Registering as self-employed

Who these days doesn’t have a portfolio career? Even if you’re not technically locuming at the moment, it’s pretty likely there will be opportunities over the coming months when you’ll be offered work outside your existing PAYE arrangements.

Running your business arrangements is not as simple as PAYE for salaried staff – you are still a business, which means ensuring you comply with all the accompanying red tape.

Registering as self-employed with HMRC

  • When you first start you need to register as self employed with the HM Revenue and Customs and arrange to pay Class 2 National Insurance contributions. You can do this on line by going to HMRC’s website or your accountant can do it for you.
    • If your projected net earnings are less than (£6,365 for 2019/20) consider obtaining exemption from Class 2.
    • If you are also employed and paying Class 1 National Insurance, consider obtaining deferment of Class 2 and 4 National Insurance contributions.

Keep appropriate records

  • Failing to keep records can attract a fine of up to £3,000 (and more if failure continues).
    • NASGP's LocumDeck includes a comprehensive free locum accounts package called Bookkeeper, completely free with NASGP membership.
    • Records do not need to be elaborate – a simple spreadsheet recording income and expenses, backed up by invoices and receipts may be all you need. Consider a separate bank account and credit card account just for business items, this will make it easier to collate the information.
    • If you intending to be a career locum rather than a temporary one, you may prefer to use bespoke software for your records that will also include your diary, invoicing and your pension forms.

Pensioning

  • Pension your income using forms Locum A and B via NASGP's fully automated LocumDeck, or do your own via the NHS pensions website. You must do this promptly each month – late claims are not permitted. Remember you can NOT pension your income if you route it through a limited company.
  • If you are tempted to use a limited company to save tax and national insurance, make sure you discuss the situation with a pensions specialist so that you fully understand what you are losing by dropping out of the NHS scheme. Remember the main saving for using a company is the national insurance (and if you are also employed, that might be a much smaller saving than you expected); whilst company profits are taxed at only 19% (2019), if you are a higher rate taxpayer, you’ll have to pay a further 32.5% (2019) of any dividends you take out.

Remember you can NOT pension your income into the NHS pension scheme if you route it through a limited company.

Tax deductible expenses

  • Looking at tax deductible expenses as a self employed person (company rules are different and are not covered here).
  • Keep a mileage log (done for you automatically through LocumDeck) – so that you can justify the business miles claimed. If you prefer you can just use the current approved Inland Revenue mileage rate of 45p for the first 10,000 business miles (and 25p per mile for any subsequent mileage), rather than having to total up all your individual car expenses.
  • keep an eye on telephone usage – splitting it between personal and business.

Recently we have seen examples of HMRC asking to see locum mileage logs and refusing claims without them. So please try to keep a mileage log of all practice related journeys. It is much easier to take out what turns out not to be deductible, than to try to recreate information that wasn’t retained in the first place.

A mileage log can be a notebook kept in the car; a spreadsheet or a phone app that calculates journeys that you can annotate.

What if you have not kept a log?

For home to GP surgeries, it is easy enough to ‘google’ journeys to find the mileage. Visits are much harder if you haven’t retained records. Some surgeries’ computer systems can produce a printout of visits by doctor, from which you can then work out the mileage. This might work for salaried doctors, but the practices are likely to be less enthusiastic hunting out the information for irregular locums.

Don’t forget to include other travel in the course of work – such as for training courses. If they are not local, that can be a noticeable amount. Salaried doctors will not be able to claim it themselves; they will need to try to get reimbursement from the practice.

If the pattern of work has not changed then a sample period might be sufficient but this is only likely to work for salaried doctors’ visits – and if HMRC want to do it by the book, it still may not be enough. Locum work is unlikely to ever be settled enough for a sample period of mileage log to be representative – so doctors in that position need to get into the habit of keeping a regular log.

Self-employed doctors may usually claim a mileage rate similar to salaried GPs, but if their turnover exceeds £81k (for 2014-15) they should claim a proportion of total car running costs.

Salaried GPs

As an employee, probably not; it's not usual practise in any employment to charge for mileage to and from work. However, there may be an allowance in your contract for use of your car for visits, or if your practice requires you to travel to certain meetings to represent the practice.

Locum GPs

If you're a locum GP then you can charge for mileage to and from your place of work and for visits too if you want to - some locums do, some don't. When you charge for mileage, it's not just the fuel you're charging for - think of the tax, insurance, oil, servicing bills, wear-and-tear, tyres and the time taken to physically get there etc. What you [successfully] charge is entirely up to your negotiations with your employing practice.

A decision on whether or not to charge depends on how much it's actually costing you vs both the hassle of working it all out plus the 'perceived pettiness' by the practices that may ultimately lead them to booking someone else.

See also

Locum GP claims will depend on the pattern of their work. If they are ‘itinerant workers’ – so that they work at different places from day-to-day with no discernible pattern, then it should be possible to argue that the main place of work is home – the base from which the business is run. This should make all journeys to surgeries allowable.

