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Letters to the Editor
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Locum pharmacy
Signing standard operating procedures could affect locums’ pockets
From Mr A. Matalia, MRPharmS
In response to Peter
Bremner’s letter (PJ, 21 April, p458), signing
standard operating procedures may well compromise a locum’s deemed
employment status and could increase his or her tax liability. One needs
to consider tax legislation known as IR35. This is a mechanism by which
HM Revenue & Customs (HMRC) closed a loophole that enabled many contractors
and freelance professionals (particularly in IT) to avoid paying large
amounts of tax and national insurance.
Before IR35, such workers would use personal service companies, partnerships
and composite companies (referred to as “intermediaries”) to
reduce their tax and national insurance contribution liabilities. Some
companies invoice on behalf of locums for a 5 per cent cut of their income.
Locums become employees of the umbrella company and, as well as paying
less national insurance, can take advantage of “unreceipted dispensations”,
enabling them to claim food expenses of around £6,000 a year (in
addition to mileage expenses and other expenses), which means they do not
pay tax on £6,000 of their income.
In addition, workers who owned their own companies were allowed to receive
payments from clients direct to the company. Company profits could be distributed
as dividends, which are not subject to national insurance contributions.
Workers could also save tax by splitting ownership of the company with
family members in order to place income in lower tax bands.
IR35 deemed that, if an intermediary was used and the employment relationship
between the worker and his client would have normally been direct employment,
the worker would be classed as a deemed employee of the business for tax
purposes and should pay tax and national insurance like any other employee.
There have been battles between contractors and HMRC over what constitutes
a real business. Vital aspects have been mutuality of obligation, control
of the worker and substitution (where the locum can send someone else to
do a job in his place). By signing an SOP one could argue that a pharmacist
agrees to work in a particular manner. This could be construed as control
and render the locum an employee.
Besides, why should a locum have to sign an SOP? If someone requests he
read it, he may well do so. Is a pharmacist’s word that the SOP has
been read not good enough? Is he not supposed to be a “professional”?
To protect their self-employed status locums should never agree to comply
with SOPs or sign a statement that they have read them.
Some believe that locum pharmacists should be deemed employees: they cannot,
generally, determine hours of work and they seldom use their own tools.
If they have a genuine right of substitution, is it ever invoked? Is the
way locums work different to employed pharmacists? What are the distinguishing
factors? I have read arguments that locums should only dispense and provide
professional advice — they should not cash-up, prepare end of month
paperwork or replenish stock for these are activities of employees.
In reality, locums tend to work to the protocols of each pharmacy they
visit. Thus, they submit to an element of control and HMRC could, under
IR35, argue they are deemed employees for tax purposes. A locum should
take professional advice before signing an SOP.
A. Matalia
Coventry |
The
Pharmaceutical Journal