Locum vets will have to follow a different set of tax rules than those in full-time employment, and it can be confusing to work out who is responsible for what. In this blog, we take a look at the recent IR35 changes and how they will affect locum vets.
What is IR35?
The IR35 rules, also known as ‘the off-payroll working rules’, were introduced by the UK government in 2000 to tackle people working in ‘disguised employment’.
It is a legislative measure that means the government can tax organisations that are reaping the benefits of engaging self-employed workers who actually act more like employees.
According to HM Revenue & Customs, “the rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same Income Tax and National Insurance contributions as employees”.
To ensure an employee is truly self-employed, HMRC will look at certain criteria, including the following:
- You are responsible for your own workload without supervision
- You can specify your working hours
- You do not receive any employee benefits, including holiday pay and pensions
- You can accept or decline work freely
- You can work for other clients at the same time
- You could supply another person to complete the contract if needed
When it comes to locum vets and vet nurses, these rules will still apply when determining IR35 status.
The IR35 rules changed on 6th April 2021
The IR35 rules changed earlier this year. While previously, locum vets and vet nurses would have been responsible for determining their own IR35 status, now, both medium and large private sector businesses will be responsible for determining the IR35 status of their contractors.
This means that medium and large vet practices will need to evaluate the status of all the people they contract services from to understand whether they need to deduct income tax and national insurance as they would with employees. Failure to do so could result in penalties and, until an organisation complies with its obligations, it will be held liable for any tax and national insurance that is not paid.
Changes to the IR35 tax legislation came into force from April this year, affecting all locums who currently work via a limited company and those practices that engage locum services.
How will the changes affect locum vets?
The changes mean that it is the ‘end client’ (i.e. the vet practices) who determines whether or not a locum falls inside or outside of IR35, whereas this was previously done by the owner of the limited company (i.e the locum vet or vet nurse).
The client will determine your status through an HMRC assessment which, due to the nature of locum vet work, will more than likely deem you to be within IR35. This is because you are likely to be working under direction and control, using practice facilities, not determining working hours, and unable to supply a substitute.
Therefore, whoever is paying you will be obligated to deduct your tax and national insurance before they pay you which eliminates the benefits of using a limited company.
The only exemptions to the IR35 regulations are small independent practices. With the corporates and larger groups dominating the industry and providing the majority of locum opportunities, competition for this work will be hugely increased.
Many medium and large-sized practices have made the decision not to assess all locums, as this is resource and time-intensive, and will only engage locums through other payment methods.
The other payment methods available to locums are:
- PAYE on a practice’s payroll, on a zero-hours contract.
- Working under an umbrella company.
- Some practices are also engaging with sole traders.
If you choose to use an umbrella company, there will be no restrictions as to where and when you can work. You will have one set tax code to ensure you are paying the correct amount and a sole company in charge of your payroll, tax and NI contributions.
If you have any questions about the IR35 rules and how they might affect you, either as a vet practice or as a locum vet or vet nurse, please do get in touch with our team. You can also browse our current locum vacancies.