If however there is a pattern claims will be restricted. For example:

  • Dr L is a freelance locum. He has a number of regular jobs. He covers at surgery A on Mondays, does 2 days a week at surgery B and the 4th and 5th days are totally variable. It is likely that surgery A and surgery B become ‘workplaces’ so that home to each of those premises will be a personal journey. The 4th and 5th days should fall within the itinerant rules so that home to surgery will be deductible.

Sometimes the pattern will not be obvious in advance. A short spell of locum work may develop into something more regular (at this stage there is a risk that the locum is no longer freelance in respect of that placement and may need to become salaried, but that is beyond the scope of this article).

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Recently we have seen examples of HMRC asking to see locum mileage logs and refusing claims without them. So please try to keep a mileage log of all practice related journeys. It is much easier to take out what turns out not to be deductible, than to try to recreate information that wasn’t retained in the first place.

A mileage log can be a notebook kept in the car; a spreadsheet or a phone app that calculates journeys that you can annotate.

What if you have not kept a log?

For home to GP surgeries, it is easy enough to ‘google’ journeys to find the mileage. Visits are much harder if you haven’t retained records. Some surgeries’ computer systems can produce a printout of visits by doctor, from which you can then work out the mileage. This might work for salaried doctors, but the practices are likely to be less enthusiastic hunting out the information for irregular locums.

Don’t forget to include other travel in the course of work – such as for training courses. If they are not local, that can be a noticeable amount. Salaried doctors will not be able to claim it themselves; they will need to try to get reimbursement from the practice.

If the pattern of work has not changed then a sample period might be sufficient but this is only likely to work for salaried doctors’ visits – and if HMRC want to do it by the book, it still may not be enough. Locum work is unlikely to ever be settled enough for a sample period of mileage log to be representative – so doctors in that position need to get into the habit of keeping a regular log.

Self-employed doctors may usually claim a mileage rate similar to salaried GPs, but if their turnover exceeds £81k (for 2014-15) they should claim a proportion of total car running costs.

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Salaried GPs may claim for journeys undertaken wholly in the performance of their duties. Where the practice reimburses a doctor for visits (pretty rare!), then salaried GP mileage reimbursements up to 45p per mile (assuming less than 10k miles pa) are tax free. Payments in excess of that (sometimes seen in payments by hospital trusts) will be treated as taxable benefits and should be shown on form P11d at the end of the year, and must be recorded on the employment pages of the tax return.

If the practice reimburses less than 45p per mile, the difference can be claimed as an expense of employment. If there is no reimbursement at all, the then full 45p per mile can be claimed as an expense of employment. Where miles exceed 10k p.a. then the reimbursement rate drops to 25p.

The above rates relate to car travel; motorcycles can be reimbursed/claimed at 24p; cycles at 20p.

Allowable journeys for salaried doctors would include patient visits, meetings (necessary ones as part of the employment), and travel between different sites, but see the caveat below.

Home to work journeys are not allowable.

Additional mileage may be claimed in restricted circumstances such as:

  • Dr D is employed by multi-site practice A to work at surgery X. If Dr D is asked to work at surgery Y for a limited time (perhaps to cover a maternity leave), then temporary travel from home to another place of work for an intended period of less than 2 years will be treated as allowable.

Note on the other hand that if Dr E was employed on a temporary basis for the maternity leave mentioned above, home to work mileage would not be allowed because surgery Y would be his main (and indeed only) workplace.

Travel between sites cannot be claimed in the following circumstance:

  • Dr D is still employed by practice A at surgery X. He lives close to surgery Y and pops in each day on his way to work to pick up post. This does not make the journey between the two surgeries a business journey.
  • Dr D is still employed by practice A. He works Mondays and Tuesday at surgery X and Wednesday and Thursday at surgery Y. These are two separate places of employment and travel between them or from home to work for either of them is not deductible.

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Claiming for GP travel expenses

Locum GP claims will depend on the pattern of their work. If they are ‘itinerant workers’ – so that they work at different places from day-to-day with no discernible pattern, then it should be possible to argue that the main place of work is home – the base from which the business is run. This should make all journeys to surgeries allowable.

If however there is a pattern claims will be restricted. For example:

  • Dr L is a freelance locum. He has a number of regular jobs. He covers at surgery A on Mondays, does 2 days a week at surgery B and the 4th and 5th days are totally variable. It is likely that surgery A and surgery B become ‘workplaces’ so that home to each of those premises will be a personal journey. The 4th and 5th days should fall within the itinerant rules so that home to surgery will be deductible.

Sometimes the pattern will not be obvious in advance. A short spell of locum work may develop into something more regular (at this stage there is a risk that the locum is no longer freelance in respect of that placement and may need to become salaried, but that is beyond the scope of this article).

Salaried GPs may claim for journeys undertaken wholly in the performance of their duties. Where the practice reimburses a doctor for visits (pretty rare!), then salaried GP mileage reimbursements up to 45p per mile (assuming less than 10k miles pa) are tax free. Payments in excess of that (sometimes seen in payments by hospital trusts) will be treated as taxable benefits and should be shown on form P11d at the end of the year, and must be recorded on the employment pages of the tax return.

