Community pharmacists will not need to pay enhanced national insurance contributions

The HMRC has issued an amendment to its Finance Bill 2017 which clarifies that community pharmacists will not be classified as ‘public authority’ employers when using the services of locums and other contractors.

national insurance forms

At the eleventh hour, community pharmacists have escaped a proposed change in the law that could have cost them millions of pounds in extra national insurance contributions (NIC) for their temporary staff.

HM Revenue & Customs (HMRC) stepped in to correct what it described as a “technical error” concerning NIC changes outlined in the Finance Bill 2017, which received Royal Assent on 27 April — days before parliament was dissolved ahead of the 8 June general election.

The unintentional error in original guidance attached to the Bill meant that community pharmacists — alongside opticians — were worried that they might be classified as ‘public authority’ employers, which meant they were liable to pay enhanced NIC for temporary staff, including locums and other non-permanent employees.

The issue was picked up by the National Pharmacy Association (NPA) following concerns from some community pharmacy members.

It sought clarification from the government and the HMRC which confirmed, in a revised amendment to the Bill, that NHS community pharmacies and high street opticians did not have public authority employer status so were excluded from the changes, which were due to apply from 6 April 2017.

Official clarification

In a statement the NPA confirmed that the issue had originally been brought to its attention by members. Its finance experts raised it with the government and the Bill was amended at the last minute before it became an Act, to confirm that pharmacies and opticians were excluded from the NIC changes.

The amendment read: “Prior to this amendment, private sector retail businesses including high street pharmacies and opticians would have inadvertently been within the scope of the off payroll working in the public sector measure. As a result, such businesses would have been required to consider whether the new rules applied to all contractors working for them through an intermediary. This was not the intention of this policy.”

Umesh Modi, a specialist accountant for community pharmacy at firm Silver Levene, said the amendment was useful as it had brought “some certainty” to those who may have been concerned that they would be hit by the changes.

He calculated that if the technical error had not been picked up, it would have cost a community pharmacist an extra £4,700 in NIC payments for every locum who earned £40,000 a year. The locums would have lost their self-employed status and become PAYE employees instead.

Modi said the changes outlined in the act — which in effect takes away any potential self-employed tax benefits from non-permanent staff — were designed to target freelancers and hospital locums who might work only for a single employer but still keep their self-employed status.

He said: “In some ways it was a self-inflicted anxiety by the sector.

“I always thought that the changes would not affect community pharmacy locums because they do not work for public sector bodies. They were not going to be caught by the new legislation — it was more likely to be freelancers working for the BBC or hospital doctors who work through their own private limited company and who predominately work for a single employer.”

Last updated
The Pharmaceutical Journal, June 2017;():DOI:10.1211/PJ.2017.20203027

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