If you continue without changing your settings, we’ll assume you’re happy to receive all cookies from the BMA website. Find out more about cookies
When you visit any web site, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalised web experience.
Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.
These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms.
You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.
These cookies are required
These cookies allow us to know which pages are the most and least popular and see how visitors move around the site. All information we collect is anonymous unless you actively provide personal information to us.
If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.
These cookies allow a website to remember choices you make (such as your user name, language or the region you're in) and tailor the website to provide enhanced features and content for you.
For example, they can be used to remember certain log-in details, changes you've made to text size, font and other parts of pages that you can customise. They may also be used to provide services you've asked for such as watching a video or commenting on a blog. These cookies may be used to ensure that all our services and communications are relevant to you. The information these cookies collect cannot track your browsing activity on other websites.
Without these cookies, a website cannot remember choices you've previously made or personalise your browsing experience meaning you would have to reset these for every visit. In addition, some functionality may not be available if this category is switched off.
Our websites sometimes integrate with other companies’ sites. For example, we integrate with social networking sites such as Twitter and Facebook, to make it easier for you to share what you have read. These sites place their own cookies on your browser as a result of us including their icons and ‘like’ or ‘share’ buttons on our sites.
From 6 April 2017, the legislation known as IR35 – which affects how people work through limited companies – is changing. The rules and implications are complex. I have attempted to answer some of the frequently asked questions below.
What is IR35?
IR35, or intermediaries legislation, is anti-avoidance tax legislation brought in by then-chancellor Gordon Brown in 2000. Its purpose is to prevent ‘disguised employment’, in which a worker receives payment from a client through an intermediary such as their own limited company, but whose relationship with the client is such that had they been paid directly then they would be employees of the client.
Prior to IR35 being introduced 17 years ago, a worker could work in the exact same job as a salaried employee, but could make significant tax savings by having the payment paid to their company, which they then draw dividends from.
What is changing on 6 April 2017?
Up until 6 April, it is the responsibility of the intermediary (eg, the worker’s limited company) to assess whether the worker falls inside or outside of IR35 and if deemed to be inside, then to apply the appropriate tax and NI (national insurance).
As of 6 April, with regard to public sector body engagements, it will be the responsibility of the organisation engaging the worker (the engager) or the agency (if they use one) to assess this, and if the worker is found to be inside IR35 then the engager/agency must apply tax and NI deductions at source.
Importantly, the criteria for assessing whether an individual operating through an intermediary falls foul of IR35 will not change on 6 April. Hence, if a worker has been working safely outside of IR35 through their limited company and not falsely declaring themselves as such, then nothing should change, apart from responsibility for due diligence shifting away from the worker.
Who is affected by this change in legislation?
It is important to note that not everyone is affected by this change. Firstly, only the public sector is affected. The private sector process remains the same. Secondly, not all of the NHS is affected. The legislation specifies that this applies to ‘public authorities’ which are defined by the Freedom of Information Act 2000. In the NHS, those authorities are:
It is only when one of the above organisations is engaging the worker through an intermediary that the new IR35 rules need to be applied. This means that APMS providers are unaffected, as well as private commercial providers who are contracted to provide NHS services such as some out-of-hours services, walk-in clinics and urgent care centres.
How is IR35 status assessed?
A full explanation of how IR35 status is assessed is contained within the new BMA guidance which also contains a link to the HMRC online tool to help you calculate IR35 status.
Once an engager/agency has assessed me, do they have to do it again?
HMRC guidance is that for each individual engagement, the engager/agency must assess the IR35 status of the worker and if necessary take the appropriate action.
I work directly for practices as a sole trader, does this apply to me?
No. As there is no intermediary between you and the client, you are excluded from IR35. In this case, the issue is solely with regard to employment status.
I get my work through an agency, does this change apply to me?
If you work as a sole trader via an agency, then IR35 needs to be considered, as the agency could be considered an intermediary. If you work via an agency through your own limited company, then IR35 still needs to be considered even though there is more than one intermediary between you and the engager. In both cases, the responsibility for assessing whether IR35 applies and applying appropriate tax and NI lies with the agency, rather than the public sector body.
The engager is a Federation or other such local organisation, are they affected?
The legislation is clear that this change applies only to ‘public authorities’ defined as such by the Freedom of Information Act 2000. Federations are not listed by that legislation as public authorities, so are not caught by this new legislation. Nor is any other organisation or entity which is not listed as such by the Act.
What must an engager/agency do if the above tool says the locum is inside IR35?
If the above tool says the worker falls inside IR35 for this engagement then they should be paid through the organisation’s payroll and tax and NI deducted at source. As an employer, the engager/agency will also then have to add 13.8% employer NI for all earnings above £156 per week in line with HMRC NI bandings. They would also have to generate payslips and a P60 end-of-year certificate for the worker as appropriate.
The locum is also free to only accept the engagement subject to satisfactory employment terms, which would need to be negotiated.
What are my options if an engager/agency deems me inside IR35?
If a locum operates through a limited company then they have several options:
What happens if an engager/agency wrongly deems someone outside IR35?
