Attention: Probe of Public Sector IR35 reform practice


We’re beginning a detailed and systematic probe of public sector organisation’s processes with respect to the public sector ‘IR35’ reforms (i.e. ITEPA Chapter 10).

We are expecting to uncover yet more evidence of bad practice I’m afraid.

This will be a pan-public sector probe – given the volume we cannot use WhatDoTheyKnow. If you have concerns about somewhere you’ve worked please consider adding them to the list for us to interrogate their processes.

All you have to do is:

  1. Google the name of the organisation and ‘FOI’
  2. Most public sector bodies will have a page detailing their FOI email address.
  3. Please fill in this form with the required details.

That’s it!

Thanks for your help folks! 

FCSA clarifies their position on Umbrella companies undertaking their own IR35 assessments

402 Birch Court
Welwyn Garden City


24 November 2017


Freelancer & Contractor Services Association clarifies the position of umbrellas undertaking their own IR35 assessment – and it’s a huge win for justice.

The Independent Health Professionals’ Association (IHPA) was delighted to receive confirmation that the Freelancer & Contractor Services Association (FCSA) recognises the right of the ‘Fee Payer’ (e.g. the umbrella or agency where it pays the worker) to disagree with the Public Sector Client’s determination and undertake its own IR35 assessment with ’Reasonable Care’ in line with the law. .

Responding to public questions from the Independent Health Professionals Association (IHPA) on whether such an umbrella would be considered ‘FCSA Compliant’ FCSA CEO Julia Kermode confirmed the FCSA’s view, supported by legal advice from Earnest & Young, that the ‘Fee Payer’ could quite legitimately disagree with the public sector client where it believes the determination to be incorrect.  She has confirmed that such an umbrella could be considered ‘compliant’ by the FCSA – as it would be acting lawfully, although it may shoulder legal liability for its decision. Most such providers mitigate this risk through an insurance product that insulates them from this risk. It will be the “fee-payer”, acting on the advice of the client, who decides whether or not to account for tax on an employment basis, rather than the contractor’s intermediary.

While the fee-payer is the person who has to operate PAYE and so must take the decision whether or not a contractor falls within the new regime, they are expected to take that decision on the basis of information supplied by the client (who of course may be the fee-payer). Section 61T ITEPA (Chapter 10 of Part 2 of ITEPA) requires the client to inform the person with whom they contract whether they have concluded that the worker is similar to an employee (as defined in the legislation) or dissimilar s 61T (1). That person can then ask the client for an explanation, which must be given to them within 31 days. If the client fails to do this, they are treated as the fee-payer. If the client contracts directly with a PSC, this means they are required to tell the PSC why they have decided they should or should not deduct PAYE. The worker has to provide the fee-payer with details of his relationship to the intermediary, so that the fee-payer can decide whether the worker falls within the requirements relating to companies, partnerships or individuals: s 61U.

Speaking in a public and open LinkedIn posting Julia Kermode stated:

Who is liable?

This depends upon whether the Public Sector Client (eg NHS trust) has honoured its statutory obligations. Particularly whether it has reached an individual determination, and whether Due Care has been taken in reaching it.  Where it does the above, the ‘Fee Payer’ (in this case the umbrella), would be liable for any unpaid taxes should it get the determination wrong (insurance is available to mitigate this risk).

What about where the public sector client behaves unlawfully, eg blanket assessments?

In this case the public sector client assumes the liability BUT the Fee Payer decides whether to operate IR35 or not.

Where the tax liability has passed to the public sector client under the new Chapter 10, for example, due to the client/NHS trust having failed in its statutory duty to undertake a lawful individual IR35 assessment with reasonable care i.e. blanketing, the umbrella may still make the determination; any tax liabilities will fall on the public sector client.

So, if the public sector body were acting lawfully, as FCSA CEO Julia Kermode correctly highlights above, the umbrella would be taking a risk in reaching its own determination. This is stark reminder why such umbrellas are often well advised to have insurance models in place to mitigate the tax risk here – which most do.

That said, where the public sector body is acting unlawfully, as it seems a truly staggering number of public sector bodies are, then the public sector client has made itself liable by acting in this way.

Misleading Rhetoric

This discussion highlights a recurring theme of misleading HMRC rhetoric surrounding who is liable under the public sector off payroll reforms, which given its patently counterfactual claims that there is no blanketing likely surprise nobody.

