Making sure you’re compliant with tax legislation when locuming
Ben Sweeney qualified from the University of Liverpool in 2008. After working as a locum vet in many different practice settings, he set up Simply Locums in 2016.
What is IR35?
IR35, also known as ‘intermediary legislation’, was introduced by the government in 1999 to combat tax avoidance by people working in ‘disguised employment’. In plain and simple terms, it was to catch the people who were working at a company and doing exactly the same job as the person next to them day in day out, but operating as a contractor rather than as an employee of the company, and as a result, significantly reducing their tax contributions.
It is commonly believed that the purpose of IR35 is to tax contractors, but in fact it is designed as a legislative measure through which the government can tax organisations who are reaping the benefits of engaging self-employed workers. By engaging a worker on a contract basis, the employer will not be required to pay employer’s National Insurance contributions or provide employment rights and benefits, thus saving large amounts of money.
The most common and obvious examples of this kind of set-up are in the building and IT industries, where large organisations employ a purely contracted staff force for long periods of time in the same roles, day in day out.
What does working within IR35 or as a true contractor look like?
Control and direction
If you are working within IR35 then you work when a practice asks you to work and can’t decline the shift. One example of this would be a ‘roaming role’ in that you do a certain number of shifts for an organisation but you go where and when you are told by that organisation to perform your role as a vet/nurse. Are you under the control of your client or do you have a degree of autonomy in your work? Can you make your own decisions in work or do you have to run everything by your manager/boss/employer?
"Are you in a position whereby you can provide or connect the practice with a suitable substitute should you be unable to fulfil your contractual arrangement with that client?"
This is one of the more confusing aspects of IR35 that many people worry about. In terms of being able to provide cover, if you are a true contractor you should have the facility to be able to request other people to cover a shift for you should you be unable to fulfil your obligation yourself. For instance, you might be part of a community where you can ask other vets or nurses to cover a shift for you if you are ill. Or, in a more official capacity, you could form a group of several independent vets working together and able to offer cover for each other if you are unable to work. Are you in a position whereby you can provide or connect the practice with a suitable substitute should you be unable to fulfil your contractual arrangement with that client?
Mutuality of obligation
Mutuality of obligation means that an employer would provide tasks/shifts to an employee on a regular and recurrent basis. However, if you are a true contractor, there is no guarantee from the client that you will have guaranteed ongoing work.
How does IR35 affect vets and vet nurses who are locuming?
If you are locuming and running a private company but still working within IR35 then neither you nor your employer will be paying appropriate taxes. If HM Revenues and Customs (HMRC) were to investigate you and find that you have been working within IR35, you and the practice that you work for may have a hefty bill to pay.
The simplest way for us all to check our own personal employment status for tax is to use the HMRC check employment status for tax tool (www.tax.service.gov.uk/check-employment-status-for-tax/setup). This will give you insight into whether you are working within or outside of IR35.
The following scenarios are examples of people working in the veterinary sector who may be affected by IR35:
I work for one practice all the time but as a contractor and I am on their rota.
I work the same two (or another number) days every week for the same practice and I have been doing so for the last year or two.
I work part time for a practice, but my boss pays me as a contractor.
I cover every Saturday for one practice.
I can’t just take time off when I want to from the practice I am working at.
I am not part of a service provider so may not be able to provide a substitute to cover if I can’t work.
All of these people are essentially in employed roles, be that part or full time. They are not in control of their own diary, they do not have the ability to provide substitute workers, and they seemingly can’t refuse work from employers.
How to ensure you’re compliant with the correct tax scenario
If one of these scenarios applies to you and you want to make sure that you are working compliantly within IR35 then I would advise that you perform the following checks.
Control and direction
Can you make your own decisions at work? This doesn’t have to mean you make the decisions on everything, but it is important to have a degree of control over your case management. Do you have to adhere to a list set by the employer of things to do in certain situations? If you prefer to work with a particular suture material, will the practice order it in for you? Are you able to order the drugs that you might want to use?
"If you are locuming and running a private company but still working within IR35 then neither you nor your employer will be paying appropriate taxes"
As a contractor, you are a service provider and your client, in the case of our profession, is the veterinary practice that you are working for. This is where having a service agreement between service provider and client is key. As part of this service agreement, you need to be able to demonstrate how you could provide a substitute in your absence. For example, you could join a veterinary recruitment service where, as a member, you could ask the community for assistance to cover a shift that you are not able to work yourself. This would enable you to continue to offer your services to that practice through a third party or ‘subcontractor’. However, do note that the practice will want to approve this subcontractor first before they could cover for you, and so, where possible, you should allow time for this to be completed before cover is required.
Mutuality of obligation
It is not advisable to have a rolling contract (ie, a contract with an indefinite end) with a practice as this could be deemed as a contract of employment. In much the same way, simply having one contract after another at the same practice (ie, a guarantee of work from date A to date B followed by another contract with clear dates outlined) can also be construed as being in a position of employment with one employer. Are you obliged to renew the contract each time or can you walk away? In the same way, can you or the client disengage from a contract at any time?
Top tips for vets and vet nurses who are locuming
Work for multiple clients
Working for multiple clients doesn’t necessarily mean that you have to work for a different practice every week, but it is sensible to have variations in your bookings as this shows that you are more of a freelance service provider rather than being tied to one client.
Have your own equipment
Having your own clothing with your own company logo will help to give your brand exposure. Perhaps also have your own stethoscope, ophthalmoscope and books so that you are prepared to start work and offer your services and don’t have to rely on equipment from the practice. There is no need to go overboard but ask yourself - if a client doesn’t have these things, can I still do my job?Make your business look professional and autonomous
Set up your own business email address and consider having a separate company bank account if you are a sole trader. Although a sole trader can run a business through their personal bank account, having a separate business account or setting up a limited company can look more professional.
"Regularly applying for jobs or contracts at practices will also show evidence of proactiveness and autonomy in finding work"
It may also be worth having a logo designed and including this on your invoices.
Regularly applying for jobs or contracts at practices will also show evidence of proactiveness and autonomy in finding work.Remember the importance of CPD
Can you show evidence of your company investing in CPD training for you at any stage? This demonstrates that your company is able to invest it its own future.
It’s an exciting and prosperous time to be a veterinary locum – there is plentiful work, the remuneration is based on your own assessment of your worth (although you should make sure that you are realistic and can back-up what you charge with great performance), and it can open your eyes to lots of opportunities in various practices. As service providers, it is important that we look after our own business interests and those of our clients.
Originally published in In Practice, Volume 41, Issue 2. https://inpractice.bmj.com/content/41/2/92