To ask the Scottish Executive, further to the answers to questions S2W-21779 and S2W-22555 by Mr Andy Kerr on 19 and 30 January 2006, what the outcome was of the meeting between Her Majesty’s Revenue and Customs, UK Health Departments, the Department for Education and Skills, NHS Employers and the University and Colleges Employers Association on 31 January 2006 in respect of the Court of the University of Glasgow ruling on the form of contract for clinical academic posts and when and where the minutes of that meeting will be published.
Health Department officials representingthe Executive attended the meeting. The outcome was that a Memorandum of Understandingis to be written to clarify the employment arrangements that exist between NHS bodiesand Universities, with a view to confirming that they constitute joint employmentarrangements that are outwith the scope of VAT.
The group is aiming to preparethe Memorandum of Understanding and negotiate with the unions by the end of March.
Minutes of such meetings arenot usually published but the following are the action notes that were circulatedto attendees and guidance to NHS bodies will follow agreement of the Memorandumof Understanding.
Action Notes of Meeting to DiscussVAT on Clinical Academic Salaries
31 January 2006
Mezzanine Room, Woburn House,Tavistock Square, London
Present:
Nic Greenfield, DH (Chair)
Martin Shaw, Guy’s and St ThomasKatie Petty-Saphon, CHMS
Steve Large, BUFDG
Eve Jagusiewicz, UUK
Sharron Powley, UCEA
Diane Gillhooley, Eversheds
Chris Cardwell, NHS Employers
Amerjit Basi, DfES
Phil Sears, HMRC
Cathy Smith, HMRC
Paul Tuckett, HMRC
Vicky Cave, DH
Anne Rylatt, DH
Anita James, SOL Employment
Jane Davidson, Scotland
Lee Sheddon, Scotland.
Apologies:
David Ogilvie, HMRC, Prof JanetFinch, UUK, Sir Jonathan Michael, AUKUH.
5. The meeting opened with introductions.It was agreed that the purpose of the meeting was to seek a practical and legalsolution to the VAT implications of the Glasgow tribunal case.
6. Vicky Cave brieflyoutlined the University of Glasgow Tribunal case and the financial pressures this had created forthe NHS. Paul Tuckett provided further detail on the definitions of supplies ofstaff and services and how these related to the contractual status of clinical academics.
7. Paul Tuckett outlined thekey criteria which had to be met in contracts if they were to be considered jointfor VAT purposes (and therefore outside the scope of VAT).
i. Each employer must recognisethe status, rights and responsibilities of the other employer.
ii. Each employer must fulfilits obligations and rights as an employer.
iii. Employees must acknowledgeand observe their rights and responsibilities to both employers.
iv. The number of contracts isirrelevant.
v. Substance takes precedenceover legal form.
vi. It does not matter if oneemployer acts as sole paymaster, pensions administrator etc. provided broadly appropriatecosts are recharged to the other.
8. It was asserted that mostof these points were clear within the current contractual framework, and that anEmployment Tribunal would have found that there were two employers.
9. Discussion followed on thepaymaster function. The following issues were important:
There would be one salary slipand one payroll.
It is irrelevant who administersthe pay as long as there is an appropriate recharge for the other employer’s share.
The contributions of the individualemployers need not be shown on the salary slip.
The recharge could be agreedat organisational level, built up from individual level data.
Membership of a single pensionscheme is permissible although the recharge would include appropriate pension contributions.
10. Discussion followed on thepractical difficulties of addressing the paymaster issue within contracts.
11. All agreed that joint jobplanning formed a reasonable basis for agreeing the level of recharge. It wouldbe impractical to monitor beyond this. A global assessment of recharge which was“broadly appropriate” would follow. This approach was acceptable to HMRC.
12. The meeting went on to discussin detail the wording in the substantive and honorary contracts for Senior AcademicGPs as a model for types of contract in place.
13. Difficulties which requiredclarification were identified around:
Pay Progression authorisation.
Annual and other leave authorisation.
Disciplinary and grievance.
14. Discussion clarified that,in practice there was a greater level of shared decision making and mediation thanmight be assumed from the contracts tabled, which represented one particular employmentmodel for a specific small group. Practitioners advised that employees and employersview, and have always viewed the arrangements as two separate contracts of employment,and are clear as to where rights and responsibilities lie in any particular instance.
