My client is a doctor who works in a hospital. In the evening and weekend he has taken up “out of hours” locum work from the same NHS trust.
The out of hours locum work was contracted out to a third party by NHS and my client performed the services for that company, therefore he was indirectly working for the same trust. There is no formal contract of services between my client and the company who offered the work.
The salary is paid through PAYE while all other work is declared as income of the limited company.
The company is now under investigation and Inspector is adamant that locum work should be treated as his personal income instead of limited company’s income. The inspector has based his arguments on the fact that out of hours work is the continuation of the same service performed during the day time.
I do not think inspector is applying IR35 as he never mentioned about the employer’s NI liability or IR35. However by transferring the income to his personal return there will be additional tax (as he is a 40% tax payer) and NI.
As far I am aware even for those doctors who do have signed formal contract with a NHS trust the contract specifies their name instead of the company. The reason, as I am told, is the recognition of liability as the doctor remains liable irrespective of the legal structure.
Using limited company is a norm in the locum industry. In most cases the income is dividend out to spouse to avoid higher rate tax. In our case we are building up reserves in the company & will apply entrepreneur relief at some point.
I have also checked the solo forms submitted by the client to NHS for superannuation and my client didn’t claim the superannuation contribution from NHS which was available had he worked as self-employed or was on the PAYE.
My question is to which extent inspector is justified in his arguments and what would be our counter argument.