Becoming a Limited Company Locum Doctor

With the National Health Service (NHS) spending a 7.0% proportion on locum doctors in medical staff for ‘Accident and Emergency departments’, it comes as no surprise that more doctors are deciding to make the move from permanent employment to locum status.

But what are the benefits of making a move from permanent employment to locum? In SJD Accountancy’s 2019 contractor attitude survey, over 86% of our 1,000 responses said they enjoy the benefits of contracting to the extent that they are likely to remain in the contract for the foreseeable future.

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Our easy to read guide lists some of the benefits of becoming a locum doctor, expected rates of pay and answers to some basic tax questions.

Benefits of working as a locum doctor

There are many benefits to becoming a locum doctor that could make it a cost-effective and advantageous career move, some of which are listed below.

Locum doctor jobs offer higher rates of pay

In 2013, The Telegraph documented that the NHS spent over two billion pounds in a three year period on locum doctors, with some locum doctors being paid over £2,000 for a 24-hour shift.

While £2,000 per shift is a rarity, locum doctors can usually command higher rates of pay than if they were a permanent employee, sometimes double. This is because your client does not have to pay personal and employee tax (which they would be required to pay if you were permanent), offer company pension contributions or pay for your holiday or your sick pay. All of these factors mean that there is greater scope to negotiate your salary with your client.

Naturally, the amount you are paid will be based on your experience, education and the demand in your area. Below are some examples of current contracts to give you a clearer idea of the amount that you could earn as a locum doctor (based on 2014 availability).

Of course, these rates will be subject to tax and national insurance contributions. For a better idea of what you could take home as a locum doctor, visit our how much can I earn as a contractor page or visit our take-home pay calculator if you have a rate in mind.

Time to study

As a doctor, you never stop learning. With new medical treatments becoming available, being up-to-date with the latest advances in your field can be a challenge. The flexibility that locum work provides means that you have complete control over when you work, so you can plan your shifts around further studies and exams.

Excellent opportunity for retired doctors

The many benefits that locum work provides such as flexibility and generous rates of pay mean that many doctors decide to take up locum work when they have retired from their full-time position.

Medicine is a profession that is constantly evolving, which is one of the reasons why it is such an exciting career path. Just because you may want to take a step back from full-time work doesn’t mean that your passion for medicine has lessened. After spending so many years studying and training in a specific field, locum work provides many retired doctors with the chance to stay up-to-date with the most recent advances.

Consultant roles for those with extensive knowledge, experience and expertise are generally the most in-demand locum positions and well suited for retired doctors, whose wisdom can drive improvements where it is needed.

If you would like more information on the benefits of contracting you might find our guide to contracting useful.

Finding work as a locum doctor

The Health and Social Care Information Centre reported that on average the number of locum doctors working for the National Health Service (NHS) in 2014 was over 2,350 per month.

Along with the fact that recruitment agencies such as ID Medical provide the NHS with more than 3 million hours of work every year, there appears to be great demand for locum workers.

Working as a locum for the NHS

The NHS jobs website advertises approximately 20,000 vacancies every month, many of which are for locum doctors. This is a great first point of call when looking for your next role.

Registering with NHS Professionals (NHSP) is also a great place to start if you would like to work as a locum doctor for the NHS. NHSP is owned by the Secretary State for Health and aims at reducing the amount that is spent by the NHS on expensive agency staff by providing a bank of temporary locum staff to use as an alternative when needed.

Through the NHSP website, you can register as a locum doctor to work for the hospital trusts that are convenient for you.

Working as a locum for private hospitals

There are no specific regulations required to locum for a private hospital, although specialised doctors and consultants tend to be more in demand. To find locum work in private hospitals there are many recruitment agencies which advertise positions, such as:

  • Coyle Medical, who provide roles in private hospitals for qualified professionals that have worked in UK hospitals for at least two years. Positions are available at all levels from Junior House Officers to Consultants.
  • Merco has vacancies for short and long-term positions in private hospitals. The majority of the roles available are for Resident Medical Officers, Trauma Doctors and Consultants.
  • MedicsPro is a medical recruitment agency that supplies locum doctors, nurses and radiographers to private healthcare providers across the UK, as well as to the NHS.

Returning to work for the NHS?

In response to the coronavirus crisis, the NHS has asked up to 50,000 of doctors and nurses to return to the frontlines. If you have previously worked as a locum doctor or nurse within the last three years and are considering returning to work, you will be asked to register with a regulatory body.

In light of these numbers returning to the NHS, HMRC has published guidance as tax avoidance schemes are attempting to target medical workers returning to work.

What do these tax avoidance schemes look like?

In their Spotlight 54 guidance, HMRC outlined a number of features which these schemes seem to share:

  • the first payment is declared as earnings and will go through the umbrella company payroll, often at around National Minimum Wage levels or a flat rate payment for example, £100 per week
  • the second payment, that the umbrella company will claim is not taxable - this payment may be described as a loan, annuity, shares, a capital advance involving mutual, joint or co-ownership, or a payment derived from a revolving line of credit facility, or some other non-taxable form
  • The company might offer vague explanations about how the schemes work and claim that your take home pay could be up to 80-85%
  • The payslips may be misleading and show the first payment only or inaccurate deductions

How can I protect myself against tax avoidance schemes?

