Locums will be facing off-payroll rules enquires from recruiters and clients following the latest NHS Employers Guidance

Locum doctors working in the NHS for GP surgeries and hospitals will be facing fresh enquiries about their tax status following new guidance on appointing locums published by NHS Employers.

Earlier in the summer, I highlighted how other contingent workers, such as IT contractors, interim executives and project managers were losing work, and turning away from the public sector, because of the off-payroll rules.

Now, it seems, it’s your turn if you are a locum doctor earning over £220 per day, or in a contract lasting more than six months. If you satisfy these criteria, then the off-payroll rules are targeting you. In fact, the latest guidance from NHS Employers recommends that your hospital or GP practice client, or your recruitment agency, should be asking you about your tax affairs.

Unfortunately, although the NHS Employers guidance is extremely helpful and quite detailed in most other respects, it does not define quite what seeking “assurance with regard to the income tax and national insurance (NIC) obligations of the worker” actually means.

It does not help you and neither does it help your client or agency. Judging by the actions of other government departments, such as the Department for Business Innovation and Skills (BIS), which terminated or failed to renew over 100 contractors for ‘tax reasons’, you could be in line to lose your locum contract.

So, what practical measures can you take if the hospital, GP practice or agency asks you for ‘tax assurances’?

Firstly, don’t panic. Whether you are a self-employed sole trader, have your own limited company or use an umbrella company, as long as you have kept to the rules governing those different trading vehicles, you have done nothing wrong.

If you use an umbrella company, the payslips you receive each month should be sufficient to prove that you are paying income tax and NICs as an employee. Similarly, if you are a self-employed sole trader, your most recent set of accounts should do the same.

(Note, if you are a sole trader earning over £219 a day, then you really should consider incorporating your own company. If you would like help with this, or to simply discuss your options, I’d be delighted to hear from you – just click on the contact form on the right hand side of this page).

If you are a limited company locum, then it is slightly more complicated. The off-payroll rules were introduced to combat the use of limited companies in the public sector, which the House of Commons’ Public Accounts Committee wants to eradicate, and ensure all government workers are paying income tax and NICs as if they were employees.

So, you have to prove that you are not employed by your hospital or GP practice client, which is pretty much the same as proving that you are outside IR35, the tax legislation introduced in 2000 to counter ‘disguised employment’.

Government documents about the implementation of the off-payroll rules leaked to the freelancer membership organisation PCG and published on ContractorCalculator last year confirm that that is exactly what you will have to do, alongside taking HMRC’s business entity tests.

If you are approached by your client or agency and asked for ‘tax assurances’, then get into the mindset that you need to prove you are outside IR35. This might require a contract review by an IR35 specialist. It might also require a more in-depth analysis of your working arrangements and relationship with your hospital or GP surgery client.

But do whatever it takes, because the alternative may be losing your contract or going onto the client’s payroll, neither of which is likely to do your bank balance, or stress levels, much good.

And if I can help in any way, then please call me.

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Shams Urrehman
MD SkyTax

Hi, I'm Shams Urrehman, Qualified accountant since 2005 and Director at SkyTax Ltd since 2009. I have been advising freelancers, management consultancies, IT contractors, SME’s and other businesses about accounts and tax planning.

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