NHS Locum Contractor Wins Partial IR35 Tax Case
An IR35 ruling on a case involving a urologist who worked for two different hospitals could have important consequences for medics operating as locums and NHS off-payroll working rules more generally.
In the tax tribunal case between a locum urologist and HMRC, a judge ruled that one of the contractor’s hospital contracts was inside IR35, while off-payroll working rules did not apply in the other.
HMRC guidance suggests that NHS locums should be considered inside IR35 by default and, following changes to off-payroll working rules in the public sector in 2017, suggested that blanket IR35 determinations were being used in the NHS.
Although the urologist in this case was only half successful in his fight against HMRC, the case clearly shows that there is a way for locums to legitimately contract outside the off-payroll working rules.
In the case, the tribunal judge had to look at some definitive features of the urologist’s contracts and decide whether they amounted to an employer-employee relationship or a genuinely self-employed contract.
In many ways, the locums work at Royal Berkshire Hospital (RBH) and Medway Maritime Hospital (MMH) was similar.
In each, there was almost no direct oversight of his work, he did not report to anyone on a daily basis and there was no indication that he was directly supervised or subject to control over how to perform any part of his work.
If the case was judged on these facts alone, then the judge would have likely ruled that he was a genuine contractor and so would have been outside of IR35.
But there were some key differences between the engagements that meant his RBH engagement was inside IR35 and his work with MMH was ruled out.
First, because there was no formal contract with RBH, it was determined that the locum was required to provide services personally to the hospital. The contract between the urologist and MMH, meanwhile, did contain a valid substitution clause that meant that somebody else could fill in to work, providing they met hospital criteria.
The MMH contract also contained a one-day notice period, which, the judge said ‘does not point to employment’. With RBH, the tribunal found that at least one week’s notice would realistically have been required to terminate the engagement.
Perhaps most significantly, the tribunal also considered the ‘mutuality of obligation’ (MOO) in both engagements.
In the RBH case, the tribunal found that there was a sufficient degree of MOO because they concluded that the hospital would have been expected to try to provide 10 half-day sessions of work per week. In the other case, the hospital bore no such obligation, which pointed away from employment.
Miles Grady, Director of , said: “This case provides an almost unique opportunity to compare two similar engagements with different IR35 outcomes. We can see that a few differences in key areas have swayed the judgements in one way and the other.
“Anyone contracting as a locum or in the NHS more generally should study this ruling before they take on a new engagement and argue for written contractual terms that put them outside of IR35. This can be difficult in controlled settings like medicine, but this tribunal shows that it is possible.”
Want to learn more about IR35 and how you can avoid the rules? Speak to a member of the team today. Call: 0800 121 6513.