IR35 for Locum Doctors: Status, Risk, and Practical Guidance

IR35 is shorthand for the off-payroll working rules introduced in 2000 and significantly reformed for the public sector in 2017 and the private sector in 2021. The legislation requires that individuals who would be employees if they contracted directly with an end-client (instead of through an intermediary such as a limited company) should pay broadly the same tax and NI as employees.

For locum doctors, IR35 matters because:

If you work through a limited company and your engagements are determined to be inside IR35, the tax advantage of the company structure is largely eliminated. The agency or end-client must apply PAYE deductions to your fee.

If you are a sole trader and your engagements are inside IR35, there is no separate tax impact (you already pay income tax and NI as a self-employed person), but the determination affects how the payer accounts for your income and NI.

IR35 status is determined by considering whether the working arrangement resembles employment, using five key tests:

• ›Personal service: Must you personally provide the services, or can you send a substitute? In medical practice, professional registration requirements mean substitution is constrained by law and by clinical governance. However, HMRC accepts that practical substitution constraints in regulated professions do not automatically create employment status if the contractual right exists.

2. Control: Does the end-client control what you do, how you do it, and when you work? Locum GPs exercising independent clinical judgment within a practice setting generally have significant control over how they work, though the practice sets the hours and location.

3. Mutuality of obligation: Is there an ongoing obligation for the practice to offer work and for you to accept it? In true sessional locum arrangements (booked session by session, no guarantee of future work, no obligation to accept every session), mutuality is low, which supports outside-IR35.

4. Financial risk: Do you have the opportunity to profit and the risk of loss? Running your own equipment, carrying your own indemnity, and potentially losing money if sessions are cancelled support self-employment.

5. Integration: Are you integral to the business, or a service provider brought in for a specific purpose? A locum filling a gap is less integrated than a regular partner.

From April 2021, medium and large end-clients (including NHS trusts and GP practices above the size threshold) are responsible for issuing Status Determination Statements (SDS) when engaging workers through limited companies or other intermediaries.

In practice, many NHS staffing agencies issue SDS determinations on behalf of the end-client. If you receive an SDS saying you are inside IR35, the agency must:

Deduct income tax and NI from your gross fee before paying you. Pay employer NI on your fee. Pay you only the net-of-deductions amount.

You cannot then run this income through your limited company tax-efficiently: the tax has already been deducted at employment rates, and using the company to receive income that has already been PAYE-processed creates double taxation issues.

A key point: the SDS must be reasonably reached. If you believe the determination is wrong, you can challenge it through the client-led disagreement process.

If you receive an SDS saying you are inside IR35 and you believe it is incorrect, you have the right to raise a formal disagreement under HMRC's client-led disagreement process. The agency or end-client must then consider your representations and respond within 45 days.

Grounds for challenge typically include:

The contract does not reflect the actual working arrangement (for example, the SDS assumed no substitution right when in practice you have agreed this with the practice).

The determination relied on incorrect factual assumptions about how the sessions operate.

The end-client has applied a blanket SDS policy without considering your specific engagement.

We review SDS determinations and advise whether a challenge has reasonable prospects. HMRC's CEST (Check Employment Status for Tax) tool can be used to document the position, though it is not binding.

For locum doctors operating through a limited company who want to maintain outside-IR35 status, the following practical steps help:

Ensure your contract includes a genuine right of substitution (subject to relevant clinical qualifications), even if you rarely exercise it.

Operate session by session rather than on a rolling or open-ended basis. Avoid arrangements where the practice expects you to attend every week and there is an implicit obligation of continuity.

Cary your own professional indemnity insurance (which covers you personally, not the practice).

Maintain records showing that your invoices are submitted professionally, that you use your own equipment, and that you exercise independent clinical judgment.

Do not accept integration into the practice's staff systems (same email domain, listed on the staff directory as a permanent team member, use of the practice's uniform or equipment) without considering whether this changes your status.

We review client engagements annually for IR35 risk and advise proactively if any arrangement shows signs of drift toward employment status.