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GPs could have to pay locum tax and NIC under new legislation

GP practices could be caught up in new tax legislation aimed at stopping contractors using companies to pay lower tax and national insurance contributions, medical accountants have warned.

Under new 'IR35' legislation coming in next month, any company who pay contractors through a company - including GP practices using locums - will need to check in each instance if they are liable for paying tax and NIC at source.

Medical accountants said that the changes are likely to lead to more locums becoming subject to higher tax and National Insurance, which could lead to locums increasing their rates.

HMRC is cracking down on individuals setting up companies and then taking money out as dividends - thereby avoiding National Insurance payments.

It has set a series of tests for contractors and companies who employ them to see if they should be treated as self-employed through an online tool.

Bob Senior, chairman of the Association of Independent Specialist Medical Accountants, said: 'Historically a GP practice could pay a company providing locum doctor services without deducting tax and NIC.

'The doctor could then pay a much lower tax and NIC bill when they took the money from the company than they would have faced had they been an employee.'

'HMRC frankly think that GPs using such companies are abusing the system and not paying enough tax and NIC.'

And he said that from 6 April, when the new legislation comes in, 'any practice paying a locum through a company will have to run that status checker to see if they can continue to make the payment to the company without deducting tax and NIC'.

He added: 'From my initial assessment it looks like they won’t in future be able to make such payments without deducting tax and NIC even though they are making the payment to a company.

'This is intended to affect the locum however given the shortage of doctors it is not impossible that the locum companies will want to increase their rates to cover some of the increased costs.'

An update from HRMC said: 'From April 2017 there are changes to the way the current intermediaries legislation (known as IR35) is applied to off-payroll working in the public sector.

'Where the rules apply, people who work in the public sector through an intermediary will pay employment taxes in a similar way to employees.'

The reform applies to payments made 'on or after 6 April 2017', including 'payments made for contracts entered into before that date', it added.

Readers' comments (15)

  • Anonymous Locum GP

    This together with the anticipated increase in defence fees will result in a pay cut of 25-30% for locum GPs. it will mean that many will be looking to work for the private sector or will have to increase rates BUT I don't think practices are going to afford to pay 40% more (taking into account Higher Rate Tax). This is I think is the final blow. The majority of locums I know work through Ltd companies. The pay drop will make locum work less attractive than partnerships and salaried posts where you can get annual leave, study leave, sick leave etc.

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  • You will loose more gps..to Australia

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  • Surely this affects any professional working on a freelance basis...
    Factoring in Taxes and utility bills. Mortgage interest
    are we actually earning anything
    The illusion of freedom.

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  • Hmmm...- only just learned of this.
    I'd have to rely on practices paying my NI and tax correctly whereas at the moment PMs like the simplicity of dealing with my company (no pension/NI/tax etc). Not very confident they'll do this.
    I may try increasing my fees but this may be the push for me to leave NHS/public work altogether and just work privately.

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  • Anonymous Locum GP

    had a look at calculator and it's a disaster - will have to cancel upcoming shifts and apply for a salaried job or work in private sector - it makes no sense being a locum anymore. Even if you do sessions to cover maternity leave, sickness etc ad hoc for multiple practices without sick leave, annual leave, stufy leave etc you will be liable for PAYE tax and NI with NO WORKER BENEFITS.

    bring on plan B stat

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  • This rule only applies to public sector workers and not private sector contractors. It has the potential to destabilise the Locum workforce and practices. The BMA and other public sector unions should be fighting this as unfair and discriminatory to public sector workers.

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  • Two locums make a company together and you will bypass IR35. Fact !!

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  • Sounds like time to form chambers like the lawyers.

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  • One day we will wake up to find that we have all resigned or have died!

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  • This without study leave, annual leave and sick pay is shocking. I think BMA should fight against it as UNFAIR.

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