A BIG FOUR FIRM faces allegations of placing NHS trusts into aggressive tax avoidance schemes.
An HM Revenue & Customs investigation is to delve into schemes that allowed the trusts to avoid VAT when paying agency medics, ITV News reports.
Internal documents of some NHS trusts, including the Sherwood Forest NHS Foundation Trust, allegedly show them openly discussing the savings made by implementing the arrangements, known as STAFFflow. In the Sherwood Trust’s case, it estimates around £250,000 is saved annually by engaging locums either as an employee for the period required for cover, or as a limited company.
In that same document, the trust names PwC and financial services firm Liaison as joint providers of the scheme.
PwC provides consulting, pensions and tax advice, while Liaison is involved in the day-to-day running of the service, a statement said.
The NHS said that the 24/7 nature of healthcare means local employers try to cover short term absences in the most cost effective way, using temporary staff, overtime as well as bank and agency staff.
A spokesman for the health service said it has approached the Treasury for clarification on the implications of using the scheme so it can plan budgets.
“We hope they [the Treasury] will be able to do this as soon as possible. Because this scheme is relatively new it would always be advised for NHS organisations to seek professional advice before proceeding with it to ensure it is not going against best practice,” the spokesman said.
The Big Four firm added that it works with NHS trusts to manage the recruitment of locums and reduce reliance on agency staff. Trusts using the service will engage locums directly on their payroll, with HR support outsourced. Locums are engaged for a contracted period of time that can vary in length, it said.
A spokesperson on behalf of PwC and Liaison added: “We categorically refute the suggestion that this is a tax avoidance scheme – direct contracting is about giving trusts greater visibility and control of their recruitment costs, helping them to manage their workforce more effectively. There is a reduction in agency costs on which VAT is due, as there is for any organisation employing someone directly rather than using agency staff.
“We have discussed the service fully with HMRC and they have raised no concerns with us.”
However, critics said the arrangements had no other benefit other than avoiding tax.
Labour MP and chair of the Public Accounts Committee Margaret Hodge said she can “understand why they are tempted to go down this route but they are wrong. They should not be engaging in aggressive tax avoidance.
“I have to say the people who benefit from this are the accountants who have set up this system and they are taking money out of the NHS, out of direct services…and pocketing it and that is tax payers’ money,” she said.
For its part, HMRC said it is aware of the issue and is actively looking to ensure the right amount of tax is paid.
A spokesperson said: “A placement for a period of one or a few shifts is clearly not consistent with a contract of employment but, rather, a supply of staff by the agency, liable to VAT in full.
“NHS Trusts can either employ people or assume the responsibilities that go with that or use agency staff and incur VAT in full. That choice is for NHS managers but the VAT rules are clear.”
HMRC is continuing to ramp up the number of raids on premises it carries out as part of criminal investigations, searching 761 properties in the last year
Lord Howard Leigh of Hurley discusses the government’s initiatives to mitigate tax avoidance and evasion
Top 50+50: Demand for tax advisory services remains high, but fee pressure is expected in relation to compliance services
The demand for tax advisory services remains high and this looks to continue; but fee pressure is expected in relation to compliance services as the “Making Tax Digital” initiative is rolled out,
While some resistance to change is to be expected, the degree of controversy surrounding HMRC's Making Tax Digital proposals has surprised the government