IR35 is Coming: A Guide for Locums

IR35 legislature is coming to the private sector

In light of the global health crisis, locums and agency workers would be forgiven for allowing IR35 regulations to slip from their mind. If you have been working in the public sector you will be aware of the IR35 legislation that was brought into force in April 2017. The government are extending this to the private sector (medium to large organisations) from 6 April 2021 (postponed from last year).

What is IR35?

IR35 is government legislation and is about preventing disguised employment. It is designed to create parity in taxation and national insurance payments, ensuring that anyone who works as an employee pays the same tax and national insurance. This applies regardless of whether they work through their own personal services company or they are employed directly.

The Impact of IR35 Explained

IR35 has been around for many years but until now it has been the responsibility of the limited company director (or their accountant) to assess each assignment to judge whether it falls inside or outside IR35. However, HMRC has reported widespread non-compliance and so from 6 April 2021 this responsibility falls on the end client with significant fines to companies that make an incorrect decision. If the locum is declared to work inside IR35, it means the locum must be treated as an employee and both tax and national insurance must be deducted at source.

What is Inside IR35 and Outside IR35 Rules?

This table outlines some of the things that help assess what is inside and outside IR35 regulations.

Outside IR35 | Inside IR35

Performing one task and one task alone, which is outlined in a contract

Performing multiple different tasks for the same employer

Drawing up a new contract, or amending an existing agreement for new roles or duties

Taking on new, ad hoc work at the request of your employer

If you are unable or unwilling to work, somebody else can fulfil your duties

Being indispensable to an employer and thus unable to be replaced by a substitute

Informing your employer that you are unable to work, taking time off accordingly

Requesting time away and having this request denied on grounds of workload

Financing independent training and not receiving any company perks

Being included in business schemes, such as training and social occasions

Eschewing performance reviews and other
business practices related to employment

Being assigned performance targets and attending performance reviews

Ability to work for other organisations, whether within or outside the health sector

Exclusivity to your current employer, forbidding you from working elsewhere

To find out if you should be classed as employed or self-employed, click here.

Who does this affect?

If you are working as a locum or agency worker in the public or a medium / large private sector through your own personal services company these rules will apply.

There’s an exemption for end-clients who are ‘small businesses’ as defined by the Companies Act 2006 which means meeting 2 or more of the following criteria:

Annual Turnover is no more than £10.2 million

Balance sheet total is no more than £5.1 million

No more than 50 employees

So, if you are working for an end-client that meets two or more of these criteria, responsibility for determining the IR35 status of an assignment still remains with the PSC (limited company or your accountant) and the new rules do not apply.

Alternatively, if you are working through the public sector, or via PAYE or umbrella, you will not be affected.

If you have any further queries about how IR35 will impact your work as a locum healthcare professional, investigate our at a glance FAQs, our IR35 resource bank and our detailed FAQs. We also recommend seeking the advice of a tax professional if you are concerned.