IR35 - What every locum GP needs to know
New IR35 rules from April could result in locum GPs operating through limited companies 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. From April 2017, this will now become the responsibility of GP practices to decide and if this is the case they must deduct 32% from the payment (12% National Insurance Contributions plus 20% basic tax rate). Here are 7 things every locum GP should know about the IR35 tax changes.
- 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 and include a copy of your results from completing the HMRC online tool. If you fail to do so they will assume IR35 rules apply and tax your pay at source. If you are self-employed send them your terms of business. MyLocumManager has the tools you need to do this.
- Understand who is affected by the new legislation. This new legislation will affect locum GPs working through limited companies. 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 self-employed. As a self-employed locum software like MyLocumManager.com is a necessity to manage all your business paperwork but crucially to record expenses, mileage and equipment cost. This will not only make submitting your tax return a breeze, but will also record everything you need for the HMRC.
- Understand which organisations are affected. ‘Public authorities’ which are defended by the Freedom of Information act 2000 are affected. These include:
- GMS & PMS practices
- NHS England
- Local Health Boards.
- Private providers of OOH, walk in centers and urgent care are not affected.
4. How do practices or agencies 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.
5. Understanding the HMRC online tool. The online tool has a series of questions that must be answered accurately. There are key questions which affect outcome. These include:
5.1. “Would the end client (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.
5.2. “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 the answer her is vehicle for home visits to patients, or if you have equipment for your doctors’ bag (stethoscope, peak flow meter, blood pressure machine, BM meter) then the tool also 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.
6. 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 terms of business which show 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 would reflect self-employment.
7. As a self-employed locum GP www.MyLocumManager.com is an essential tool for your business. Not only will it take care of your invoicing and pension work preparation, it will also record all the information you need to stay IR35 compliant and support your self-employed status with the HMRC. For example: Our terms and conditions template support your level of control as an independent worker. MyLocumManager automatically records all your vehicle mileage, you can log all your expenses for medical equipment and business related costs. All this can then be sent to your accountant at the touch of a button.
Dr Surina Chibber Locum GP & Co-founder of www.MyLocumManager.com