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NHS Chiefs are needlessly handing Tax Avoidance Advisors £Millions in vital NHS funding

A tax avoidance scheme being utilised by bosses of hundreds of NHS Trusts is losing the public purse millions of pounds, and at the same time shifting tax liabilities, potentially illegally, onto temporary staff members within the NHS.

The NHS bosses responsible for entering their Trusts into the legally dubious schemes have been handing over millions of pounds of taxpayer’s money to advisors and accountants.

The end result is that the money men providing the expertise behind the schemes have been taking 25% of the money generated – thus creating a vicious circle where there is actually less available in the public purse to pay for the NHS in the first place.

IHPA investigation

The Independent Health Professionals Association (IHPA), which represents the interests of locum healthcare staff and independent doctors and nurses, has carried out an extensive investigation into the tax practices of various NHS Trusts in respect of their contracting staff.

The IHPA has discovered what is, in essence, a tax avoidance scheme endemic across hundreds of NHS Trusts. Bosses are dodging VAT, which should be paid by the Trust, and instead placing the VAT liability on the staff themselves.

The scheme is devastating to the financial longevity of the NHS itself and according to doctors working with the IHPA, it is a direct result of chronic Tory underfunding of the NHS.


In April 2017, reforms were made to the Intermediaries legislation, colloquially known as IR35. Simply put, this is the legislation that governs how contractors working with public authorities are to be taxed.

IR35, brought into force in 2000, was intended to close the loophole of employees ‘posing’ as contractors in order to avoid tax. 

Under the April 2017 reforms to IR35, the responsibility for determining the tax status of locum agency and bank staff lies with the NHS as a public authority. In essence, the NHS is the client in their relationship with the contracted staff-member. As such, the April 2017 reforms gave power to NHS Trusts to organise the tax affairs of their locum staff. 

The scheme

With respect to IR35, the default position is that contracting healthcare staff are considered ‘inside’ IR35. This means that they are under the direction and control of the NHS and, thus, the NHS has to pay VAT on their ’employment’. 

However, it now appears that NHS bosses are relying on an HMRC exemption under IR35, wherein locum staff – registered doctors and nurses – are deemed ‘outside’ of IR35. That is, not under the NHS’ direction and control. However, the IHPA says this is nothing but a lie, conjured and facilitated by the predatory accountants advising Trust bosses.

In essence, the scheme relies on exploiting locum staff who are considered ’employed’ and thus exposing them to tax liabilities to which they should not be exposed. As a result, many doctors, nurses and allied health professionals are being charged employers’ and employees’ taxes simultaneously. That is, employers’ National Insurance and, sometimes, the Apprenticeship Levy, which is a tax on big business with an annual turnover of over £3m, as well as standard PAYE deductions.


The IHPA consider the schemes to be illegal, since HMRC began encouraging NHS Trusts to ‘blanket assess’ their locum workers as ‘deemed employees’. General Secretary of the IHPA, Dr Iain Campbell, said this:

“It is rank hypocrisy for Trusts to force our workforce into false-employment, without the obligatory assessments, aiming to cause doctors and nurses to be taxed more, whilst contemporaneously engaging in arcane accountancy practices in an attempt to dodge their own tax liabilities arising directly from the same actions.”

Indeed, the IHPA considers that the estimated 300 NHS Trusts allegedly complicit in the schemes will face potential convictions under the Criminal Finances Act 2017

The endemic issue

NHS Trusts are public sector corporations, and therefore have a level of autonomy over their budget and the means by which they carry out their responsibilities, which includes hiring staff. 

Dr Iain Campbell of the IHPA lays the blame squarely at the feet of central government and HMRC, stating that the necessity to engage in such measures to avoid tax legitimately owed arises as a result of the rank underfunding of the NHS, to which the Tories have subjected it:

“Many NHS bosses and accountants will not be resting easily as news breaks and we urge all affected to review their arrangements to ensure they are certain they are all behaving lawfully. […] The current unlawful behaviour here needs to stop, and that Trusts urgently need the extra money which the NHS needs and the Chancellor, who presides over these very tax schemes, is presently denying them.”

The leeching accountants

At the heart of the scheme is a lie. That accountants pocketing millions from NHS Trusts are providing ‘healthcare’. They are not, they are providing staff. Such use of terminology allows the relevant NHS Trusts to exploit the loophole at the heart of IR35. As the IHPA press release stated:

“…whilst the private companies are cashing in, the temporary health workers themselves are facing exploitation and a lack of any benefits associated with employment, such as docking their pay to provide their own holidays, sick pay and employer’s pensions – or not providing them at all.

The unaffordable tax demands lead to their being taxed at a rate higher than actual employees. As a result, trusts are not only dodging their VAT bills, they are also flaunting the law by unlawfully passing on the trusts’ employment taxes to the workers themselves – seeing ordinary workers wrongly charged Employer’s National Insurance Contributions and even the Apprenticeship Levy – all meaning an unfair and unlawful 14% hit to the income of ordinary health workers, who predominantly come from ethnic minority backgrounds.”

Indeed, in 2013, Dame Margaret Hodge called out these schemes as “aggressive tax avoidance” and condemned the accountants profiting from selling them to Trusts and workers alike. In doing so, they are being paid in tax money to engage in a rouse, and they are taking money directly away from front-line services.

The cost to the NHS

It is the cost to individuals merely trying to work and provide a service through the NHS, which is the most damaging. As a result of these tax loophole schemes being exploited by NHS Trusts, locum staff are being told to pay more tax. They are even facing bankruptcy because of the changes. All so that NHS Trust bosses can cut costs by avoiding tax. Dr Iain Campbell told Evolve that:

“We are seeing dieticians on £15 per hour charged a tax levied only on businesses of gross turnovers greater than £3million…[The apprenticeship Levy] in addition to being unlawfully taxed as their own employer.”

The private companies taking a slice to provide the tax avoidance services to the relevant Trusts are leeches on the hull of the NHS. In one NHS Trust, the commission they earned was enough to fund 15 extra nurses or 5 junior consultants per year. 


At the heart of the matter is central government funding. The Tories have slashed it to such an extent that NHS Trust bosses are being forced into engaging in dodgy practices in order to make ends meet.

The IHPA proffers three simple solutions:

“1. Absolutely ban Trusts from doing this (NHSI CEO Ian Dalton has been telling them to stop this for over 20 years). Enforce it strictly.

2. Increase the NHS budget by the amount of VAT previously avoided (including the commission element).

3. The net result will be that all the money that would have been commission goes to the NHS. It’s a cost neutral cash injection for our NHS and can bring much needed extra staff.”

This is the culture of desperation that the Tories’ central policies have gestated. From local authorities to the NHS, police to carers, the institutions on which this country runs are at boiling point and everywhere private enterprise vultures circle.

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