HMRC has been routinely attempting to give the false impression that there is an obligation upon other parties to respect the public sector client’s determination. A decision which IHPA’s leaked evidence and multiple industry sources reveal is usually unlawful in practice.

Who is the Fee Payer (The technical bit!):

Put simply, this means whoever pays the worker’s company, or where the payment chain moves offshore the last UK resident company/individual – in this example it refers to an umbrella company.

Or in legal speak (feel free to skip):

The “fee-payer”, who is the lowest UK-resident person, not controlled by the worker or their associates, and not being a company in which the worker or their associates has a material interest, who forms part of a chain of persons along which the consideration for the worker’s services is passed from the public authority client to the intermediary. Where the public authority engages the intermediary directly, they will be the fee-payer as well as the client.

These requirements are set out in new ITEPA Chapter 10 s 61N.

Does the Sector Client Have to Reach a Determination?

Whilst there is a statutory obligation upon the client to reach an individual determination with reasonable care, most are failing to do this, and are instead adopting blanket approaches as they lack the required legal background to comply, and are not competent to exercise the required reasonable care. Furthermore, most would struggle with the administrative burden of compliance with the legislation, and huge pressure from external bodies to blanket by the collusion of numerous other bodies. They’re also required to clarify enquiries into how their determination has been reached by the worker within 31 days. The public sector client’s determination does NOT need to be accepted by the fee payer. The fee payer needs to consider it, but may overturn it.

This demonstrates that the legislation is unworkable.

Who is the Public Sector Body Obliged to Tell Under the Legislation?

There is no statutory obligation on the client to tell anybody save the worker themselves. Not the agency, nor the umbrella.  There is equally no obligation upon anyone to abide by these determinations – most of which are unlawful blankets, and those which are not are usually being reached by those without the required technical knowledge to undertake an assessment.

The Fee Payer is responsible for whether or not to operate IR35. This will be the public sector body (eg NHS trust) only where they pay the worker directly. We must remonstrate that this is NOT the form of ‘Direct Engagement’ that we see in the NHS at present. 

So would an umbrella which undertakes its own IR35 assessment with due care and respects the law be compliant? FCSA CEO Julia Kermode seems to think it would be so, which agrees with numerous legal opinions seen by IHPA.

So does HMRC acknowledge this is the case?

Yes actually. They might not like it, they might try to misrepresent things in their guidance and rhetoric, but take a good look at Pg 22 of the Private sector IR35 consultation and look at what change HMRC wants enacted:

6.11, question 8:

 "Q8. What action should be taken in the case where the fee-payer hasn’t acted upon the client’s conclusion that the worker would have been regarded as an employee for income tax and NICs purposes if engaged directly? Should an obligation be placed upon the fee-payer to adopt the client’s conclusion and there be sanctions for failing to do so?"

So does HMRC know there is no obligation to respect the public sector client’s decision – yes it absolutely does, and  they hate it.

Is that surprising? Hardly, given the overwhelming evidence of HMRC malfeasance –

  • misleading advice
  • tools that don’t align with the case law
  • Using arguments which have publicly failed in court on multiple occasions as a ruse to maintain unlawful blankets.

Buried away elsewhere in HMRC’s guidance is this other telling phrase:

“8. Where a public authority, agency, or third party, “the fee payer” makes a payment to a worker’s intermediary on or after 6 April 2017, IT DECIDES IF THE RULES APPLY, and then deducts tax and primary NICs from the payment it makes, and pays employer NICs and is included for calculating the Apprenticeship Levy. The VAT exclusive amounts must be accounted for through Real Time Information (RTI), in in the same way as for an employee. The change does not affect employment rights available to the worker.”


“31. The off-payroll working in the public sector legislation in Chapter 10 imposes the same employment status test. THE PERSON PAYING THE INTERMEDIARY MUST LOOK AT THE ARRANGEMENTS UNDER WHICH THE WORKER PROVIDES THEIR SERVICES TO THE CLIENT. If applying the employment status tests to that engagement shows they would have been an employee of the client but for the existence of the intermediary, then the engagement is caught by the new rules.”


Can the frameworks sanction you for disagreeing?

The stories of frameworks being complicit in unlawful conspiracies to blanket workers are abound.  Indeed, certain parts of such claims appear to be corroborated by clauses contained in their framework agreements and notable in some of their payslip audit requirements.

