on what actions they should be taking in preparation for April 2020.

Read the pharmacy bodies' consultation response in full.

1 Comments
Question: 
What do you make of the proposed tax reforms?

Andrew Jukes, Locum pharmacist

Now that April 2020 is approaching I thought I would re-post an article I previously wrote on this...Has the profession mitigated its risks..Are we ready for IR35 in community Pharmacy?

Andrew Jukes, Locum pharmacist

Posted on Fri, 29/03/2019 - 10:45

I thank you sincerely for addressing this topic. I have been researching IR35 since it was introduced into the public sector in March 2017. I am aware of not only salary reductions for locums but severe 'secondary effects' causing service deterioration, with less locums as they leave service due to lower wages.In addition a reduction in available locum posts has been experienced by some recruiters, as budgets contract as there are added costs to businesses to operate this framework. The EMPLOYER will be responsible for assigning a locums tax status under IR35, in accordance with HMRC definitions, and then taxation will be deducted at source rather than in the past via, for example a locums accountant on behalf of HMRC when annual accounts are submitted.. If operating a limited company for example there will be a significant pay reduction when you compare corporation tax versus IR35. I have felt this personally to such an extent that it comprimised my whole work viability and created many financial obstacles. The 'secondary effects' are not on the radar of most of the profession, with all due respect, but they are real and are still being felt now from the public sector roll out.. One day soon the coffee beans will provide a waft that gets noticed. This is NOT going away.

What has staggered me is the lack of 'pick up' of this topic by the profession generally ....A head in the sand/'sleep walking into danger' stance. IR35 is now being consulted in government for the private sector, and will be live in 2020 I am sure.

I am NOT an accountant and individual professional bodies and organisations are not either but they should have been sign posting on this a long time ago to prepare locums in advance for what is highly likely to impact upon them.

My advice, from research and experience, is for locums to seek robust tax advice from an accountant, as everyone has individual circumstances. Do not rely solely on HMRC's 'CEST' tool to determine IR35 status as its reliability is questionnable including counteraction in the courts by some locums incorrectly assigned.. A lot of employers going fowards will not permit the use of limited companies in 2020 and there will be no tax advantages using them anyway. The use of umbrella companies dictates the use of 'IR35 Compliant' versions but this will NOT totally avoid the HIGHER tax liability if deemed inside IR35 (that the employer decides), as deductions will be made by the employer BEFORE payment to the locum.. There are real risks to individual earnings, service delivery if locums leave, and impacts on businesses in terms of related costs. You cannot compare apples with lemons, BUT it is an 'indicator' to review what has happenned in the public sector.... Please research readily published articles via a general search..There has been some real damage done and it at least needs risk assessing generally, and for individuals to assess thier own circumstances via a qualified accountant.

An additional wealth of resource on IR35 is via www.contractorcalculator.co.uk ,who are in addition supporting a national campaign to halt the introduction of IR35 into the private sector.They also have a wide range of evidence and data on the impacts of IR35 and good quality articles.

I would say, learn more about IR35, be aware, risk manage and don't avoid whats coming as it will have consequences. Another 'can of worms' is the employee/locum or contractor status and how you may or may not be entitled to any benefits such as expenses etc if your position changes....All this needs to be factored in.

Well done on raising this issue ...I was wondering if I would ever see it addressed or if it would remain the issue to lay a carpet over in the long term and then just REACT when problems occur,rather than advise and mitigate the risks.It's so easy to avoid eyes in corridors, to park a difficult issue, or pass by on the other side of the road but that level of management of an issue will get us where we deserve ....NO WHERE!, and this is too important not to tackle NOW.

This is probably the single most important issue, given the impacts, non addressed i've seen in my entire career--It's not solely about an individual locums salary. It has impacts on services and patient safety....

*Could you manage a salary reduction?, if so by how much?

*Could you cope If you had less colleagues in your shop or business?

*What would be the financial impact on your business due to IR35?

*What would be the impact on the service and patients with less staff?

*Would patient safety be affected?

In addition IR35 will be adding into a 'perfect storm' of co-existing factors...such as budgetary cuts, rising costs, competition from online and other service providers in very challenging times.....We have already witnessed a 'round' of Pharmacy closures en masse and individually.Can Pharmacy businessess and locums alike afford NOT to care about this issue, going fowards?

Please research the issue......I hope this helps ...I'm sharing my thoughts from research and personal experience but if you have not considered this please seek professional advice in advance of the private sector roll out in 2020.

Heads in the sand don't tend to see very much!

A profession, professional organisations,businesses, employers and individuall professionals,, with respect, in ABSOLUTE DENIAL.

 

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