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Growing Healthcare Contracting Workforce Means More are at Risk of Tax Fraud Schemes

Healthcare contractors are at financial risk from fraudulent activity in the outsourced payroll sector, warns Martin Innes, the newest board member at the Payroll Compliance Authority (PCA), a not-for-profit accreditor in the outsourced payroll sector.

The ongoing lack of government regulation in the sector has spurred a proliferation of fraudulent activity by some third-party payroll operators, known as umbrella companies, such as pay skimming and incorrect tax deductions, leading to contractors receiving unexpected tax bills from HMRC down the line. On 18 April 2024, the government announced its intention to implement a form of statutory due diligence regime to tackle non-compliant umbrella companies, subject to further stakeholder engagement, but implementation is likely many months away.

With the healthcare sector’s rising reliance on temporary staff, Martin – who led a team that facilitated an NHS cost reduction of £1.24 billion in agency staffing spend – is concerned that in the meantime we may see a rise in the number of healthcare tax fraud victims.

He says: “If you’re hired by a healthcare provider, a contractor may not even consider that the organisation that has been engaged to pay their wages may be operating illegally. Many contractors are unaware of the real risk that they will be exploited should they come on the books of an umbrella company that is taking advantage of its employees.

“This lack of awareness among UK healthcare contractors could have a significant financial impact, particularly for lower paid workers such as healthcare assistants, whose financial wellbeing is more vulnerable. Many contractors work through multiple umbrella companies, further increasing the risks if they are not vigilant about what is going into and out of their bank account.”

With £10 billion spent on temporary staffing by the NHS in 2022/2023, and four in five nurse vacancies filled by temporary staff according to Nuffield Trust’s 2022 report, the sector’s reliance on contract workers is profound and growing. Approximately 800,000 workers are paid by umbrella companies in the UK, and whilst it is not currently possible to establish an exact figure for how many healthcare workers are paid by umbrella companies through publicly available sources, the figures are evidently high.

Martin, who has an extensive background in the healthcare sector, including data-led senior leadership roles at various private and NHS organisations, adds: “Healthcare workers should not find themselves stung because, unknown to them, the company that manages their wages is profiteering from a tax avoidance scheme and has not paid the taxes that were due. Particularly healthcare workers on the lowest pay bands cannot afford a large, unexpected tax bill and the profound impact this could have on their pocket and mental health.”

 

 
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