IHPA has seen contractual clauses which attempt to bind people to override the law in respecting the public body decision - whether it was reached lawfully or not.  Requests for clarification on such points are met with deafening silence. The section of the law on whether the ‘Fee Payer’ should operate IR35 refers to the facts of the engagement, not the public sector body’s determination.

If the Fee Payer knows a public sector body decision has not been reached lawfully, it is not unreasonable for it to make a correct decision. If the decision was reached lawfully, but the fee payer believes it is incorrect, the Fee Payer is absolutely entitled to respect the result of its own determination, provided it is reached lawfully and in good faith.

Can the frameworks bind you to do otherwise? Operating the off payroll rules when you shouldn’t is unlawful; it would appear to IHPA that a framework contract clause which attempts to compel an individual to commit an act which would be unlawful is probably unenforceable as a matter of contract law.

One cannot very well sue one’s hitman for not carrying through on a contract killing.

The above notwithstanding we urge all parties to take their own legal advice on this matter. Which we expect will confirm this position.


Disclaimer – This is not legal advice. We urge all parties to seek independent legal tax advice from regulated legal tax practitioners.

Independent health workers and IR35 – So far

IR35, health workers and current state of things


Prior to April 2017 independent healthcare ‘locum’ contractors from all healthcare disciplines were disparate groups with no centralised voice.  This absence of representation on the national stage has facilitated repeated attacks on their income and working conditions in recent years – allowing cartel behaviour of rate fixing between NHS bodies to be rolled out without effective opposition and setting the stage to convince politicians that, this group could be bullied and manipulated into accepting unlawful blanketing under off-payroll tax rules (IR35), regardless of the clear reality that, for many locums, they should be outside the legislation due to a lack of control, mutuality of obligations, and because of the financial risks they bear – which can amount to tens of thousands of pounds.

April 2017 and the change to the Intermediaries Legislation:

The events we are about to cover are the assault that was the last straw for contractors and was the crucible which caused locums to come together to forge first the Locum Doctors Union and ultimately to expand to embrace all disciplines of healthcare contractor under the Independent Health Professionals Association….

In April 2017 a very minor alteration was made to the part of the UK’s tax legislation governing working through intermediaries, commonly referred to as IR35 – essentially only two changes were made:

  1. The responsibility for undertaking assessments and liability for back taxes was switched to the Fee Payer (Note that sometimes this is the public body but the responsibility rests, in fact, with whoever makes the final payment to the contractor’s company and this may be an Agency, Umbrella or Payroll company).
  2. For those found to be under IR35 in the public sector, previous rules allowing a 5% expenses allowance were scrapped.

Notably the rules for determining status have not changed and if you were outside IR35 legally beforehand you still are now….or at least if you got a fair assessment you would be.

….So, why did everything change in April 2017 despite the fact that the legal change should not have changed the outcome of a single assessment?

Sadly, there has been a simultaneous push by public bodies such as HMRC and NHSI to ignore the law of the land and manipulate public bodies into finding contractors caught by the IR35 legislation. Initially this was implemented by blanket banning of contractors working outside IR35. This was very clearly unlawful, and our organisation successfully challenged through the Judicial Review process – NHSI conceded it had been acting unlawfully by advocating blanketing settling out of court and issuing this updated guidance.

This clear indicator has been deliberately ignored by the calculator – as has been confirmed directly by HMRC’s chief policy advisor on IR35 Mark Frampton in a secret webinar held with Trusts and NHSI to coordinate de facto clandestine blanketing

Most public bodies were not equipped to handle the assessments properly and HMRC’s answer to this has been a tool (initially called the ES tool now called CEST) which does not align with the case law. The tool appears to be rigged and ignores key tests – such as mutuality of obligation something most locums would pass and achieve an outside IR35 result as there is no requirement on them to accept shifts nor upon the hospital to offer them. Many members have examples of contracts being terminated during a shift or within several hours of the start date. This clear indicator has been deliberately ignored by the calculator – as has been confirmed directly by HMRC’s chief policy advisor on IR35 Mark Frampton in a secret webinar held with Trusts and NHSI to coordinate de facto clandestine blanketing – above board blanketing having failed.

Additionally, the courts have consistently ruled that ‘Mechanistic Approaches’ such as the CEST tool are not an acceptable method of IR35 status determination.

This de facto blanketing by institutionalised misrepresentation of answers to the CEST tool and ignoring the legal tests has been an abuse of the duty of determination entrusted to Public Bodies following the changes.

