NHS trusts are paying consultants to help them avoid VAT on temporary medical staff, according to a report from the Independent Health Professionals Association.

The report found that hundreds of NHS Trusts and accountants have been exploiting a VAT loophole that has allowed private ‘umbrella’ companies to pocket up to 50% of VAT avoided while leaving thousands of temporary workers facing huge tax bill hikes.

The schemes, which hinge on accountants claiming to be providing ‘healthcare’ to Trusts to exploit a VAT loophole, became illegal when senior civil servants started pushing NHS Trusts to blanket assess all public sector contractors en masse as ‘deemed employees’, regardless of their contracting conditions, stripping them of self-employed status. The report stated that this rendered the schemes illegal overnight from 6 April 2017, however usage has increased throughout the public sector, including in the NHS.

Iain Campbell, Secretary General of the Independent Health Professionals Association commented, “While we are sympathetic to the Trusts who are indeed desperately underfunded, it is rank hypocrisy for trusts to force our workforce into false employment, without the obligatory assessments, aiming to cause doctors and nurses to be taxed more, while contemporaneously engaging in arcane accountancy practices in an attempt to dodge their own tax liabilities arising directly from the same actions. This would be bad enough on its own, but to then force workers to shoulder the trusts’ employer’s liabilities beggars belief.

“The current unlawful behaviour here needs to stop, and that trusts urgently need the extra money which the NHS needs and the Chancellor, who presides over these very tax schemes, is presently denying them,” Campbell said.

The report also stated, “The scandal also opens the possibility that NHS chiefs, direct engagement providers, agency staff, and even ordinary doctors and nurses could face criminal convictions under the Criminal Finance Act 2017 if they continue to facilitate the use of these schemes as being ‘knowingly concerned’ in such schemes presents a risk of prosecution.  Many NHS bosses who have potentially crossed the legal line, albeit with good intentions, could find themselves facing criminal prosecution as the schemes they were sold do not work where agency workers are assessed as deemed employees. 300 NHS Providers are believed to be affected.”

A recent report from the Open University found that NHS trusts in England are spending at least £1.46 billion on temporary nursing staff a year.