Qualified nurses working on contracts are often asked to set up limited companies by nursing agencies for a number of reasons. If this applies to you, you need to be aware of the tax implications of (and the likelihood of HMRC investigations into) providing your services through your company.
You may have heard of the Intermediaries legislation, popularly known as the IR35, which applies when personal services are provided to clients eg hospitals through a company. If this legislation is triggered, all payments received are treated as employment income and you may be liable to penalties on past contracts.
It is, therefore, important that IR35 is proactively tested against each and every contract entered into. If you or your clients receive (or have received) a Business Records Check letter from HMRC asking if IR35 has been considered, you are already in the jaws of an investigation.
WHAT YOU SHOULD DO AT THE START OF EVERY CONTRACT
- 1. Go through your contract’s terms and conditions to check your role(s), payment terms, supervision and control conditions, notice periods, and whether you must be the one carrying out the work stated in the contract.
- 2. Note what the client is actually doing, ie, what are the employment terms in practice. Eg, Are you required to clock in at particular times? Are your lunch breaks monitored? Are you paid overtime? Are you treated like normal employees at work? Do you have to use the client’s tools to do the work? Is the client obliged to provide work?
- 3. Do you have access to, or have you seen, the contract between the nursing agency and the client? Do the terms match the ones in your contract and what actually happens in practice?
- 4. Do you have previous working relationships with the client?
- 5. How long is the contract for?
If you are an agency nurse, speak to your accountant now about your tax position and ensure your accounts (corporation tax and self assessment) are prepared in line with the requirements of the IR35 legislation so that you do not get caught in a myriad of heavy penalties. Ignorance of the law is not an excuse when HMRC officials are sitting across the desk from you.
If you can’t get hold of your accountant or if you don’t have one, email firstname.lastname@example.org or get hold of us via the contact page, and we will be in touch as soon as possible.