Contractor Pay Guide

IR35 Basics for Busy Medics

At its heart, IR35 (or the 'off-payroll working rules') is about fairness. HMRC wants to make sure that if you're working in a way that's very similar to a regular employee, you're paying broadly the same tax and National Insurance as one. If your contract and working practices suggest you're more like an independent business providing a service, then you're likely 'Outside IR35' and can often operate more tax-efficiently through your own limited company. If it looks more like employment, you're 'Inside IR35'.

For locums, the key IR35 factors often come down to:

• Control: This is a biggie. Who's really calling the shots on *how* you do your work? Are you following strict hospital protocols and shift patterns dictated by the client (pointing towards Inside IR35)? Or do you have significant autonomy over your working methods and specific tasks within a broader service agreement (more like Outside IR35)?
• Substitution: Could you, theoretically, send another suitably qualified and vetted locum in your place if you couldn't make a shift? In many medical settings, this is tricky due to patient safety, specific skill requirements, and regulatory checks. A genuine, unfettered right to substitute is a strong pointer to being Outside IR35, but its absence, especially if the client insists on *you* personally, leans towards Inside.
• Mutuality of Obligation (MOO): Is there an ongoing expectation of work from the client, and an obligation for you to accept it? Or are you engaged for specific shifts or a defined period with no guarantee of further work beyond that (which is more typical of locum work and supports an Outside IR35 stance)? Shift-based work, common for locums, often demonstrates a lack of MOO.
• Integration: How much are you 'part and parcel' of the client's organisation? Do you have a hospital ID badge, an internal email, report to a ward manager like other staff, attend general staff meetings? The more integrated you appear, the more it can look like employment.
• Financial Risk: Are you responsible for your own medical indemnity insurance? Do you provide any of your own essential equipment (though often medical equipment is client-provided)? Do you bear any financial risk if a shift is cancelled (unless specified in your contract)? These are all factors that can point towards being a business in your own right.

Remember, it's the overall picture of your contract and day-to-day working practices that matters. Not just one single factor. Our main Understanding IR35 guide explains these in more general detail.

NHS vs. Private Sector: Any IR35 Differences?

Generally, yes, there can be. The NHS, as a public sector body, has been responsible for determining IR35 status for its direct locum engagements for longer (since 2017). They are usually quite clear about whether a role is Inside or Outside IR35 based on their assessment.

Private healthcare providers, if they are medium or large-sized businesses, also have to determine your IR35 status (since April 2021). Small private clinics, however, might mean the responsibility for IR35 status falls back to your limited company, if you use one. It's always crucial to clarify who is making the determination.

Working Through Agencies and Staff Banks

This is a very common route for locums. When you work through a medical recruitment agency or an NHS staff bank for an Inside IR35 role, the agency or staff bank usually acts as the 'fee-payer'. This means they are responsible for deducting the correct Income Tax and National Insurance contributions through PAYE before paying you.

Often, they'll achieve this by paying you through an umbrella company. The umbrella becomes your employer for that contract, handling all the tax and NI.

Making Sense of Determinations and Pay

• Status Determination Statement (SDS): Your client (the hospital, clinic, or sometimes agency on their behalf) should provide you with an SDS. This document tells you if they think the role is Inside or Outside IR35 and why. You have the right to challenge this determination if you disagree, but there's a process to follow.
• If Inside IR35: Your main options are usually to be paid via an agency's PAYE system or through an umbrella company. An umbrella company can offer some benefits like continuity of employment and access to salary sacrifice for pensions.
• If Outside IR35: You can usually operate through your own limited company. This generally offers more tax planning opportunities but comes with more administrative responsibilities. Our guide on choosing your trading structure can help here.

Curious about the financial impact? Our IR35 Calculator can help you estimate your take-home pay under different scenarios.