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The tax implications of taking on private work

Business advisors Gill Salmons and Mark Collins consider some of the pitfalls for GPs who take on private or locum work

Private work

The issue of GPs conducting private work separate to their everyday role either in practice or in a hospital gives a similar conundrum. If the private work follows a regular pattern then it may be treated as an employment situation by the tax authorities and PAYE income tax and employee’s National Insurance may be sought from the organisation who supplies them with the private work. It is not unusual to have simultaneous sources of employment and self-employed income.


Locum GPs may be treated as either employees or self-employed workers depending on the exact situation in which they find themselves. HM Revenue & Customs (HMRC) has issued guidance on the situations where it will treat an individual as either employed or self-employed, and all who work as locums or who engage locum staff should understand the consequences of the way in which the rules are interpreted.

HMRC’s guidance states that where a doctor is supplied through an agency to a practice to cover sickness, holiday or other absence, then provided that doctor is not supervised in his or her work he or she will not be treated as an employee of the agency as would normally be the case. The same is true where a locum is used to cover out-of-hours services, and income for such work will be treated as self-employment income and will not be taxed under PAYE.

Where a locum is engaged to assist a doctor rather than to actually replace the doctor in times of absence, then payments to that locum will usually be treated as employment income and PAYE should be withheld from them.

While employees have their employment income subjected to income tax and employee’s National Insurance via a payroll on a regular basis, self-employed locums can claim deductions for various expenses and pay National Insurance at lower rates. In addition, where a locum is self-employed the income tax is due with the submission of the tax return, so there is an advantage in cashflow terms. Employment status is currently a hot topic and locums would be well advised to consider each contract carefully.

The particular terms of the engagement will assist in determining their status. Who controls the work of the locum? How long have they been working for a particular practice? Is the individual locum part and parcel of the practice professional staff or are they merely fulfilling a function which has to be performed on an ad-hoc or casual basis? Does the practice insurance cover all locums or would the individual locum have to rely on their own medical defence in the event of medical mishap? The picture has to be considered in the round and looking at any of these areas in isolation may give a misleading answer. Where a locum is engaged for short periods by a number of practices, they are very likely to be treated as self-employed but this is not guaranteed.

National Insurance

Finally, for individuals paying both Class 1 National Insurance as an employee and Classes 2 and 4 National Insurance as a self-employed worker, GPs should be aware of the “maximum” contribution levels payable at the main rate of National Insurance (11%). Once the maximum has been reached contributions are payable on all further earnings from whatever source, currently at 1%. This will rise to 2% from April 2011.


There are many tax pitfalls to be aware of and GPs are advised to consider these carefully before taking on locums. Expert tax advice should be sought to help avoid significant tax liabilities in the future.

Mark Collins is a partner and Gill Salmons a manager specialising in employer compliance issues at Baker Tilly’s Employer Consulting Group in Guildford. They can be contacted on 01483 307000.