If the practice reimburses less than 45p per mile, the difference can be claimed as an expense of employment. If there is no reimbursement at all, the then full 45p per mile can be claimed as an expense of employment. Where miles exceed 10k p.a. then the reimbursement rate drops to 25p.

The above rates relate to car travel; motorcycles can be reimbursed/claimed at 24p; cycles at 20p.

Allowable journeys for salaried doctors would include patient visits, meetings (necessary ones as part of the employment), and travel between different sites, but see the caveat below.

Home to work journeys are not allowable.

Additional mileage may be claimed in restricted circumstances such as:

  • Dr D is employed by multi-site practice A to work at surgery X. If Dr D is asked to work at surgery Y for a limited time (perhaps to cover a maternity leave), then temporary travel from home to another place of work for an intended period of less than 2 years will be treated as allowable.

Note on the other hand that if Dr E was employed on a temporary basis for the maternity leave mentioned above, home to work mileage would not be allowed because surgery Y would be his main (and indeed only) workplace.

Travel between sites cannot be claimed in the following circumstance:

  • Dr D is still employed by practice A at surgery X. He lives close to surgery Y and pops in each day on his way to work to pick up post. This does not make the journey between the two surgeries a business journey.
  • Dr D is still employed by practice A. He works Mondays and Tuesday at surgery X and Wednesday and Thursday at surgery Y. These are two separate places of employment and travel between them or from home to work for either of them is not deductible.

NASGP member BD has raised this very important question, since NASGP's LocumDeck excludes travel costs from the Locum A pension calculation.

The NHSBSA, in its 2017 factsheet for GP locums, states:

Q. Are travel expenses, i.e. motor mileage allowance pensionable?

A. No. Deduct 10% of your gross pay first which accounts for expenses.

So is it just a plain fat 'no'? Does one include one's charges for travel as 'gross pay', or include it? And is NASGP correct in not including expenses i.e. travel costs/mileage in our automated Locum A forms within LocumDeck?

Our advice from Honey Barrett accountants (4th May 2017), and confirmed by their pension experts from the Association of Independent Specialist Medical Accountants, has confirmed NASGP's position by pinning down the actual legislation:

1995 regulations, schedule 2, regulation R1, paragraph 6(3):

"In the case of a locum practitioner, "pensionable earnings" means all fees and other payments made to the locum practitioner in respect of the provision of locum services (but excluding payments made to cover expenses or for overtime), less such expenses as are deductible in accordance with guidance laid down by the Secretary of State."

Honey Barrett conclude "...[pensionable earnings] excludes expenses, so just the locum fee x 90% (which is the allowance for expenses as stipulated by the Secretary of State)."

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Note that rules have changed in recent years on what is business mileage. If you are working at lots of different practices with no regularity, then you should still be able to argue that you are running your business from home and claim mileage from home to each surgery. However, if you are doing long term locums, or if you are regularly in a particular practice, then the argument is that the practice premises are your place of business so travelling to get there is not a business expense. Detailed mileage records should enable you to prove that what you are claiming is allowable.

Similarly keep an eye on telephone usage – splitting it between personal and business. If you can show how you have arrived at the apportionment, rather than just guessing, there should be no problem obtaining the tax deduction.

Use of home is harder to claim than it used to be. Keep a record of how many hours you work from home, so that your accountant can maximise the relief you claim.

Be organised

  • Save for tax as you go – don’t leave it until the payment is nearly due.
  • Provide your accountant with information promptly – the earlier you give it to them, the earlier that they can warn you accurately about tax liabilities.
  • Consider using a specialist accountant from day one – they will be able to set up your self employment with HMRC, provide you with checklists of expenses that you can claim, tell you how much tax to save and deal with all the set up work for you, so that you can spend your time earning money! Ask them for a fixed fee – to include phone calls – so that you can approach them when necessary without wondering what it will cost.
  • Provide your accountant with information promptly – the earlier you give it to them, the earlier that they can warn you accurately about tax liabilities.
  • Always be totally honest with your accountant. Money laundering rules mean that all accountants have a legal responsibility to report any tax evasion they suspect however small, or face criminal charges themselves. A good accountant will ensure that you always pay the minimum tax legally required.
  • Remember to ask for advice before acting rather than afterwards when it will be too late to change how something is done.
  • Some recent examples we have come across where a quick phone call would have saved large amounts of tax:
    • Buying a low emissions car the day after the rules changed, so the car no longer qualified as low emissions – so tax relief was hugely restricted.
    • Not understanding the allocation rules for shares: shares were sold and repurchased too close together to create the intended capital loss – so no tax relief, just the unnecessary costs of the transaction.

Finally remember that you are your business – if you do not work, no money comes in. Make sure that you have life cover, critical illness cover, sickness and accident insurance etc appropriate to your personal circumstances and needs.

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