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Locum doctors and nurses succeed in overturning unfair tax rule (1 June 2017)

Date: 01/06/2017
Duncan Lewis, Main Solicitors, Locum doctors and nurses succeed in overturning unfair tax rule

Two unions representing locum doctors, nurses and allied healthcare professionals have today succeeded in overturning a new tax rule imposed by NHS Improvement (NHSI) that risked thousands of agency workers leaving the NHS.

The Locum Doctors Union, who are supported by the Healthcare Professionals Union, an association that represents nurses and allied health care workers, threatened legal action against NHSI after it instructed NHS Trusts across the UK to apply an HMRC Rule known as IR35 to all self-employed NHS healthcare workers.

This change to the contracts of locum doctors, nurses and allied healthcare workers would have potentially resulted in the loss of between 30% to 50% of their income, because they would have been treated as employees rather than as self-employed for tax purposes.

Even though locum healthcare workers would be taxed as employed workers under the purported IR35 rule, they are still not entitled to the same employment rights that all other NHS staff receive.

Legal action

The grounds of challenge raised in the pre-action protocol included


  • It was irrational for NHS Improvement to claim that locum workers use personal service companies as part of tax mitigation or avoidance strategies because there was no empirical evidence to substantiate this contention;

  • NHS Improvement’s position unlawfully fettered providers’ discretion because it prevented them from entering into contractual arrangements with limited companies;

  • The decision was ultra vires because NHS Improvement had no statutory or other power to mandate NHS providers to take any particular action in relation to taxation matters;

  • The approach of NHS Improvement was unlawful because it failed to take account of locum workers individual circumstances, which were relevant material considerations that the statute required the decision makers to consider;

  • The decision breached Article 1 of the First Protocol to the European Convention on Human Rights because it deprived locum workers of their property in a manner otherwise than in accordance with domestic law.

On Friday, NSHI responded by issuing updated guidance entitled “Working through intermediaries: IR35 Update”, which states that the new tax rule should be imposed on a case-by-case basis, depending on each individual locum’s circumstances, rather than on a blanket basis.

While the new guidance suggested that NHSI is climbing down from imposing IR35 on all agency workers, it at the same time stated that if the rule can be applied to one locum in a particular role then this “will help inform the likely application of the test to another worker in the same role.”

While the two locum unions welcomed the move by NHSI to change its guidance, it did not go far enough, according to Alex Peebles of Duncan Lewis Solicitors, who is representing them.

Alex Peebles commented:

“The Locum Doctors Union has been forced to initiate the pre-action protocol for a claim for judicial review because of the unlawful and detrimental stance that has been taken by NHS Improvement. The LDU’s barrister, Michael Paulin, was instructed at the earliest stage in proceedings”.

“Locum staff, including locum doctors, nurses and allied Healthcare workers, are dedicated public servants. They often operate under personal service companies because doing so allows them to provide medical services up and down the country to the benefit of patients and the NHS.”

Mr. Peebles wrote to NHSI to ask for further clarity on its guidance before the deadline for filing a claim for judicial review, which is 26 May 2017.

NHS Improvement has today conceded to every substantive point made by the Locum Doctors Union. The new guidance specifically provides that NHS Providers may contract with locum doctors, nurses and allied Healthcare workers via personal service companies. NHSI have also clarified the importance of consulting with individual locum doctors, nurses and allied Healthcare workers, on a case-by-case basis, and of taking account of any representations they may wish to make.

Mr Stephen Mhiribidi and Dr Benedict Itsuokor, the two lead Claimant members of the Locum Doctors Union in the proposed judicial review claim, have stated:

“We are delighted that NHS Improvement has effectively conceded that their previous directive to NHS Providers was unlawful. Our members are dedicated public servants and we hope that, in light of our success in this case, we will be able to continue our service to the NHS without being further penalised in this difficult economic climate.

“We sincerely hope that NHS Providers will welcome this clarification, which means that it will be business as usual for the NHS. We wish to express our gratitude to our solicitor, Alex Peebles, and our barrister, Michael Paulin, both of whom have worked tirelessly to ensure that we obtained a just satisfaction to our claim”.


Duncan Lewis

Duncan Lewis Solicitors is recognised as a top tier and leading law firm by Legal 500 UK 2016 across its key practice areas. The company serves both corporate entities and private individuals in over 20 areas of law from offices across London and throughout the UK. Other established areas of law are: actions against the police, business immigration, child care, clinical negligence, civil liberties, community care, court of protection, crime and fraud, dispute resolution, debt and insolvency, employment, family and divorce, housing, asylum and immigration, mental health, mental capacity, personal injury, prison law, public law and administrative law, regulatory matters and welfare benefits.

Alex Peebles

Alex Peebles is a Solicitor in Duncan Lewis’ Public Law Department. He has a broad range of experience in handling complex cases in the High Court, the Court of Appeal and the European Court of Human Rights in issues including Commercial, Social Care and Environment Judicial Review, Discriminatory matter relating to the Quality Act, Data Protection and Information law, Disputes in the Court of Protection and Human Rights Claims and Inquests.

Michael Paulin

Michael Paulin is a barrister whose principal practice is in tax litigation and tax dispute resolution including litigation settlement strategy, IR35, challenges to Accelerated Payment Notices, VAT planning, tax avoidance and the DOTAS rules, and COP9 enquiries. He has acquired experience in a range of courts and tribunals, including county courts, tax tribunals, employment tribunals, the Court of Appeal (where he has appeared as sole junior Counsel), the Privy Council, and the Supreme Court. Michael’s practice invariably involves the intersection of tax law and judicial review.

For more information please contact michael.paulin@1cor.com or visit:

https://www.1cor.com/london/barristers/michael-paulin/

https://www.linkedin.com/in/mpaulinbarrister/

About Locum Doctors Union

Locum Doctors Union was formed on 25 March 2017 by locum doctor interest groups concerned about the state of locum doctors in the UK.

For more information, please visit: https://www.locumdoctorsunion.uk

For further information, please contact:

Samantha Lafferty, PR Agency One, at 07854 523 924 or sam@pragencyone.co.uk

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