An NHS regulator has dropped plans to charge locum doctors income tax and National Insurance Contributions (NICs) by default following new public sector tax rules introduced in April.
Following IR35 guidance, NHS Improvement had said all “locum, agency and bank staff” should fall under the new rules.
NHS trusts were ordered to subtract income tax and NICs from wages of workers supplied to them via agencies or personal service companies (PSCs).
However, some doctors said the changes could mean a drop in income of up to 50 per cent, and threatened to withdraw from shifts at late notice, unless rates of pay were increased.
Legal action was also threatened from two unions, the Locum Doctors Union and the healthcare Professionals Union.
NHS Improvement issued new guidance following the outcry. It said trusts should instead examine each case on an individual basis, before deciding whether to apply IR35 rules.
The Telegraph recently reported that self-employed contractors who work mainly in the public sector are losing up to 30 per cent of their income after IR35 was introduced.
It said such workers are now being taxed as employees, but without the accompanying benefits, such as sick pay and holiday allowance.
Under IR35 rules, it is now the responsibility of the NHS provider to decide whether IR35 applies to the GP.