Placing a mug on a chair does not make the chair into a table – it is merely a chair that is being used as if it is a table. Likewise, just by calling yourself self-employed and issuing invoices does not necessarily make you self-employed. Your status is not a matter of personal preference but it is dependent upon how you, and in particular H M Revenue & Customs, view the facts. If you are really employed but you agree with your “employer” to be self-employed by issuing invoices and accounting for your own tax you will be dealing with matters incorrectly and are opening yourself up to challenge by HMRC. This gives rise to the the risk of penalties.
As a self-employed locum you are responsible for preparing your own accounts and tax return and paying your tax and national insurance yourself. As an employee your employer would be responsible not only for deducting tax and employees national insurance but also to pay an additional amount in respect of employers national insurance. Furthermore, a self-employed locum is often entitled to claim deductions against their tax liability for certain expenses whereas an employed locum cannot. Employed locums therefore often contribute more tax and national insurance than the self-employed.
”Employed locums therefore often contribute more tax and national insurance than the self-employed.”
If HMRC identify you are in fact self-employed the shortfall in payments must be paid by a combination of the locum/employee and the employer. You could operate for a number of years incorrectly as a self-employed locum, however if this is identified H M Revenue & Customs have the power to collect the shortfall in tax and national insurance going back six years together with interest and penalties thereon.
It is therefore important to ensure you are correctly classified from the start. Furthermore, it may be possible that you can change the nature of your status by altering your terms and conditions in a suitable manner. This however does need careful consideration. In order to ensure that you are being classified and, as a consequence, taxed in the right manner you should follow these rules (this list is not exhaustive and a full and proper understanding must be obtained);
- Ensure there is a written agreement in place between yourself and the GPs practice.
- Ensure that the manner in which you actually work is in accordance with the terms of the contract.
- There are a number of badges of trade which must be present within any contract if you wish to be treated as self-employed. These include matters such as:
o Can you send a substitute in your place if you are unable to attend a session
o At the end of the period of the contract, are you obligated to continue working or is the GPs practice obliged to provide you with additional work
o Are you involved in the management of the GPs practice
o Is the GPs practice able to control the way in which you perform your work
Finally, if you are providing your services to more than one party this does not mean that you are self-employed, it is possible to be employed for one piece of work and self-employed for the other – which is the case depends, as mentioned above, on your contract in each case.
Daniel Prais heads the specialist healthcare division at Crawfords Accountants LLP.He has developed in expertise in the sector over 20 years, acting for many GP practices and health centres as well as locums and other healthcare professionals.
For Network Locum (now Lantum) see www.lantum.com