HMRC have also offered a number of ways to check if you’re being offered this scheme:

  • check how much tax you would normally have to pay on your income by using HMRC’s online tax calculator
  • ask the person who is offering you the arrangement for a breakdown of the deductions being made so you can see exactly what you’re paying
  • compare the figures to see if the scheme you have been offered is legitimate and compliant

If you’re thinking of working under an umbrella company, the easiest way to protect yourself is by using a compliant employment solution. As a founding member of APSCo and a board member of FCSA, SJD’s sister company, Parasol are regulated by the highest industry standards. This means that you will always be protected by a company who values compliance above all else.

Find out more about how the joining process works and what’s on offer with Parasol.

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Finding work as a locum GP

There are substantial opportunities for locum GPs to fill in for doctors on sick leave or on longer contracts to cover sabbatical or maternity leave.

Naturally, if you would like to work as a locum GP the best place to start is by contacting local medical centres and doctors’ surgeries to let them know that you are available. Specialist job boards such as GP Jobs may also be a useful place to begin.

Another way to find work as a locum GP would be to attend sessional GP groups for networking opportunities. These groups are usually regional and could also provide advice and information on industry knowledge and the latest industry news.

Specialist recruitment agencies

For help finding locum work in your area you may find the specialist recruitment agencies below useful:

Moving from permanent to locum - limited company or umbrella company?

As a locum doctor, you have the choice of working as director of your own limited company or through an umbrella company.

If you were to work through an umbrella company you would effectively be an employee of that company as they are responsible for taking the salary from your client and paying it on to you with all necessary tax and National Insurance deducted.

Working through a limited company is widely considered to be the most tax efficient way of working and allows greater opportunities for tax planning. Forming a limited company is a straightforward process, which is usually completed the same day. For more information please visit our limited company formation page.

The best way to work as a locum will vary depending on your contract, so it is a good idea to discuss your individual circumstances with a professional who can recommend the best option for you. Alternatively, read our guide to limited vs umbrella.

As a limited company locum doctor, you are entitled to claim business costs such as travel, uniform, textbooks and equipment for example stethoscopes as expenses. For more information on what costs are classed as an expense and the process involved in claiming expenses take a look at our contractor’s guide to expenses.

We find that many of our clients choose to work through their own limited company because they can add cover to ensure their business through professional indemnity insurance.

Locum doctors who are contracting for the NHS are usually covered by the NHS indemnity cover. However, this cover does not necessarily extend to locums working in a private hospital or in general practice. Due to the nature of working as a doctor, it is important to ensure that you do not put yourself at risk and consider taking cover if it is not provided. Visit our insurance page for more information on what cover you may need as a locum.

Does IR35 apply to a locum doctor working through a limited company?

IR35 is a legislation introduced by HMRC to tackle ‘disguised employment’. This is to prevent those working on a contractor basis receiving the same benefits that full-time employees do.

Like all other contractors, freelancers, consultants and interims, if you are planning to work through your own limited company then you will need to confirm whether your contract is classed as ‘inside’ or ‘outside’ of IR35.

When working ‘outside’ IR35 you will receive the full benefits and rewards when working as a legitimate limited company contractor. If your contract is deemed ‘inside’ IR35, then you will be limited to the benefits you receive as a contractor and be required to pay full tax and National Insurance – visit our guide to IR35 for more information.

If you are unsure whether your contract falls inside or outside IR35, why not take advantage of our IR35 contract review service?

Do I need to charge VAT for my services?

It is probably best to speak to an accountant about your individual situation, but as a general rule locum doctors are not required to charge VAT for their services. This means that you cannot register for the Flat Rate VAT Scheme and so there will be less paperwork for you to complete.

HMRC state that health professionals are not required to charge VAT when they meet the following two conditions:

  • They are providing a service that they are registered to practice.
  • The primary purpose of the service that they provide is the ‘protection, maintenance or restoration of the health of the person concerned’.

This is, of course, a rule of thumb and we would always recommend seeking professional advice.

Do I need an accountant?

When you start working as a locum doctor you may wish to appoint an accountant to support you with all your taxation requirements. An accountant will guide you through the process of forming a limited company; year end accounts and advice on what expenses you are entitled to claim.

SJD Accountancy is an award-winning, specialist contractor accountancy firm. We currently have over 15,000 contractor clients on our books including a number of locum doctors. We offer a fixed fee, the all-inclusive accountancy package, which includes unlimited access to your own dedicated accountant. Our accountancy package also includes assistance when dealing with HMRC, tax deadline reminders and dividend administration.

For more information about the services that SJD Accountancy provides, please visit our services page.

We hope you have found our becoming a locum doctor guide useful. For more information, you may find our accountants for locums guide useful.

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