15. It was clarified that referenceto a service level agreement in the contracts merely reflected the work that a teamof employees would undertake under the joint planning arrangements rather that themore usual use of the term to reflect a service provided by one body to another.
16. Following discussion, allagreed that the current substantive and honorary contract framework provided a formof joint employment with two employers.
17. There was a need to reviewwording in the Consultant Contract as well as the Academic GP contract as the wordingin places may be different.
18. It was agreed that it wouldbe difficult to change the contracts which had been agreed through lengthy negotiationby the DH, UCEA, NHS Employers and the BMA/BDA.
19. Instead, it was agreed todraft a Memorandum of Understanding to make absolutely clear that there are twoemployers, each with their respective rights and responsibilities as employers.This would form part of the totality of the contractual arrangements for all typesof staff that are engaged by universities and NHS bodies under joint employmentarrangements.
20. The wording of the Memorandumof Understanding would need to be approved by all those who were party to the contractnegotiations (UCEA, NHS Employers, Trade Unions, DH) and that SOL and HMRC wouldalso be involved.
21. The Memorandum of Understandingwould make clear that:
It sets the context for the contractsof employment and forms part of the overall contract arrangements for the individual.
In cases of conflict betweenthe Memorandum and the underlying contracts, the Memorandum takes precedence.
The “substantive” and “honorary”contracts are two separate contracts of employment
Where contracts require one employerto take action in circumstances where involvement of both employers would be impracticale.g. chairing an appeal hearing, this does not remove the rights or responsibilitiesof the other employer.
the substantive employers wouldpay the full remuneration to the employee i.e. on a paymaster basis for the otheremployer’s share. An appropriate level of recharge would be agreed annually on thebasis of the joint job plan.
Pay Progression would be agreedby both employers and both the Vice-Chancellor and Chief Executive would be coreto the pay process.
both employers would agree leaveof all kinds.
payment of allowances would beagreed by the two employers or decided by the employer to which the allowance wasrelevant disciplinary action would be initiated by the relevant employer under theircode of conduct dependent upon the role in which the individual was engaged at thetime of the incident.
That there was a unique symbioticrelationship between the NHS and Universities in providing clinical academic trainingand research.
22. Once agreed, the Memorandumof Understanding would be publicised and disseminated through UCEA and NHS Employersto employers and employees and placed on the DH Finman website.
23. The memorandum would be designedfor four country use.
24. HMRC advised that if theMemorandum of Understanding genuinely reflected clarification of an employment situationand measures that were in practice all along, there would be no retrospective liabilityfor VAT
25. It was agreed that partiesshould meet and aim to conclude the Memorandum of Understanding by the end of February2006.
26. Once HMRC were satisfiedwith the content of the memorandum, they would issue a “comfort note” confirmingthat arrangements conforming to this contractual framework within the NHS and Universitieswould be outside the scope of VAT. This letter of comfort would also be publishedon the DH VAT website, and via UCEA.
27. HMRC explained that the GlasgowTribunal started from the assumption that there was a supply and limited itselfto deciding whether the supply was of staff or services. It did not step back furtherto consider joint employment. The outcome of this meeting did not therefore cutacross the tribunal decision and the solution should be available to Glasgow equallywith other universities/NHS bodies. Scottish officials agreed to discuss the outcomeof the meeting directly with the University of Glasgow.
28. HMRC confirmed that theirenquiries at local level had been deferred until the date this meeting. Cathy Smithwould meet with HMRC officers to extend this deferral until the Memorandum of Understandingwas in place.
Summary of Actions:
1. HMRC to defer enquiries untilMemorandum of Understanding agreed (by 28 Feb 2006)
2. VC/AR/PT to review ConsultantContract .
3. VC/AR to draft Memorandumof Understanding
4. NHS Employers/UCEA/TradesUnions/DH/HMRC/SOL to negotiate and agree wording of Memorandum of Understandingby end of February 2006.
5. HMRC to issue “comfort note”once Memorandum of Understanding agreed
6. UCEA/NHS Employers/DH to publiciseMemorandum to employers and employees.
7. Scottish Officials to discussimplications directly with University of Glasgow.
