Health and Care update: Tax update - A guide to recent changes for the healthcare sector

Published: Wednesday 4 December 2019

Below, we take a closer look at some of the recent and upcoming changes in taxation rules that may impact health and care businesses.

PRIVATE SECTOR OFF-PAYROLL WORKING 
From April 2020, medium and large sized private sector businesses will become responsible for assessing the employment status of any off-payroll workers with whom they engage that operate through an intermediary. 

Any healthcare business which pays for a worker’s services other than via its own payroll (for example by using a care agency) could potentially be affected. The off-payroll working rules apply to people working like employees, but operating through a company (often known as a personal service company or PSC). Currently it is the PSC’s responsibility to determine whether the off payroll working rules apply when engaged by a private sector company. Where the individual is self-employed, it is always the responsibility of the engaging firm to determine employment status and operate PAYE as appropriate.

A small business, which is excluded from the new rules, will be defined using the Companies Act definition and will, therefore, be deemed to be small if it satisfies two of the following conditions: 

  • annual turnover - not more than £10.2 million;
  • balance sheet total - not more than £5.1 million; and 
  • number of employees - not more than 50.

Where there are several agencies or intermediaries in the chain, the end client is required to complete and provide a ‘status determination sheet’ and communicate this down the chain so that the agency or intermediary making the payment to the worker can deduct PAYE/NIC as appropriate. If they fail to provide a valid statement, the end client will be treated as the fee-payer and become responsible for operating payroll as appropriate.

The draft legislation also introduces a ‘client-led disagreement process’ in cases where the individual or agency disagrees with the determination. This is an appeal to the end user, who will be required to review and re-assess but there will be no independent review available. 

The draft legislation also provides powers to HMRC such that it can pass any PAYE/NIC liability through the chain where it is unable to collect any unpaid taxes from the party that has failed to comply.

Final legislation should be published shortly after the Budget, but we would recommend that businesses begin to prepare now and assess how they may be impacted. Some actions to consider taking may include: 

  1. Identify any workers engaged through agencies or other intermediaries to establish if services are being provided through a PSC. 
  2. Identify any existing contracts extending beyond April 2020 and determine if the off-payroll rules will apply. Talk to those workers potentially affected. 
  3. Establish internal processes or seek professional advice to consider whether the rules apply to new engagements. Whilst many workers provided by agencies (especially lower paid care workers) are likely to be on the payroll of the agency rather than working via their own limited companies, to minimise the risk of becoming liable for any underpaid PAYE and NICs, it is essential that businesses put in place processes to identify any workers who are affected and deal with them correctly. 

We can help you to understand your responsibilities and assess engagements to determine if the new rules will apply.

Please contact Katie Williams on 01242 237661 or katie.williams@hazlewoods.co.uk for further information.

STRUCTURES AND BUILDINGS ALLOWANCE (SBA)
A new capital allowance for qualifying expenditure on commercial structures and buildings was announced at Budget 2018, applying to contracts entered into on or after 29 October 2018. Relief is given at an annual rate of 2% on 
a straight-line basis over 50 years from the date that the building is first brought into use.

If you are incurring expenditure on constructing, renovating or converting a non-residential building, it is likely that you will have some costs eligible for the SBA. Relief can be claimed via the business tax return along with an allowance which includes details of qualifying expenditure incurred, confirmation of dates the contract was entered into and when the building was first brought into use.

For any questions around the structures and buildings allowance, please contact Nick Haines on 01242 237661 or nick.haines@hazlewoods.co.uk.

HMRC PAYE PROCEDURES
We have become aware that HMRC has been focusing in on PAYE compliance and sending out a spate of ’employer compliance check questionnaires’ to businesses without notifying agents. The questionnaire asks a number of questions including details about the business, the directors, payroll, entertaining, benefits loans and company vehicles. 

This appears to be a new approach to the traditional PAYE compliance visits, saving HMRC time and money in identifying companies that may not be complying. If you receive a questionnaire, we would recommend seeking professional advice as inaccurate answers or failure to complete the questionnaire could result in a lengthy and costly PAYE enquiry. 

We can also carry out a PAYE health check to ensure that your systems are compliant and help to minimise any consequences that may arise from an investigation.

For more information on the HMRC Paye procedures please contact Katie Williams on 01242 237661 or katie.williams@hazlewoods.co.uk.

VAT AND AGENCY STAFF
We have recently seen an increase in instances of nursing agencies (or employment businesses that provide nurses and other health professionals) promoting their supplies of care staff as exempt or ‘VAT free’ . Whilst HMRC has an informal extra-statutory concession which allows certain supplies by a nursing agency to be made without charging VAT, this does not apply in all circumstances. The purpose of the concession is to exempt the supply of nurses, nursing auxiliaries and care assistants by state regulated* agencies.

It is a requirement of the concession that the exemption will only apply to the supply of nursing auxiliaries or care assistants, where their role requires them to undertake some direct medical care, such as administering drugs or taking blood pressures. HMRC have made it clear that the concession does not apply to supplies of general care assistants who are only involved in providing personal care or working in care homes without nursing where they do not require supervision by health professionals to provide their services. 

Some nursing agencies are asking care providers to sign a certificate to confirm that the supply it is receiving falls within the concession. It should be noted that this is not a supply which requires a supplier to obtain a certificate but care should still be taken that where suppliers are insisting on such documentation that these are only provided where the specific conditions of the concession are met. 

If you would like us to review the appropriateness of the VAT treatment of agency provision to your business, please contact Julian Millinchamp on 01242 237661 or julian.millinchamp@hazlewoods.co.uk.

(*In England, with effect from 1 October 2010, the legal requirement for nursing agencies to be registered under the Care Quality Commission ceased, therefore for supplies on or after 1 October 2010, the concession applies to employment business that would have been required to be registered withthe Care Quality Commission before that date).

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