NHS Improvement (NHSI) has backtracked on its blanket decision include agency and locum healthcare staff in the IR35 tax clampdown.
Last month the government altered IR35 tax legislation to include locum and agency staff who work for a public body or recruitment agency.
The Treasury said it hoped to raise £185m for 2017/18 by subtracting tax and national insurance from pay packets at source. NHS trusts are now being advised to carry out a case by case assessment.
Following last month changes the NHS saw a sharp drop in the number of agency and locum staff willing to work for the NHS. Subsequently NHSI has declared that previous IR35 determinations were "not accurate" and says that each case will be assessed individually.
A NHS Improvement spokesman said: “We have published updated guidance on the IR35 rules, which amends our previous guidance to trusts. Trusts should not assume that all agency staff will fall inside IR35; they need to assess whether or not the IR35 rules apply on a case by case basis".