How the latest decisive IR35 tribunal victory affects the locum market

© Jo De Vulder |

The IHPA is delighted to note the decisive court victory of Jensal Software Ltd in its IR35 Tribunal against HMRC and, whilst there were a number of important factors one is, or rather should be, the final nail in the coffin of HMRC's highly criticised CEST tool.

A critical factor in this case was the test of Mutuality of Obligations (MOO).


What is mutuality of obligations?

In its simplest terms this means that the client is obliged to continue offering you work and you are obliged to continue accepting the work offered.

MOO is a key factor in IR35 (off-payroll rules) assessments, which comes up often in the case law, and yet is completely omitted in the CEST tool. In a webinar conducted between NHS Trusts, NHSI, and HMRC, Mark Frampton (HMRC's Policy Adviser on IR35) revealed a shocking fact to the contractor world - HMRC had deliberately omitted this key test from the CEST tool as they considered MOO to be present in all contractor engagements.

This position is at odds with all previous case law. Indeed, were this the case, why has this been such an enduring test in the case law? Surely the courts wouldn't spend so much time deliberating on this point.

This latest case put HMRC's flawed reasoning to the test and the courts have, unsurprisingly, thoroughly rejected it.

Jolyon Maugham, QC, Director of The Good Law Project predicts that in a two years MP's would be looking at the question "whether the BBC and the NHS were right to force everybody to be taxed as employees in circumstances where the case law has shown, after the fact, that very often that those people were properly taxed as self-employed.”


What does this mean for locum contractors?

This thoroughly underlines why the CEST tool is not fit for purpose and cannot be used. MOO must be taken into account by NHS Trusts in making IR35 determinations as we have highlighted in our guidance sent to all NHS Trusts in September 2017. The recent court judgement spectacularly demonstrates that HMRC has been misleading Trusts by attempting to steer them away from this important test.

The bottom line is this comes down to whether there is an obligation to provide work to the locum and correspondingly upon the locum to accept work offered.

Some questions to consider are:

  1. What is the minimum notice period I need to give the locum of termination?
    - eg in Many contracts in current use this is 4 hours. In Brookson's contract, for example, the notice period is only 1 hour.
  2. Can I unilaterally cancel the contract without repercussions?
    Medical staffing will have experience in cancelling locum contracts. They'll also know locums cannot sue them over it. They are entitled to usually only a few hours notice. Anything else is often a courtesy.
  3. Do locums cancel shifts themselves at short notice?
    Many in medical staff will find this is a frequent and frustrating experience for them. It does however underline the point.
  4. Are locums obliged to do the shifts I tell them to?
    You might wish they were but anyone that has every tried to push this matter will tell you a locum decides what shifts they will and will not work. Indeed their hours are often negotiated and they have the right to simply refuse to do shifts. They will often try to give adequate notice as a professional courtesy (and the law allows this without compromising MOO).
  5. Oh and if someone from medical staffing read some of those and thought - if they tried to do that I'd cancel their contract on the spot...
    You've just proved the point the fact you can do that tells you there's no mutuality of obligations.

The number of locums, in our estimation, who would have a significant degree of MOO is perishingly small and the omission of this test has been a very deliberate injustice on the part of HMRC to force contractors into blanket false employment.

That deliberate omission has now been rejected and it behoves NHS Trusts to consider MOO in their assessments.

It is extremely likely that this will change many of your IR35 status determinations. There are, of course, other tests but MOO is a big one!

Any Trusts who have realised HMRC's guidance is unreliable with this and would like assistance in helping them reach IR35 determinations for IHPA members please feel free to contact and we will be more than happy to guide and assist you.

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

NHSI Declare War on Recruitment Agencies and Umbrellas

NHSI Declare War on Recruitment Agencies and Umbrellas!

So NHSI has morphed into HMRC2 now- threatening recruitment agencies that are supposedly using non-compliant umbrella companies. They promise to shut down such agencies and help to bring prosecutions- interesting indeed? They also state: “nurses and locums found to be using these payroll schemes to avoid paying tax and NICs on their full salary, will be reported to their respective bodies NMC and GMC, which may result in their licences to practise revoked IF THEY DO NOT MOVE TO BANK or a COMPLIANT UMBRELLA COMPANY!

Have I missed something here- is NHSI now a department in HMRC or vice versa? And how exactly do they define a non-compliant umbrella- one that does not comply to their policy of blanket IR35.

As for umbrellas and FCSA- are you going b (sic) to take this lying down? Everybody does not want to put their head above the parapet ofcourse- fortunately we’ve heard of an action ensuing.

I wonder if NHSI are acting within their powers or over-reaching yet again. Why can’t public bodies just work within the law- is it that hard? Yet another problem caused by the 2017 Chapter 10 amendments (IR35)!

