HMRC and CCA seminar

HMRC and CCA seminar

02 Mar . 7 min read.

Recently I was invited to an IR35 seminar. It was presented by HMRC, organised by the CCA and hosted by RPS. The aim of the seminar was for the HMRC to understand the Locum Pharmacy and Optician sector and which locums would come under IR35. Below are the notes and Power Point presentation from the seminar. We will publish more articles in the near future once we receive clarification form the HMRC about how IR35 will apply to locum pharmacists.

Notes and presentation of the recent HMRC and CCA IR35 Seminar hosted by the Royal Pharaceutical Society. Power Point presentation link is at the bottom of the page.

Determining the tax status of locums
The modern workforce is increasingly characterised by flexibility and diversity with terms such as “portfolio career” and “gig economy” used more frequently and more widely reflected in the environment in which employers, government and workers need to navigate. This makes it difficult for those determining employment and tax status, particularly against a backdrop of several high-profile challenges to tax status making their way through the High Court.

It is in this context that HMRC is undertaking a programme of work to see whether the tax status of pharmacy locum workers is being determined appropriately, or if this needs to change. There are also imminent changes to tax law to prepare for, as in the last budget the Chancellor announced changes to the application of the IR35 regulations which will come into effect in April 2020. For those working inside the IR35 rules, changes to the law will place the onus on the worker’s engager to make sure that the right tax status is assigned.

The Company Chemists’ Association (CCA) and Her Majesty’s Revenue and Customs (HMRC) are working together to develop an understanding of how changes to tax law could impact individuals and businesses. They agreed to jointly host an event for representatives from key bodies in the pharmacy sector and extended this invite to colleagues from The Federation of (Opthalmic and Dispensing) Opticians. The seminar was held at the offices of the Royal Pharmaceutical Society (RPS) on 13 February with engagement between the CCA and delegates (which were then fed back to HMRC) on the topics that organisations wanted to know more about.


Malcolm Harrison, Chief Executive at the CCA, opened the event by explaining that the seminar was organised to ensure open dialogue between HMRC and the sector, to provide clarity on the proposed changes, and to discuss how we can work together to implement them.  Malcolm then handed the session over to Russell Kirk and John Lauder (HMRC Employment Status & Intermediaries) who presented on the determinants of employment status and some key factors for delegates to consider, including;
The definitions of ‘Office’, ‘Worker’ and ‘Tax Status’
The difference between a contract ‘for service’ and ‘of service’
Mutuality of obligation
Personal Service and the right of substitution
Financial risk
Running a business in their own account
Other pointers.
John Milburn and Brendan Dewar (Large Business, HMRC) were also there to support the session and John provided an overview of the current and ongoing reforms to tax law, including the use of Check Employment Status for Tax (CEST) and proposed changes to the application of IR35 in April 2020. The seminar was set in the context as an opportunity for HMRC to engage with representatives from across the pharmacy and optical sectors.
Discussion points:

HMRC want to find a settled position across small, medium and large business on the application of status indicators when determining tax status. However, tax can only be determined on a case by case basis. Other headline points made by HMRC and delegates are as follows:

Office Holder
If the person is deemed to be an “office holder” they will be taxed through PAYE immediately and the other indicators won’t come into effect.
HMRC will undertake further work to consider the Responsible Pharmacist (RP) role in relation to the term “office holder.”
Worker and “employee” are two different status’ with different rights conferred.
It was argued that if locum is an RP they can close a pharmacy store if they consider it to be unsafe to practice, and so the locum has ‘control.’
McKenna case law sets out that personal service and having a sufficient degree of control are key indicators of employment. However, other factors (status indicators) also need to be considered.
It was acknowledged that the regulatory environment creates some control but HMRC questioned the degree of control. They said they would be considering if there are business standards present in the work environment that are separate to regulatory standards.
HMRC said they will be exploring the escalation route to the regulatory bodies when engagers identify issues with an individual’s performance, and if this “performance management” constitutes control.
SOPs were discussed, and HMRC said they will do further work to understand if they confer an element of control in themselves. Again, it was argued that SOPs may be the ruled by regulatory requirements which are then implemented within instructions (SOPs).
Control doesn’t necessarily have to come via regulatory requirements, there may be other targets for workers to meet, e.g. sell a certain product. ‘Sufficient degree’ is a subjective term. Is the engager ultimately able to tell the worker what to do?
Does the locum have control over any other person’s work?
Personal Service
Personal service is defined by the genuine, unfettered, right to substitute. There are well defined criteria that determine what is and is not an unfettered right to substitute.
Substitution would mean an engaged worker deciding not to deliver the work personally and to subcontract to another worker, whilst the engager still pays the originally contracted worker.
Financial Risk
Does the worker take on any financial risk with the contract? Does this apply to pharmacists? Medical liability can put locums in a loss-making situation. Are there other factors that could constitute risk?
Evolution of employment law
Markers that define ‘being in business’ have changed and HMRC may need to adapt. (i.e. advertising services publicly)
Has the world has moved on from case law (much set over 40 years ago)?
There was a discussion around whether HMRC are adapting to change and applying new criteria going forward or viewing tax status through a backward-looking lens and, if so, does retrospective action come into play? HMRC acknowledged these concerns and don’t have a position on this to date.
Essentially, the more integrated a locum is in the work context, the more likely it is that they are an employee.
Other matters discussed
Definition of a locum and the criteria for when a locum stops being a locum is unclear to the sector and it’s an area that HMRC continues to work on.
Is the worker replacing an actual role (i.e. cover for illness or holiday) or is there actually no intent to fill the position offered to the locum worker?
What are the rules for pharmacists working from home (clinically checking prescriptions from home)? Would likely depend on what sort of governance there is around that position.
There are several different pharmacy contacts, for example, 100-hour contracts and distance selling pharmacies. HMRC need to take these nuances into consideration.
Some locums work for several different employers, in these circumstances, which organisation is responsible for the employment contract?
‘Stay away’ locums (e.g. in the south west) get accommodation paid as a locum. Mileage is sometimes paid for by locum. (It was agreed that specific questions like this are issues for the sector to work through).
Would certain on-line platforms that advertise shifts for locums to accept be counted as an agency according to HMRC requirements? Was it the original intention of the legislation to catch certain platforms? (HMRC are working through this question).
Employment agency and employment business are different things. Do online platforms fall under the agency definition?

Questions for HMRC

Several questions were raised by delegates that HMRC have committed to providing a response to. In some circumstances, questions raised related to a broader issue that requires further work from HMRC with partners. The key points are as follows:

What is the current accepted definition of a locum?
Has any consideration been given to time constraints determining locum or employer? (NHS has produced their own guidance on locums, but that hasn’t been approved by HMRC. A locum can be engaged for a set period of time.)
What is a fettered right to substitution?
How do professional standards/regulations/legislation impact on the element of ‘control’?
How do the terms of the NHS contract impact upon ‘control’?
What are the rules for pharmacists working from home (Distance selling pharmacies)?
How do the rules apply to locum agency placements (there is separate legislation regarding agency workers?)
Home workers are not necessarily self-employed. How does this fit into control?

Next steps
The CCA will share the above questions with HMRC for them to respond to. CCA will also plan future workshops with stakeholders, to a timeframe which is aligned with HMRC’s deadline for implementing change. Future engagement will provide the sector with an opportunity to identify their position and concerns about the key discussion points from the seminar. It’s envisaged that this will facilitate more detailed engagement with HMRC going forward.


HMRC Presentation