Should HMRC carry out an IR35 investigation of the organisation, at any point in the future, then any engagements deemed outside IR35 when they are in fact inside would mean the engager/agency would be liable to pay any taxes and NI due to HMRC as well as penalties. These taxes could be clawed back as far as 6 April 2017.
What happens to me as a locum if I am wrongly deemed to be outside IR35?
As far as HMRC is concerned, nothing. Liability would lie solely with the engager, or the agency if there is one, unless a specific indemnity arrangement is in place to compensate any liability which may befall the engager/agency.
Can an engager/agency deem all workers inside IR35, just to be safe?
There is nothing to prevent an engager/agency from attempting this. However, HMRC guidance makes it clear that each engagement should be assessed individually and the above HMRC tool applied. Blanket policies by engagers or agencies do not comply with this. A worker is free to raise this with HMRC. However, given that wrongly deeming someone as an employee could result in more tax generated rather than less, it seems unlikely HMRC would take a harsh view. HMRC have said they will stand by any result their tool produces, providing the tool hasn’t been manipulated to produce the result desired.
Although adopting such a blanket policy may mitigate future tax risk, the engager would then see a rise in their costs as they apply employer NI, as well as the administrative and payroll costs involved.
An engager/agency has deemed me inside IR35, but I think I’m outside, what can I do?
HMRC have said they will stand by any result their assessment tool produces. However, as said above, where HMRC believes the tool has been deliberately used incorrectly they will treat this as deliberate non-compliance. However, as far as the locum is concerned, there is little that can be done to overturn the decision.
Do engagers/agencies have to offer employment protection to workers they deem inside IR35?
Being employed for tax purposes and being employed for statutory purposes are separate legal entities. Being deemed employed from HMRC’s point of view does not automatically confer any employment rights. Such a decision would fall within the remit of an employment tribunal.
Should a tribunal rule in the favour of the worker and agree they have statutory employment rights then the engager/agency would have to provide such protection as:
Furthermore, depending on the status of the engager, they may also be obligated under such circumstances to offer employment terms no less favourable than the BMA model salaried contract.
Whether a locum wishes to press for employment rights depends entirely on the engagement. A locum who does regular work each week for an engager may be more inclined to seek employment rights than someone who is seeking casual ad hoc shifts.
Matt Mayer is a salaried GP and executive member of the BMA sessional GPs subcommittee
It is clear that this is just a cynical attempt to demolish any savings that locum GPs - who are now the majority of all new GPs- try to make by working thru a Ltd Company. As locums, you DON'T get the annual paid leave/maternity pay/sick paid leave or employment rights and have to pay much higher compulsory Medical Defence Organisation fees, but despite this you will now be paying the same income tax/NIC as salaried GPs who DO get the benefits.
Is the Government trying to force locum GPs to work fewer and fewer shifts?
But what puzzles me is the RATE of income tax you would have automatically deducted from your pay if you work as a locum GP for SEVERAL different practices.
An Employer would deduct the 40% income tax rate from your pay if the money you earned for THAT particular employer went over the limit for the 40% rate of tax.
But if you work for several DIFFERENT employers, your individual pay for each one might not breach the 40 % limit for an increased tax rate.
You do not pay any further tax or NIC on your pay that has been deducted- as HMRC have effectively demolished the benefit of having a Ltd Company by not allowing you to be paid in dividends from your Ltd Company.
This suggests that bizarrely, the best thing for Locum GPs to do is to work FEWER SHIFTS, for several employers, to avoid any one employer being able to charge you the higher rate of income tax.
Typical Government incompetence, from the people who who insisted it be made easier for people to book appointments with their GPS regardless of clinical need, and then complained that more people were going to A&E as GP appointments were all full seeing more patients.
Or a Prime Minister who insisted GP surgeries are opened 8am-8pm 7 days a week, with no "long lunch breaks" ( when exactly do GPs get to eat/toiletries/read letters /make referrals/check results/have a break/do Home Visits etc?), when there are NO extra overworked GPs available to do any extra shifts, which means salaried GPs are often now bullied into working later shifts, for no extra pay and regardless of the effects on their families, so reducing the number of GPs available to work and offer appointments in the Peak Demand morning slots, so forcing more and more people to go to A&E....
Seems a bit like the current system where if one person in a civil partnership/marriage works long hours full- time and earns a high wage- like a full-time GP- and the other partner doesn't work or only few sessions as they are left to keep the family responsibilities going, then they are heavily penalised by the Government as the main household income is heavily taxed at the higher rate.
Instead, if both partners in a civil partnership/marriage work fewer shifts overall, then the two main household incomes remain below the 40 % higher income rate, and the family has a higher overall income and together pays lower tax, and still get benefits such as Child Benefit etc.
There seems to be MORE and MORE vindictive policies by an incompetent HMRC to force GPs to work fewer and fewer shifts .
Note, these IR35 changes deliberately don't affect PRIVATE medical company providers like CAPITA or ATOS.
"You will see a change in hourly rate on your bookings because the trust will be paying the Employer’s NI instead of the PSC " - this is a quote from Liaison FS who processes direct engagement payments for NHS Trusts. This means they are going to pay employer's NI however the worker/PSC will be responsible ie. it will come out of your rate. If your hourly rate is £50/hr this is going to be paid as £43.1/hr from 6th April.