Stephen Mhiribidi

Head of Legal IHPA/LDU

First posted on Linkedin – 5 October 2017 

Response to Plymouth Herald – Junior Doctors Understaffing in Derriford Hospital

Youtube Banner-headed paper-modified




The Independent Health Professionals Association is a Trade Association representing dependently contracting health professionals sometimes referred to as locum tenens.



We note, with dismay, your article of 15th September regarding the plight of Junior Doctors in Derriford. Sadly, this situation is far from unique or isolated and is being echoed at Trusts up and down the country. Conditions like these cause a dramatic crisis of recruitment and retention and increased staff sickness which exacerbates the problem and, quite understandably, drives up both the demand for staff to take on additional ‘locum’ shifts and increases the value staff across all hospitals will attach to their precious few days of rest (which many give up when locuming). These supply and demand market forces result in increased locum rates, as those taking extra shifts struggle with such conditions as much as permanent staff.

The present situation is a result of long standing lack of investment in our health service with failure to train enough doctors, nurses, and AHPs creating a vicious cycle which drives those already working to leave plus a number of recent factors affecting the locum market which we are very concerned are missing from the narrative here and being reported as if they were a separate story – when in reality this is a matter of cause and effect with the two problems being inextricably linked.

In the example noted, as in many others, you will have noticed an attempt was made to find temporary staff to cover this rota gap which failed.

There are essentially three reasons why finding temporary cover is failing;

The first is that hospitals are now so underfunded and understaffed that working conditions are often atrocious. This is clearly captured in your article – any independent doctor is voluntarily working under the same conditions and, as you can imagine, this makes it harder to find staff willing to do this.

The second factor is that Jeremy Hunt’s rate caps on ‘Agency’ staff represent a spectacular failure to grasp basic market economics, which should be bread and butter for a party with a free market mantra like the Conservatives. Current locum rates are just a symptom – the actual disease is the fact that our substantive colleagues are underpaid, undervalued, and overstretched thanks to Jeremy Hunt’s New Contract spreading an already too slim workforce over even more hours exacerbated by the fact we’ve been undertraining doctors for decades. Many locum shifts are filled by these same doctors taking on additional hours - of course the rates will be high. If we attempt to cap pay below what the free market rates dictate we will not fill shifts as nobody is going to take them.

The third, most recent, and worst of the exacerbating factors relates to an unlawful blanketing of locum health professionals under a hitherto obscure piece of tax legislation referred to as IR35 – which is stopping locums claiming expenses for hotel bills and flights to cover shifts across the country against tax. This often runs to many thousands and even tens of thousands of pounds. Additionally, if the locums took these shifts they would additionally reduce their take home pay by up to 50%. Despite this the actual tax rules themselves have not changed – only the responsibility for who conducts the assessment has been shifted to the Trusts.

This blanketing was initially instigated following a demand from NHSI that all locum doctors should be taxed as employees -ignoring their, often colossal, indemnity insurance, travel and temporary accommodation expenses and not affording them holiday pay, sick pay, maternity pay, protection from unfair dismissal, pensions or any of the other statutorily protected benefits that actual employees enjoy. NHSI advocated a blanket approach which is well recognised to be unlawful in what is, very clear case law. Our organisation, specifically our doctors advocacy group the Locum Doctors Union, commenced the preaction protocol of judicial review against NHS Improvement and forced them to concede the unlawfulness resulting in updated guidance to trusts which told them they had to conduct individual assessments but did not teach them how to do this lawfully.

Trusts are finding this a huge burden administratively and are grappling with incorrect advice issuing from various government departments.  We have taken action to help the Trusts with this task last week by issuing them with detailed guidance, written by our barrister Michael Paulin, on how to correctly comply with their legal duties. If they follow this we are confident most locums would be found to be outside IR35 and Trusts would pay less money overall.

The fact remains that, at 50% below a free market rate due to increased tax, it is extremely difficult for trusts to fill shifts and as a result of this, Jeremy Hunt’s New Contract and Rate Caps rates are being driven up by government policy whilst contemporaneous attempts are being made to prevent trusts paying them. It is almost as if the government wants bad headlines to manufacture consent for the privatisation of the health service.

Lastly the IHPA would like to state that we stand shoulder to shoulder with our substantive colleagues and will continue to advocate for better pay and working conditions for them as being the only definitive way to address the problems within the system.  More money must be put into training new doctors and NHS careers must be made attractive and financially competitive or we will continue to haemorrhage our best and brightest to places that do value and pay their medics properly.



I do hope this helps add some context to the story. Should you wish to run a piece on the guidance itself please get in touch.

Yours faithfully,