Taxman cracking down on locum social workers, warns recruitment agency group
HMRC is focusing on contract social workers as part of a drive to stop ‘false self-employment’ warns APSCo
The taxman is targeting locum and independent social workers that operate as limited companies as part of a crackdown on false self-employment, the recruitment agency association APSCo has warned.
Samantha Hurley, head of external relations and compliance at APSCo, told Community Care that HM Revenue & Customs (HMRC) officials have told the organisation that it believes that the amount of supervision most independent social workers working through limited companies need means they may fall under IR35 rules, which would see them deemed as employees rather than self-employed and therefore charged more tax.
“In discussions we had with HMRC this issue with social workers came up and they made it very clear that they were aware of it, were going to be looking at it and their general feeling is there would be a lot of cases where it is probably inappropriate,” said Hurley, who sits on HMRC’s IR35 Forum on APSCo’s behalf.
“For them supervision, direction and control is the deal breaker. I know there’s a lot of case law around employment status for tax purposes but for HMRC the deal breaker is if there is supervision, direction and control.”
The IR35 test is designed to catch individuals who work as limited companies so that they only pay corporation tax and can take their earnings out as dividends, allowing them to pay less income tax than they would as employees or sole traders.
Matthew Brown, managing director of HR services company Giant Group and APSCo’s financial director, said the Local Government Association’s Standards for Employers of Social Workers, which underlines the importance of supervision in social work, adds weight to the idea that IR35 applies to independent social workers operating as limited companies.
“Roles within the social work arena require an individual to operate within a strong supervisory culture, meaning that they will not be deemed as self employed by HMRC for tax purposes,” he said.
Brown said social work contractors should consider returning to employment or becoming an employee of an umbrella company instead of working through a limited company. “In our view, contractors should consider alternative options or they could be exposing themselves to investigation by HMRC,” he said.
However Nicola Anderson, head of accounting at specialist social work accountancy firm Boox, told Community Care that the amount of freedom contractors have from supervision is only one of the factors used to see if IR35 applies. Other factors include what obligations the social worker and client have to each other under their contract.
“In our opinion, it is important to ensure that the mode of operation and contractual position are clear, which then supports the other tests,” she said.
“As there are many different roles undertaken by social workers, each individual case should be considered on its own merit to establish if the assignment can be carried out by someone working through their own personal service company.”