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Markel Tax

23 May 2018

Check of locums employment status letters

We are currently representing a number of locums whose employment status has been challenged by HMRC. Letters headed, ‘Employment Status’ are being sent to both engagers of locums and the locums themselves.

These letters are being issued under the guise of HMRC’s 'One to Many Approach' where HMRC decides to send one standard message to a particular group of taxpayers to influence their behaviour and presumably prompt them to check with their advisors that they are tax compliant. 

The letters are asking the locum/engager to contact HMRC in order to arrange a meeting with one of their officers to discuss the engagement in order that HMRC may reach a decision regarding the employment status of the locum. The letters make clear this is not a statutory check of the individual’s Self-Assessment Return. We believe that the purpose of these letters is to bring more locums within the PAYE regulations which appears to be a policy decision from the Treasury. 

The danger of the ‘one size fits all’ approach is that it will potentially exert pressure on engagers of locums to treat self-employed individuals as employees. It is essential that engagers and locums, on receipt of one of these letters, take a considered approach and seek specialist advise to ensure that each case is judged on its own merits and circumstances.  

Additionally, if it is decided that the locum’s status should be changed, consideration should be given as to whether there is a danger that HMRC may seize the opportunity to undertake a formal review for earlier years, the argument being that if the terms and conditions of an engagement are unchanged, then the status of the locum has been incorrect in prior years also.

This could lead to engagers being exposed to significant tax liabilities for PAYE/NIC, interest and tax-geared penalties and locums potentially losing income as well as the freedom and independence that is associated with being a self-employed locum.

It is important to recognise that the letter is a form of intervention and is not a formal request, issued using any statutory legislation and as such compliance with the request is on a voluntary basis. There is no reference to what specific action, if any, will be taken should the locum/engager decide there is no need to take any further action. 

In our view, any decision to change a locum’s status should be carefully considered because of the implications for the past, the present and the future. On a positive note, the letter could be considered a warning to check tax compliance. 

We believe that it is vital for locums/engagers and their advisors to consider carefully all aspects of the engagement between the engager and locum. We always advise that businesses check that the written contractual terms accurately reflect the day to day working reality. The next step is to check this information against the status tests.  

We specialise in assisting businesses that either wish to check the status of their self-employed individuals or who are under investigation. We have a proven track record of successfully resolving disputes and have built up a wealth of experience in this specialist area.  

We are experienced tax professionals that specialise in PAYE and status matters and have regular involvement in drafting and reviewing status contracts. As such, they are uniquely placed to assist engagers, locums and their advisors with a view to minimising the risks of further unwanted HMRC attention and giving peace of mind and support to those locums/engagers in receipt of these letters.

For further information on how we can assist you with issues surrounding tax status, so please call on 0345 223 2727.
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23 May 2018

HMRC tackling National Minimum Wage

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