An NHS locum is to challenge an IR35 tax tribunal judgment at the Upper Tribunal (UT) in a case which could set a beneficial precedent for other healthcare locums affected by IR35 and the Off-Payroll rules.
In July 2019, it emerged that consultant urologist George Mantides had been on the receiving end of a split decision when appealing tax bills imposed by HMRC for two engagements in 2013, after the taxman had concluded that he was caught by IR35.
Despite enlisting no legal representation at the First-Tier Tribunal (FTT), Mr Mantides successfully overturned his deemed IR35 status for one of the contracts. Now, backed by the Independent Health Professionals’ Association (IHPA), he is to appeal against not only the second engagement, but what he refers to as “the unfair false employment of myself and other healthcare professionals”.
Ruling to set ‘binding precedent’ for treatment of locums
The sum of the tax bill being challenged is negligible when compared with the potential repercussions for the healthcare sector as a whole, many members of which have been pursued by HMRC or bundled into bogus employment arrangements by NHS trusts.
Though Mantides won his appeal against HMRC’s evaluation of one of two contracts at the FTT, victory in appealing the lost case at the UT would bear far greater significance. It would set a binding precedent informing not only future tribunal cases, but also the tax treatment of locums within the NHS, undermining the role-based blanketing agenda that HMRC has encouraged throughout much of the public sector.
The employment status of locums has been a source of contention for some time, following the introduction of the Off-Payroll rules to the public sector. In October 2018, a September 2017 HMRC webinar on the application of the Off-Payroll rules emerged, in which NHS Trusts were encouraged to blanket assess their locums as ‘inside IR35’, contrary to the legislation itself.
In May 2018 the IHPA (then trading as the Locum Doctors’ Union) and the Healthcare Professionals’ Union (HPU) secured a successful legal challenge to NHS Improvement (NHSI), and its plans to place all healthcare contractors inside IR35 irrespective of their circumstances. After conceding a Judicial Review at the pre-action stage, NHSI sent out instructions to trusts, informing them that locums must be assessed on a case-by-case basis.
How have the Off-Payroll rules impacted the NHS?
Unfortunately, by this point, much of the damage had already been done. A November 2017 study of healthcare locums by ContractorCalculator and the IHPA found 25% to have left the NHS following the IR35 reform, following an almost universal uptake of blanket assessments by NHS trusts.
For many locum nurses, the impact of blanket assessments was compounded by the unlawful deduction of employer’s National Insurance (NI) from already capped rates. Combined, these factors have reduced the net income of some nurses by roughly a third overnight, and mean that long distant assignments are no longer a viable option for many.
The resulting intensified staff shortages have had a tangible impact on the quality of service within the NHS, where more than 10,000 excess deaths were reported during the first seven weeks of 2018 – just eight months on from the introduction of the public sector changes. Unsurprisingly, 87% of respondents to the November survey reported said that the Off-Payroll rules were drastically impeding patient care.
And although NHS trusts have been warned against conducting blanket assessments, many continue to do so following continued contradictory instructions from HMRC, threatening continued deterioration of the healthcare sector.
Contributions needed to ‘stop horrendous injustice’
Though Mantides represented himself at FTT, the significance of a UT ruling necessitates proper legal representation from a tax barrister, the cost of which is expected to exceed £20,000. As a result, Mantides and the IHPA are appealing for contributions from anyone eager to help rectify the damaging impact that IR35 and the Off-Payroll rules have had on public healthcare.
“It’s time for contractors from across the public sector, and those who will soon be affected in the private sector, to take a stand against what HMRC has done,” comments Dr Iain Campbell, secretary-general of the IHPA:
“Delivering HMRC a defeat that sets binding precedent, while underlining the taxman’s flawed approach to mutuality of obligation (MOO), should help many people escape HMRC’s snare for the genuinely self-employed. This is also a great opportunity to send a loud and clear signal to the Sir Amyas inquiry that HMRC’s assertions that whole professions fall inside the rules without assessment are incorrect and unlawful.”
“A win at UT would set binding precedent and not only positively affect me, but all other independent healthcare professionals, independent non-healthcare professionals and patients alike,” notes Mantides on his CrowdJustice campaign funding page. “If you’re a fellow independent healthcare professional, this is a good chance to expose and stop this horrendous injustice.”
First-Tier Tribunal conclusions based on questionable assumptions
According to the IHPA, the FTT’s decision to deem Mantides’ 2013 engagement with Royal Berkshire Hospital (RBH) within scope of IR35 was largely drawn from suppositions based on a lack of evidence.
With the NHS trust in question failing to provide testimony, and in the absence of a physical contract, the judge was required to make assumptions as to what the terms of the notional contract might have been.
One was that the hospital would likely have been expected to try to provide Mantides with 10 half-day sessions of work per week, which contributed to the judge’s determination that a sufficient degree of MOO existed between the two parties. However, as Dr Campbell highlights, the assumptions made were questionable:
“While we do not know the individual circumstances of the engagement any more than the judge would have done, we do feel that the terms of the notional contract used in reaching this judgment do appear atypical.
“They look quite unorthodox to those of us with experience in the locum health worker market, where one to four-hour notice periods are often the norm and there is almost invariably no guarantee of continuing work or minimum hours.”
Dr Campbell concludes: "We are confident that, equipped with the necessary evidence, the UT will draw a more accurate conclusion as to Mr Mantides' engagement, and more importantly, help usher in positive change to the treatment of contractors under the Off-Payroll rules."