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TAX TIP TUESDAY: IR35 Update for Locums

Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 

IR35 details a set of rules that ensure workers, who provide services to a company but aren’t on their payroll, pay tax and National insurance just the same as employees who are.

IR35 might be important to you if you are:

  • a worker who provides services through an intermediary
  • a client who receives services from a worker through an intermediary
  • an agency providing workers’ services through an intermediary.

Prior to 6 April, 2020, in the public sector, it’s the client’s responsibility to decide and inform the employee of their employment status. In the private sector, (including third sector organisations like charities) it’s the intermediary’s responsibility and may vary from contract to contract.

After 6 April, 2020 the responsibility for deciding a worker’s status will fall to all public sector authorities as well as medium and large-sized private sector clients. As for small clients in the private sector, the responsibility will remain with the intermediary.

Case law update?

A recent case between a locum doctor and two NHS hospitals concluded in part victory for the doctor, but the win will not be the basis of any new case law, according to experts.

At the root of the matter was differentiations in contract conditions – namely substitution and mutuality – concerning two clients, which the locum alleged meant that IR35 did not apply. While the appeal was awarded for one client, it was dismissed in another.

Due to some anomalies with the case, it will potentially, at most, have minor influence concerning the matter. And HMRC may still file an appeal, so the victory may be short-lived.

The moral of the story is that contractors, including locum doctors and dentists, will need to pay careful attention to each of their contracts with individual hospitals and practices to determine whether or not IR35 applies to them and if they’re responsible for paying tax and National insurance.

While many will fall outside of the rules of IR35, it’s not outside the realm of possibility that yours might.

If you’re a locum or contractor worker concerned about whether or not the tax and NI you may owe under IR35 rules will affect your overall financial situation, don’t hesitate to get in touch with us. We specialise in tax planning and will do all we can to help keep your tax liabilities to a minimum.

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