How Will IR35 Affect Locums?

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If you’re a locum operating as part of a limited company, then the new IR35 changes might mean that you could be facing an unwanted extra tax implication.  IR35 rules were originally put in place to tax away some tax advantages to individuals who were operating as part of a limited company whereby they themselves were like an employee. Ultimately, it was up to the individual themselves to decide whether or not IR35 rules applied to them and their company.

IR35 is in place in the hopes of reducing tax avoidance, which is done via what is known as disguised employment. This means that locums who are engaged as contractors through an agency or their own company are taxed as employees rather than an employer. They will therefore be required to pay income tax and national insurance contributions.

IR25 Changes In 2021

It has normally been the decision of the locum to decide what their employment status is and to arrange their tax payments accordingly. However, as of April 2021, companies will be required to determine the IR35 status of locums if their main client does not qualify for the ‘small company exemption’.

If the company decides that the locum should be taxed as an employee, then the company will be required to deduct any tax or national insurance contributions at source as well as any PAYE deductions for actual employees.

What Do I Need to Do as A Locum?

It would be wise to inform your GP practice or locum agency if you are operating as a sole trader or limited company. It is also worth including a copy of your HMRC online tool results. Failing to do this will mean that IR35 rules will be assumed to apply and you will be taxed at your pay at source.

Does the New IR35 Legislation Apply to Me?

Fortunately, locums who are currently operating as sole traders won’t be affected by any of the new rules relating to IR35. The IR35 rules will only apply to locums operating through or as limited companies. 

Will the IR35 Rules Affect Me as A Locum?

It is important to be aware that taking on locum work regardless of if it is regular or not, will not mean that any of the IR35 rules will apply automatically. You can use an online employment checker which can help assess whether or not your specific engagement will be deemed as self-employment or not.

There are many different factors which can help identify if your specific engagement is classed as self-employed. This can be things such as having terms of business, which is used to show an overview of when/where/how you undertake locum work. Are you able to change any of your terms of engagement? For example, if you cannot attend a certain session, then are you required to provide your employer with a substitute? Are you bringing your own equipment or is it being provided? Do you have your own transport or is this something that is being provided for you? These are all great ways to show that you are self-employed.

If you are looking to switch to locum work, get in touch with us today!

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