Beware of unforeseen financial impacts on NHS pension, national insurance and tax, specialist medical accountant Liz Densley advises on how overtime affects GP locums and salaried GPs doing overtime or additional sessions.
GP locum doing more sessions for a particular practice
If you start to do more and/or regular sessions for a practice, there will come a time when HMRC will not accept that you are freelance and will suggest that you are employed by the practice. This can happen when you are not standing in for a missing doctor, but are just an extra pair of hands, or where the practice names you on their website or practice publications as being part of the practice, or where patients start to treat you as ‘their’ doctor.
There used to be a pensions rule whereby you were deemed employed after a specific period, but this does not apply now. However, pensions will need to follow the tax treatment.
If you become employed ‘accidentally’ in the above situation, you would pay PAYE tax on the income and suffer NIC as an employee (with the practice paying employer’s contributions), so would likely end up with less after deductions than if you were still self employed on that source (but not always – as it would depend on your overall income position). From a pension point of view 100% would be pensionable rather than 90% as a locum.
In each of these cases, the risk of getting it wrong falls more on the practice than on the individual doing the work – and they are likely to want to protect themselves, so will err on the side of caution. That being said, ensure you understand your own position and how you are affected – and if you need help to do that, then contact a specialist accountant – it could save you time and money.
We often come across salaried GPs and partners who work additional hours at their own practices and want to treat them as locum income – either as self-employment or through a company.
Salaried GPs working additional sessions at their salaried practice
If a salaried doctor does additional work for their practice it would be very hard to argue from an HMRC point of view that it is not overtime. To treat it as self-employed would put the practice at risk of breaching PAYE rules and could give rise to penalties.
There could very occasionally be work done that is not the same as the usual job, where the practice doesn’t exercise any control over the work, that might be arguable that it is a separate self-employment, but it’s probably normally not worth the cost of an argument with HMRC.
For pension purposes if the extra time takes you over full-time hours, the excess won’t be pensionable – otherwise, if you’re in the scheme, it will be. So most commonly, tax, national insurance and pension will all be deducted at source for a salaried doctor working locum sessions at their own practice. There is theoretical scope within the pension rules to pension this extra income as locum work – but you need to pass the self-employed tax rules first.
So far as a limited company is concerned, it would be really difficult to argue the IR35 (anti avoidance) legislation doesn’t apply – so the practice would need to make deductions as if you were an employee before paying invoices to your company – which would negate the benefit of using a company, not to mention increasing the professional fees for dealing with the company. You cannot pension any income paid to a limited company through the NHS pension scheme.
Only if you were doing something completely different and running it as a business providing that service to lots of different people might that work. If for example you did one session of business management and your company provided that service to lots of practices, and you were not in any way controlled by the practice, you might be able to argue it. But it’s not likely to happen in practice. Again, you couldn’t pension this income through the NHS scheme. (The tax/NIC consequences of using a limited company are beyond the scope of this brief article).
GP partners doing additional sessions
This will not be a separate self-employment – it will be an increase in partnership share. So, for tax and NIC purposes it will have exactly the same effect as earning more profit – because a partnership share is effectively taxed in the same way as a self-employment. The practice accounts will need to show a ‘pre-share’ or ‘prior share’ of profits credited to the doctor who has done the additional work – and this will then reduce the pool of profits available to the rest of the partners (so exactly the same situation for them as if they had paid an external locum).
Contrast this to pensionable out-of-hours sessions done outside the practice. This is not (normally) part of the practice’s business, so it is perfectly acceptable for this to be treated as a self-employment – in which case it will be pensioned under the GP SOLO regime. Equally it is perfectly acceptable to put it through the practice accounts and treat it as a prior share of profits. It will come out to the same overall.
From a practice point of view and nothing to do with tax or pensions, the main benefit of the Partnership Agreement insisting on putting out-of-hours and any other outside work through the practice is to have some sort of control over the level of stress that a partner is putting themselves under. That will open a conversation if the other partners feel someone is unable to perform their partner duties efficiently because they are too exhausted from outside work. It can also stop partners ‘cherry-picking’ lucrative outside appointments to the detriment of the practice.
If tax is saved within the practice for the full personal tax liability, do not draw the full amount earned or you will have to pay the tax back in at the end of the year.
For NHS pensions purposes, partners are explicitly forbidden from using Locum A/B forms to pension their extra internal locum hours. The income will be pensioned within the total practice income via the annual Pension certificate. Remember that if you draw the full amount of the fee, you will potentially need to pay the pension element back to the practice as they will have to pay over the pension contributions on it.
Some partners want to put extra sessions through a limited company. Where this is part of the normal work – just extra hours, it would be difficult to argue that the company is properly contracting for the work. There is some justification if it is to provide a separate service that isn’t provided within the practice – running a travel clinic for example (although not a good example in the current climate). Anything put through a company of course is not pensionable in the NHS scheme.
