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Guidance for negotiating fees for locum services in general practice

January 2007

How do you start to work out what to charge for a standard session?
How do you work out your business expenses?
What factors should you consider in calculating your projected income?

Welcome to the ready reckoner
This calculator is intended as an aid to help you answer those questions. Although you may estimate your expenses when calculating how you should set your locum fees, you should of course use actual figures derived over the year when calculating actual income and tax in your accounts. This calculator can be used in Excel and does the maths for you. Alternatively, print the calculator and fill in the gaps.

The calculator is provided to allow you to estimate your own fee for the services provided to the supplier. The fee should be based on your own individual circumstances and the assignment to be undertaken. Remember that these calculations will give you a ‘ball-park’ figure for a sessional rate to achieve your target income. This will give you a starting point for negotiating individual contracts with each employing organisation, taking into account length of session, work involved, travel expenses etc.

Your target net income (pre-tax, after expenses) will be based on a variety of factors – such as equivalent principal and salaried incomes, your experience and seniority and, importantly, local market factors.

More information about factors involved in negotiations of charges is available in the joint NASGP/BMA guidance document.

As mentioned in the guidance all expenses in the calculator may not be allowable for tax purposes.

In order to claim tax relief on expenditure incurred it must be of a revenue nature (and not capital) and incurred ‘wholly and exclusively’ for the purpose of the locum profession. Relief may be available for capital expenditure through the capital allowances relief. The following guidance must be tailored to each assignment and your own personal circumstances. There is no set percentage that can be claimed for expenses, you must work out your own business use.

Motor expenses
It is usual practice for a locum to use a car to travel to the surgery and to see patients. Only business use should be included in the calculator and this is also relevant for tax purposes. The percentage of motor expense business use will vary with every appointment depending upon the amount of travel involved.

Typically the costs of running a car (including insurance, road tax, servicing, repairs, petrol, interest on a loan to purchase the car etc) can be added together and a claim made for the business proportion of the total expenses, based on the ration of business mileage to total mileage.

In addition, a statutory rate of depreciation, know as capital allowances, can be claimed on the capital cost of purchasing the car. Capital allowances are calculated as 25 per cent of the cost of the car on a reducing balance basis, subject to a maximum of £3,000 for any one year, with adjustments for any profit or loss on the eventual disposal of the car. The same business use proportion used for the running expenses would normally be applied to the full allowances available to arrive at the amount to be claimed for tax relief.

Alternatively, you could agree a fixed rate per business mile with the relevant practice, currently the Revenue & Customs guidance figure is 40p per mile for the first 10,000 business miles in a year and 25p per mile thereafter. This fixed rate covers the costs of running and maintaining the vehicle, such as fuel, oil, servicing, repairs, insurance, road tax and MOT. It also covers the capital cost of the car so no capital allowances can be claimed. However, additional amounts may be claimed for interest on a loan to buy the car. Parking and toll fees associated with each appointment also need to be taken into account.

Use of home
A tax deduction in respect of the business use of a locum’s home will usually be justified if any significant business activity is carried out at home provided that a definite part of the home is used for business purposes. However, this does not mean that a room must be used only for business purposes, indeed it would be unusual for a locum to have a room set aside exclusively for business purposes.

It is normally possible to claim a proportion of the costs of lighting, heating, insurance, repairs, decorating, council tax and water rates of premises used partly for business purposes and partly for other purposes. Similarly where a home telephone or computer are used partly but exclusively for business purposes a proportion of those costs would normally be allowable. In the case of capital equipment eg a new computer the relief may be spread over a number of years through the capital allowances regime.

The portion of expenditure that is appropriate to claim will vary depending upon your individual circumstances. This would be affected by the proportion of the home that is used for business purposes and the proportion of time that part of the home is used for business or other purposes. So, for example if one average sized room out of five rooms in the home is used for business purposes for 50 per cent of the time, it might be appropriate to claim 10 per cent of the relevant costs.

The proportion of home telephone or computer costs should be based on a reasonable estimate of the ratio of business to total use and the proportion claimed will often vary from the proportion claimed for other items such as light and heat.

If a room is used exclusively for business purposes you should take advice on the possible loss of the principal private resident exemption from capital gains tax.

Please double click here to calculate your sessional charges on an individual basis