If you're working as a locum doctor in the UK, understanding locum doctor IR35 what you need to know is essential for managing your tax affairs correctly. IR35 rules determine whether you're treated as an employee or contractor for tax purposes, with significant implications for your take-home pay and compliance obligations.
The off-payroll working rules (IR35) affect how locum doctors are taxed when working through their own limited companies or personal service companies. Getting this wrong can result in unexpected tax bills and penalties from HMRC.
What Is IR35 for Locum Doctors?
IR35, formally known as the off-payroll working rules, determines whether a locum doctor working through a company should be taxed as if they were an employee of the end client (typically an NHS trust or private hospital).
The rules apply when you provide services through an intermediary - usually your own limited company - rather than working directly as an employee. For locum doctors, this typically means working through a personal service company or umbrella company arrangement.
If your engagement falls "inside IR35", you'll pay income tax and National Insurance as if you were an employed doctor. If it's "outside IR35", you can take advantage of corporation tax rates and dividend taxation, which can be more tax-efficient.
Who Makes the IR35 Determination?
For medium and large organisations (including most NHS trusts), the end client determines your IR35 status. This means the hospital or trust you're working for must assess whether your role falls inside or outside IR35 before you start.
Small companies (fewer than 50 employees and meeting two other criteria) are exempt from making determinations. In these cases, you're responsible for assessing your own IR35 status - though this rarely applies to NHS work.
The client must provide you with a Status Determination Statement (SDS) explaining their decision and the reasons behind it. You have the right to challenge this determination if you disagree.
Key Tests for IR35 Status
HMRC and clients consider three main factors when determining IR35 status:
Control
Who controls what work you do, when you do it, and how it's done? If the client has significant control over your working arrangements - similar to an employee - this points towards being inside IR35.
For locum doctors, NHS trusts typically have substantial control over clinical protocols, patient care standards, and working hours, which often suggests inside IR35 status.
Substitution
Can you send someone else to do the work in your place? True contractors usually have substitution rights, while employees cannot typically send substitutes.
In medical roles, substitution is often limited by GMC registration requirements, professional indemnity arrangements, and clinical governance. This factor typically points towards inside IR35 for medical work.
Mutuality of Obligation
Is there an ongoing obligation for the client to provide work and for you to accept it? Employment relationships typically involve mutual obligations beyond individual assignments.
Short-term locum assignments often lack ongoing mutual obligations, which can support outside IR35 status. However, regular ongoing arrangements may suggest employment-like relationships.
Practical Impact for Locum Doctors
When your locum work falls inside IR35, the financial impact can be significant:
- Income tax and National Insurance deducted at source through PAYE
- No corporation tax benefits from working through your company
- Limited expense deductions compared to outside IR35 arrangements
- Employer's National Insurance costs passed back to you through reduced fees
For example, a locum doctor earning £150,000 annually might see their net income reduce by £15,000-£25,000 when moving from outside to inside IR35, depending on their company structure and expense claims.
Working Through Agencies
Many locum doctors work through recruitment agencies or umbrella companies. The IR35 rules still apply, but the mechanics change slightly:
If you're inside IR35, the agency becomes the "fee payer" responsible for operating PAYE and deducting income tax and National Insurance. They'll typically reduce your gross fee to cover the employer's National Insurance costs.
Some agencies offer umbrella company arrangements that handle the PAYE obligations on your behalf. While this simplifies administration, you're still effectively taxed as an employee for inside IR35 work.
Common Scenarios in Medical Locum Work
Short-Term Hospital Cover
Covering specific shifts or short-term absences often supports outside IR35 status, particularly when you have genuine substitution rights and limited ongoing obligations.
Long-Term Secondments
Extended assignments lasting several months typically fall inside IR35, especially when integrated into the client's normal working arrangements with ongoing obligations.
Specialist Consulting
Providing specialist medical opinions or specific project work may fall outside IR35 if you maintain genuine independence and control over delivery methods.
Record Keeping and Compliance
Regardless of your IR35 status, maintain detailed records of your working arrangements:
- Contracts and statements of work
- Status Determination Statements from clients
- Communications about working arrangements
- Evidence of control, substitution rights, and obligations
- Professional expenses and equipment purchases
These records are essential if HMRC challenges your IR35 position or if you need to appeal a client's determination.
Professional Advice and Support
Given the complexity of IR35 rules and their significant financial impact, most locum doctors benefit from professional advice. Specialist medical accountants can help you understand your position, challenge incorrect determinations, and structure your affairs tax-efficiently.
The rules continue to evolve, and HMRC's approach to medical professionals remains under scrutiny. Regular review of your arrangements ensures you remain compliant while optimising your tax position.
For locum doctors navigating these complex rules, understanding locum doctor IR35 what you need to know is the first step towards making informed decisions about your working arrangements and tax planning.