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IR35 for locum healthcare professionals
Plain-English guide to the off-payroll working rules for UK locum doctors, pharmacists, nurses and allied health.
Important
This is general information, not tax advice. IR35 status is fact-specific and depends on the written contract and the working reality. Get a written contract review from an IR35 specialist before accepting any engagement where the status is unclear.
What IR35 is, in one paragraph
IR35 is the shorthand for the off-payroll working rules in UK tax law. It applies when someone works through an intermediary (usually a personal service company, PSC) but would, looking at the reality of the engagement, be treated as an employee of the end client if the intermediary didn't exist. When the rules bite, the end client (or fee-payer) must deduct PAYE and National Insurance from the invoice as if the worker were an employee, stripping out the tax advantages of operating through a company.
Who the rules affect
- Sole-trader locums (most locum GPs, pharmacists, and many nurses): IR35 does not apply. You pay income tax and Class 4 NI on profit; HMRC may challenge you on general employment-status grounds but not under IR35.
- Limited-company locums working for medium or large end clients (NHS trusts, big private hospital groups, large pharmacy chains): the end client issues a status determination statement (SDS) that places you inside or outside. Inside = PAYE on the invoice.
- Limited-company locums working for small end clients (most individual GP practices, many small private clinics): responsibility stays with your own company. You decide your own status and deal with HMRC directly if challenged.
- Umbrella-company locums: the umbrella handles PAYE as standard. IR35 is not the live issue; your take-home depends on the umbrella's deductions and fees.
The three main status tests
HMRC and tribunals weigh three factors most heavily when deciding employment status:
- Control: who decides how, when, and where the work happens? A locum who picks their own sessions, brings their own equipment, and isn't supervised looks self-employed. A locum slotted into a rota and supervised looks employed.
- Mutuality of obligation: is the client obliged to offer work and the worker obliged to accept? Genuine self-employment has neither obligation beyond the current booking. An expectation of ongoing work on the same terms points toward employment.
- Personal service: can the worker send a competent substitute if they can't make a session? A genuine right of substitution, used at least occasionally, strongly supports outside-IR35 status. Healthcare often makes this tricky in practice, but the contract should still include the right.
What to do before accepting a booking
- Ask the end client for their size classification. Small, medium, or large. Under the Companies Act thresholds. Small = your own determination; medium/large = their SDS.
- If inside IR35 or if they refuse to say, get a specialist contract review. Budget £250–£500 per contract. It pays for itself on a single engagement.
- For long-running arrangements, review annually even if nothing has changed on paper. The working reality drifts over time.
- Keep written evidence of substitution rights, session-by-session pricing, and control over how you work. Emails matter if HMRC ever asks.
Frequently asked questions
Does IR35 apply to self-employed locums invoicing as sole traders?
No. The off-payroll working rules (commonly called IR35) only apply when an individual works through an intermediary. Typically a personal service company (PSC) or, less often, a partnership. A self-employed locum GP or pharmacist invoicing a practice or pharmacy directly as a sole trader falls outside the rules entirely. HMRC may still look at employment status under the general "employed vs self-employed" tests, but that is a different regime.
What changed in April 2021?
Responsibility for determining employment status for tax shifted from the worker’s limited company to the end client, when the end client is a medium or large organisation. All NHS trusts, most NHS practices, and large private hospitals are in scope. That means the trust or practice decides whether you are "inside IR35" and, if so, must deduct PAYE and NI as if you were an employee before paying your company.
Inside vs outside IR35. What is the practical difference?
Outside IR35: the engagement is treated as a genuine business-to-business contract. The worker pays corporation tax on company profits, can draw a low salary plus dividends, and retains control over tax planning. Inside IR35: the end client (or fee-payer) deducts PAYE and employee NI from the worker’s invoice before paying the company. The worker keeps the company for admin purposes but loses most of the tax efficiency of operating through a PSC.
What factors make a locum engagement inside IR35?
The main tests are control, mutuality of obligation, and personal service (right of substitution). If the practice dictates how, where and when you work; if you must accept offered sessions; and if you must do the work personally without the right to send a substitute. Those point to inside IR35. If you set your own days, bring your own equipment, invoice per session, and have a contract that permits substitution, those point to outside.
Is a locum GP through a primary care practice inside or outside IR35?
Most single-session locum GP work at GP practices is outside IR35 when the GP works as a sole trader. When working through a limited company into an NHS-contracted practice or PCN, the practice is usually a "small company" for IR35 purposes (below two of: £10.2m turnover, £5.1m balance sheet, 50 employees), meaning responsibility remains with the GP’s own company. However, larger GP federations and out-of-hours providers may be medium-sized, pushing the determination to them. Always check the status determination statement (SDS) you receive.
How does IR35 affect agency locums?
If you work through an agency that pays you through an umbrella company, PAYE is already deducted; IR35 is not the relevant regime. If the agency pays your limited company, the end-client (trust/practice) still issues the SDS, and the agency acts as the "fee-payer" responsible for deductions when inside. Always ask for the SDS before accepting the booking.
What do I do if I disagree with an inside-IR35 determination?
You have a statutory right to appeal. Write to the end client within 45 days of receiving the SDS, setting out which factors you dispute (control, mutuality, substitution). They must respond within 45 days with a reasoned decision. If unresolved, you can take the dispute through HMRC’s check employment status for tax (CEST) tool, a contract review with an IR35 specialist, or ultimately a tax tribunal.
Does IR35 apply to locum nurses and allied health professionals?
Yes, on the same basis as doctors and pharmacists. The rules are profession-neutral. What matters is whether you work through an intermediary and whether the end client is a medium/large organisation. Most bank nursing goes through umbrella or agency PAYE, so IR35 rarely bites. Locum physiotherapists, occupational therapists and psychologists operating through limited companies into NHS trusts face the same SDS process as doctors.
Should I form a limited company as a locum?
It depends. If you earn above roughly £60,000 gross, are mostly outside IR35 in practice, and can leave profits in the company for tax-efficient future drawdown, a limited company can save tax. If most of your work is inside IR35, or your earnings are modest, the sole-trader route is usually simpler and the PSC overhead isn’t worth it. Talk to a medical-specialist accountant before deciding.