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AIMp: Tax reform could lead to locum shortages and pharmacy closures

Leyla Hannbeck: "Shortage of locum pharmacists will certainly cause unplanned closures"
Leyla Hannbeck: "Shortage of locum pharmacists will certainly cause unplanned closures"

The IR35 tax reform could discourage pharmacists from considering self-employment, resulting in a gap in the locum workforce and “unplanned” pharmacy closures, AIMp has warned.

The introduction of the new tax rules – also known as “off-payroll” working – could have a “deep impact” on medium-sized pharmacy businesses’ ability to deliver services, Leyla Hannbeck, CEO of the Association of Independent Multiple Pharmacies (AIMp) wrote in a letter to the Treasury yesterday (February 13).

Medium and large organisations – which the HMRC defines as having a “turnover of more than £10.2million, a balance sheet total of £5.1m and/or more than 50 employees” – will be responsible for determining the tax status of the locums that work for them from April 6.

Under the proposals, pharmacy businesses will be responsible for determining if the locum pharmacists they hire should pay income tax and national insurance contributions and cover those costs if appropriate.

A number of pharmacy organisations, including AIMp, warned last year that under current plans, locums working in community pharmacy could be mistakenly defined as “employed” for employment tax status. 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 organisations argued.

Self-employed

The tax reform “may put people off being self-employed and put more people into early retirement”, Ms Hannbeck told C+D today (February 14).

Pharmacies cannot always afford to employ another full-time employee and locums might not want to enter into full-time employment, she added.

Pharmacies can “legally function” only when a qualified pharmacist is on the premises and “any shortage of locum pharmacists will certainly cause unplanned closures of pharmacies”, Ms Hannbeck wrote in her letter to the Treasury.

“The ability to select individuals at both long and short notice, from a resource group, with specific training and experience for a specific gap that needs filling is critical,” she added.

Review IR35

She added that HM Revenue and Customs (HMRC)’s check employment status for tax (CEST) tool is also not fit for purpose”, as it is not “refined enough” to reflect the working practices of locum pharmacists.

Her view is shared by Umesh Modi, a chartered accountant and a partner at Silver Levene LLP.

“It is not enough to solely rely on HMRC’s CEST tool, which is not fit for purpose. The locum workforce will surely be destabilised, and most will be re-thinking their current long-term engagements, which will have a negative impact on the community pharmacies that rely on their specialist skills as well as detailed knowledge of their patients requirements.”

Ms Hannbeck invited the Treasury to start discussions with the sector on how the IR35 regulation could be revised.

The House of Lords Finance Bill Sub-Committee is set to analyse the impact of IR35 on large and medium-sized organisations as part of its inquiry into the draft Finance Bill 2019-20. Earlier this month (February 4), it invited stakeholders to submit their evidence to the inquiry by February 25.

Ms Hannbeck told C+D that the organisation decided to write the letter to the Treasury now as it hopes the concerns it raises will be considered by the inquiry.

The Treasury has been approached for comment.

3 Comments
Question: 
How will the introduction of IR35 affect your business?

Andrew Jukes, Locum pharmacist

Re-POSTED from last year-Has the Pharmacy sector effectively mitigated risks and are prepared for IR35 in the private/community sector?(April 2020):-

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dave Downham, Manager

Umesh, do you still agree that "If you can show you do not work solely for one employer and have multiple sources of income, you should not have a problem."?

Really? Wow, Superintendent Pharmacist

So will this apply to pharmacises under that threshold in the same way?

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