What locums need to know about the new tax rules
From 5 April, the HMRC has implemented new 'IR35' rules which could result in locum GPs operating through limited companies and partnerships facing an extra tax charge. Originally IR35 rules were designed to take away tax advantages for individuals operating through a limited company where the nature of the relationship was more like that of an employee. It was up to the individual to determine if the IR35 rules applied to their company or partnerships. However from 6 April 2017 this will now become the responsibility of GP practices to decide and if this is the case they will have to deduct 32% from the payment (12% National Insurance Contributions plus 20% basic tax rate). Here are five things every locum GP should know about the IR35 tax changes.
1. Inform the practice of your employment status in writing. Inform your locum agency or GP practice whether you are a limited company or sole trader. If you fail to do so they will assume IR35 rules apply and tax your pay at source.
2. Understand who is affected by the new legislation. This new legislation will affect locum GPs working through limited companies and partnerships. Locums working as sole traders will not be affected by the new IR35 rules, however normal employment status rules apply therefore the practice must decide if you should be treated as an employee or as a self employed individual. The employment status checker can be used to determine this.
3. Understand which organisations are affected. ‘Public authorities’ which are defined by the Freedom of Information Act 2000 are affected. These include:
- GMS & PMS practices
- NHS England
- Local Health Boards.
Private providers of out of hours care, walk in centres and urgent care are not affected.
4. Find out if the rules apply There is an online tool which practices need to use to determine if a locum falls within the IR35 rules. The tool is made up of a series of questions. It is advisable that locums also take the time to complete the tool and check their own status.
The online tool has a series of questions that must be answered accurately. There are a number of key questions which affect outcome. These include:
4.1) 'Would the end client (i.e GP practice) accept the worker’s business sending a substitute (someone else) to do this work?'
If the answer to this is 'yes' and the practice or agency would have to pay the substitute worker the tool shows that IR35 legislation would not apply. This would be the case even if the locum company has never substituted someone else to do the work in the past.
4.2) 'What items does the worker have to buy for this engagement that they can’t claim as an expense from the end client or an agency?'
If you have to provide your own vehicle for home visits to patients, or if you have equipment for your doctors’ bag (stethoscope, peak flow meter, blood pressure machine, BM meter etc) then the tool answers that the legislation does not apply.
If the tool confirms that IR35 rules do not apply then the practice or agency must keep this as evidence. It is important that you as a locum also have a copy for your own records.
5. You can continue to provide locum work at your regular practices.Undertaking regular locum work at a practice does not mean that the new IR35 rules will automatically apply. Use the online employment checker to assess if your engagement is deemed to be in the capacity of self employment.
There are number of factors that would support your engagement as one that is self employed. For example: Do you have a high level of control over how/where/when you work? Can you change your terms of engagement so that you have the right to provide a substitute if you cannot attend the session? Is it clear in your agreement that you are providing your own equipment and materials in your doctors bag? Are you providing you own transport to undertake home visits? If ‘yes’ then these support self-employment.
Dr Surina Chibber is co-founder of MyLocumManager.com. With special thanks to Christine Robinson, head of employment & taxes BHP Chartered accountants