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  • By RMT
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  • Posted Monday October 15, 2018

Practices' locum pay arrangements under the IR35 spotlight

The calculation of accounts for the first full financial year following the introduction of the updated IR35 tax regulations is well underway. Their impact on the primary care sector is quickly becoming obvious - and lessons are being learned that all principals and practice managers would be well advised to heed.  

The wider issue addressed by IR35 is whether individuals are working with companies as self-employed operators, or for them, and should, therefore, be entitled to the types of benefits such as sickness and maternity pay that generally come with being the employee of a given business.

The consequences for primary care

In general practice, this mainly relates to Personal Service Companies (PSCs) owned by locums who are being employed by a given GP practice.

Up until April 2017, it was the responsibility of the PSC to decide whether the individual worker should be classed as an employee of the client (i.e. the practice), and protected clients from tax liabilities where they have engaged locums through PSCs.

From that date however, major changes were made to IR35 tax legislation which effectively remove this protection from ‘Public Authorities’, a definition which will catch most GP practices.

Take a ‘safety first’ approach 

Responsibility for applying the IR35 (or "intermediaries") rules now falls to the practice where locum GPs are engaged through their own limited company.

Practices, rather than the PSC, will need to assess whether a locum should be regarded as an employee of the practice for tax purposes - and if they are, the practice will be responsible for deducting PAYE and National Insurance Contributions from payment, as well as for paying any associated income tax and employers' National Insurance.

What we have found in a few instances is that locums not trading through a PSC have been unintentionally remunerated as salaried doctors, and have been paid through a practice's payroll without receiving the employment benefits to which, in this situation, they would be entitled.

This has tax, National Insurance and expenses implications for both the practice and the practitioner, and while case law is currently evolving on precisely what these will be, there is a clear imperative for all parties to take a 'safety first' approach.

What action should you take? 

Our strong advice would be for all practices to urgently review their arrangements with both existing locum PSC contractors and any others they expect to hire in the future, and to take expert advice if you're at all uncertain about where things stand for you.

Practice managers need to most especially check the status of any locums engaged on a regular basis, such as when they are covering for someone on maternity or long-term sick leave, as they would be more than likely to fall into the employee spotlight.

Having brought in the new rules, HMRC will doubtless be extra keen to see how they're working in practice, and any perceived diversion from the rules in your practice, no matter how unintentional, will give them good enough reason to check.

Richard Humphreys is director at RMT Healthcare, the specialist medical division of Newcastle-based RMT Accountants & Business Advisors. For further information on RMT Accountants & Business Advisors, please visit


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