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IR35 reforms affecting GP locums to be reversed

by Costanza Potter
26 September 2022

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IR35 reforms that affect the way GP locums report their taxes will be reversed, the Government announced amid a range of tax-cutting measures.

Last week’s mini budget also included plans for scrapping the Health and Social Care Levy that had been due to come into force in April and a cut to income tax.

Announcing his Growth plan, Chancellor Kwasi Kwarteng confirmed that the scrapping of plans to raise NHS money via tax will not mean a cut to NHS funding.

He said: ‘Reversing the Levy delivers a tax cut for 28 million people, worth, on average, £330 every year.

‘[But] I can confirm the additional funding for the NHS and social care services will be maintained at the same level.’

Mr Kwarteng also said he would be ‘happy to have a discussion’ about GP annual allowance (AA) pensions tax charges during parliamentary questioning on his budget announcement.

However, the plan failed to set out any further support for GPs.

On IR35, Mr Kwarteng said he will ‘simplify’ the rules, which GP leaders had warned would cause ‘instability’ for locum GPs.

Mr Kwarteng said: ‘In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses.

‘So, as promised by my right honourable friend the Prime Minister, we will repeal the 2017 and 2021 reforms.’

However, he added that the Treasury will ‘continue to keep compliance closely under review’.

The plan itself set out that the reforms to the off-payroll working rules known as IR35 will be repealed from 6 April 2023.

It said: ‘From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions. 

‘This will free up time and money for businesses that engage contractors, that could be put towards other priorities. The reform also minimises the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.’

Under the IR35 anti-tax avoidance measures, the responsibility falls on large or medium private sector bodies to determine whether contractors are self-employed or employed for tax purposes.

The measures aimed to stop self-employed workers from hiding behind an intermediary, such as a limited company, in order to pay less tax than if paid directly by their client/employer.

Tax cuts

The chancellor’s mini budget also announced a cut in taxes for those earning more than £150,000, abolishing the additional rate of income tax that currently stands at 45% and establishing a ‘single higher rate of income tax’ of 40% from April.

The basic rate income tax will also be reduced from 20% to 19%.

Announcing the new measures, the Chancellor said that high tax rates ‘reduce the incentive to work’.

The UK will move to just three income tax rates – 0%, 19% and 40% – meaning all annual income above £50,270 will be taxed at 40% from 6 April.

Previously, earners were taxed an additional 45% on annual income above £150,000.

Responding to the chancellor’s announcement, BMA council chair Professor Philip Banfield said that a ‘plan for growth without a plan for health investment is not worth the paper it is written on’.

He said: ‘It’s clear from the chancellor’s speech today that the NHS has no place in the Government’s plan to turn a “vicious cycle of stagnation into a virtuous cycle of growth”.

‘The Government has offered precisely nothing to doctors leaving due to pay erosion and nothing further to yesterday’s sticking plasters to address the broken pension tax rules that are forcing doctors into early retirement. It is the Government’s continual failure to address both issues adequately which is driving the workforce emergency in the NHS.’

He added: ‘While it’s good that the NHS and social care services did not feature among the Government’s barrage of tax cuts, maintaining funding at existing levels is little consolation to patients on mammoth waiting lists, or the staff providing their care.

‘With sky-high inflation and the soaring cost of living eroding the NHS’s budget, more funding is desperately needed to fill the gaping black hole in NHS finances.’

It comes as the health secretary set out her own plan for the NHS, which includes two-week GP appointment targets, the new publication of practice-level appointment data and reforms to GP pensions.

A version of this article was first published on our sister title Pulse.