Pharmacy bodies have voiced ‘significant concerns’ over the effects that tax reforms proposed by HMRC could have on locum pharmacists.
The Company Chemists’ Association (CCA), the National Pharmacy Association (NPA), the Association of Independent Multiple Pharmacies (AIM), the Royal Pharmaceutical Society (RPS) and the locum agencies Team Locum and Locate a Locum issued a joint response to an HMRC consultation on the proposed changes.
The reforms, announced in 2018, will see medium and large pharmacy businesses that employ more than 50 people become responsible for assigning the tax status of locums themselves from April 2020.
HMRC consulted on the proposed changes to the ‘off-payroll’ working rules, known as IR35 regulations, between 5 March and 28 May this year.
The pharmacy group said: ‘We have significant concerns that, following these reforms, the flexibility of the pharmacy workforce may be affected to the extent that it disrupts the necessary supply of medicines and services to patients.’
An HMRC spokesperson said: 'The rules determining an individual’s employment status will not change. Where an individual has been operating the existing off-payroll rules correctly, and paying the right amount of tax and national insurance contributions (NICs), there will be no change to the rates at which tax and NICs are charged.'
A flexible workforce?
In its consultation response, the group raised concerns that some workers may have to pay the same amount of tax as employees but without access to the same rights, making fewer people willing to be self-employed as locums in the sector.
The document said: ‘The nature of working as a contractor or locum in the sector may meet the HMRC’s ‘tests’ for employment and this may lead the Revenue to declaring that all workers are ‘employed’ for employment tax status.
‘If this were the situation, it would make working as a locum or self-employed person untenable because, for many, the reforms may mean that they pay the same tax as employees but without the same access to employee rights.’
It added that the ambiguity around the definition of a ‘true locum’ following the reform might lead clients to avoid hiring workers on a temporary basis.
‘Clear communications’ needed
The pharmacy also group called for a detailed timetable outlining the rollout of the reforms as well as further guidance on how those affected should prepare for the changes.
The consultation response document said: ‘With now less than 12 months before these reforms are due to be enforced, businesses will struggle to put the required changes in place on time.
‘HMRC need to recognise the amount of time it takes for business to change their processes to reflect this new legislation.’
It continued: ‘Therefore, we are calling for businesses to have time to adjust to these changes and clear communications from the Revenue to both clients and workers. We believe that this will be key to the success of these reforms.’
CCA chief Malcolm Harrison said: ‘We have worked across the sector and engaged with HMRC to highlight our collective concerns and to call for more clarity and support for community pharmacy.
‘HMRC are challenging the norms that have existed around the use of locums and self-employed pharmacists and everybody needs to be attuned to change.’
He added: ‘There are steps that individuals and businesses can take to prepare and we’d advise everyone to be as proactive as possible with the information and tools currently available.’
'Dictated by the facts'
The HMRC spokesperson said: 'Employment status is never a matter of choice; it is always dictated by the facts.
'It is fair that two individuals working in the same way pay broadly the same income tax and National Insurance contributions (NICs), even if one of them works through a company. The off-payroll working rules require that individuals who work like employees, but through companies, pay similar taxes to other employees.'
Here are the pharmacy group’s tips for locums and employers ahead of the reforms:
- Don’t assume your tax status if you’re self-employed or a locum. If you are an employer, don’t assume the status of those you engage.
- Make yourself aware of what your CEST determination is. Access it here
- Visit the government’s website and read about IR35
- Read the HMRC’s guide for organisations that sets out what actions they should be taking now to prepare for the changes ahead of April 2020. You can find this on gov.uk
- Keep an eye out for further messaging including the HMRC’s publication of draft legislation and the summary of responses to the consultation.
A wider review of the use of self-employed locums is also being undertaken by HMRC, which ‘could affect a larger proportion of the sector than the IR35 reforms’, a spokesperson for the pharmacy group said.
The group also called for HMRC to fully assess the impact of the reforms on public sector roles such as nursing before they are extended into the private sector.