IR35 change provokes staffing exodus and crisis

“Not only the reforms themselves but HMRC’s encouragement of malpractice within the sector is driving away the essential skills that the NHS depends on,”

The fall out has been an exodus of contractors from the public sector across many sectors leading to delays in completion of public service contracts. The chronically understaffed NHS, even admitted by the Secretary of State for Health, has also been affected with less locum and agency workers willing to take extra shifts. A survey of 450 healthcare locums by ContractorCalculator showed that a quarter had left the NHS, 72% were considering changing careers and 87% said the reforms are already drastically impeding patient care. This does not bode well for our beloved National Health Service.

Dave Chaplin, ContractorCalculator CEO notes that “Not only the reforms themselves but HMRC’s encouragement of malpractice within the sector is driving away the essential skills that the NHS depends on,”.


It appears that there will be no resolution to this injustice without further legal action bearing in mind that this was one of the steps we had to take to reverse the "inaccurate" (read as unlawful) decision by NHSI to apply a blanket decision to place all locum workers inside IR35.

The lack of consideration of Mutuality Of Obligation by the CEST tool is one such judicial review challenge that would go a long way to resolving this for all public sector contractors, not just those in the health sector.

Help correct this unlawfulness!

We are crowdfunding a Judicial Review on the incorrect implementation and application of IR35 for healthcare workers

Legislation to tackle tax avoidance absolutely necessary

Whilst legislation to tackle tax avoidance is absolutely necessary, it must be transparent.

Healthcare contractors, current situation is akin to dealing with the ‘Mafia’; Don being HMRC, issuing instructions without considering the ramifications. NHS overseeing bodies being the consiglieres – making sure the don’s instructions are carried out, and keeping the mafioso (foot soldiers in provider bases in line). The foot soldiers then arm twist the poor suppliers (the recruiters) to play ball by undercutting the retailers (contractors). The ones paying the dearest price are the end clients (NHS users).

To be clear, I am not saying that they are a mafia- just giving an analogy of how things are playing out. We are getting reports of healthcare contractors been told that they will not be considered for contracts if they dare request an assessment as required by law. We even have in our possession letters from health boards still telling recruiters that ALL healthcare contractors are within IR35 and no representations will be considered.

The poor recruiters who try to do the right thing then lose out to the ones who are playing ball. All the while contractors have either left or reduced their work considerably. Absolute mess!

Stephen Mhiribidi

Head Legal – IHPA/LDU


First published on Linkedin – 23 September 2017

IHPA – HPU – LDU send IR35 Guidance to NHS Trusts

Over the past few months, most healthcare agency workers and locum doctors have been unduly subject to costly misapplications of the IR35 rule.

In the first instance, NHSI “inaccurately” instructed NHS Trusts to apply a blanket approach of classifying all workers as being caught inside IR35. The LDU prepared pre-action protocols for a Judicial Review. NHSI capitulated and updated their instructions, requesting NHS Trusts to carry out case by case assessments.

Unfortunately, whether by design or inadequate knowledge, Trusts have struggled to meet their legal obligation in relation to case by case assessments.

We have now written to all NHS Trusts with the included guidance to ensure that all material factors are taken into consideration when carrying out these assessments.


1. Cover Letter from Stephen Mhiribidi (Legal Director IHPA/LDU) on behalf of Dr Ben Itsuokor (President IHPA/LDU)

Final LDU Cover Letter – Stephen-secure


2. Guidance letter sent out to all NHS Trusts

Final IR35 Guidance 11 September 2017- secure1

Login to access a sample letter you can send to your locum agency consultant


3. Next steps

1. The full guidance is now available for downloading and printing

2. Please print 2 copies- one for yourself and the other for the person assessing you

3. Downloaded copies need to be emailed to the below list and “CC’d” to Vital that you CC to IHPA and request that the response be to all.

Please email to
(i) your agency rep
(ii) reps for all other agencies that you are registered with, but
for now, please only forward to current role agent, then to others when role confirmed.
(iii) the assessor, HR and Finance Directors at whatever hospital your contracted with
(iv) your local Member of Parliament (address to be found at You need to put in your postcode and must be a constituent

Please copy into these email correspondence

5. On the MP issue – any members in Northern Ireland- please write to them, especially if you happen to be in a constituency belonging to an MP whose party is currently in a quasi-coalition with the government. I shall draft a brief explanation that can accompany the guidance to them, and post it here

6. For new roles, please bring out the guidance when the role has been confirmed.



Direct any queries to

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