" The NHS Regulator NHS Improvement has issue guidance stating:
- To provide clarity NHS Improvement’s view is that all Medical Locums fall inside IR35 and thus tax must be deducted at source
- Ensure all locum, agency and bank staff are subject to PAYE and on payroll from the 1st April 2017"
This is a quote from an email response of a Deputy Director of HR of an NHS Trust to me. Based on this can you argue your case as anyone else's is treated the same ie. you were not individually assessed with regards to IR35 since NHS Trusts are just following above guidance ?
Thanks for this Istvan,
From what you say it appears that NHS Improvement are instructing trusts to declare all locums (whether operating through an intermediary or not) as inside IR35. If so, this goes against HMRC guidance that each engagement should be individually assessed. Furthermore it could have significant historic tax ramifications for not only the locum but the trust as well. Furthermore, deducting the employer national insurance from the gross pay of the worker, albeit by severely cutting their gross pay, is unacceptable.
I have escalated this urgently to seek a statement from the wider BMA across all branches of practice (not just GPs) condemning such practices. I will comment further when I have updates.
Thanks again for bringing this to our attention.
Hi' i'm a salaried GP doing 6sessions/week. I opened a ltd company few months ago and about to start locum sessions from this tuesday.
Will be doing locums on adhoc basis for a surgery run by community care trust-mainly one day a week for them for April.
When I asked them about IR35 the manager and their accountant were not sure n said to speak to my accountant who is equally not sure. The responsibility lies with the practice but they are not sure. They prefer to pay in gross.
My query is that if its under IR35 i'm better off working as sole trader- but that means then the surgery has to contribute towards pension as well.
Till no one is clear about this what is the safest route to take? Sole trader or Ltd company?
is been a sole trader and working via own limited company same thing? or if I work through limited company and have direct contract with gp practice, (no agency involved) then does it mean there is no intermediary??
Great work by Matt. Thanks for your efforts. I think NHS managers will take easy route rather than assess individually
On Thursday the Urgent Care Service provider in Dorset wrote to all those of us who work OOH to inform us that we would all be classified as intermediaries from now on. This is despite having already filled in the EES myself and come out as "self-employed". As I work over 80% for the OOH service this means I can kiss my NHS pension and tax benefits goodbye. Am absolutely furious. This could be the end of Urgent Care in Dorset as there is no way my colleagues and I will work under these conditions. What is the BMA / GPC / SGP Sub-C doing about this??? Dr L-J Evans - Sessional GP
Two issues and not sure if they've been covered.
First hospitals are attempting to deduct employer's NI from our rate.
Second they are using compulsory deductions for unpaid breaks as a means of reducing our rates through the back door. Sometimes this can be as much as thirty minutes unpaid every four hours (stand up Medacs. You should be ashamed of yourselves).
Surely they can't have it both ways. If we're paying employer's NI then we should be getting out EWTD paid breaks, what is the BMA going to do about this? I think a centrally funded test case wouldn't be too much to expect as there's quite a lot of money involved.
BTW we weren't paying employer's NI as a limited company but corporation tax and dividend tax, which worked out to about the same as employee's NI and income tax. And of course we can't now claim our expenses and CPD as deductible. It was actually the trusts who wanted us to form limited companies so that they (not us) could avoid the employer's NI, which we are now being expected to pay.
What is the BMA going to do about this?
The new calculator makes it clear that even sole traders or self employed fall inside IR35. They have reworded the whole thing to focus on whether PAYE applies or not. IR35 becomes secondary only if you contract through an agency
No, once again I clarify: IR35 only applies where there is an intermediary. That is why it is called intermediaries legislation. The HMRC employment status tool is designed to assess the employment status of any worker, whether a sole trader or working via an intermediary. That is why it asks you your engagement relationship at the start.
I have explained this previously, as have BMA Law in their legal guidance.
I work as a consultant in EM with more than 11 PA. On some of my week ends, days off and annual leave days, I also work in other NHS hospitals as locum though my limited company and an agency. I checked with the HMRC tool Kit my status with the result stating that I am falling outside the IR35. I approached my agency contacting the hospitals but, they so far replied that I fall within the IR35. Since April the 6th, I have not worked as a locum & do not have the desire to do so while having my livelihood slushed into half taxed 40%, not to say the NI contribution is likely to be deducted at source and a huge expenses involved doing the hard work to be denied. Any one has any suggestion for me, appreciate.
Hi.Who is responsible for Employer NI if locum doctor wants to be paid via Ltd or umbrella company?
In November I have accepted a 6 months assignment as a Locum Consultant Histopathologist (i.e. to terminate on the 28th April 2017). I have worked through my company, the assignment was provided by an agency. Following the change in legislation the contract was terminated/changed and I was offered a new contract. The hourly rate was reduced by 13% and I heard - through the agency - that the difference was the EmployersNI contributions, which I should have paid. I have not signed the contract, but continued to work, because I was afraid I might be referred to the GMC.