COVID-19 VACCINATIONS: If, in addition to indemnity for your main employment, you would like cover for delivering COVID-19 Vaccinations please apply for our standalone extension Apply Today

Website maintenance The PDA website will be unavailable during a 1 hour window due to scheduled maintenance between 00:00am and 06:00am on the Tuesday 27th of February 2024

Home  »   Latest News   »   Community pharmacy employers should consider how their behaviour influences HMRC decision on tax status of locums

Community pharmacy employers should consider how their behaviour influences HMRC decision on tax status of locums

Since before the pandemic, HMRC has been examining the engagement of locums in community pharmacy and are moving towards a decision on their tax status.

Thu 10th November 2022 The PDA

His Majesty’s Revenue and Customs (HMRC) is moving towards a conclusion of its lengthy review of the tax arrangements for locums in community pharmacy. If HMRC decides that locums should be treated as self-employed for tax purposes, nothing major should change. However, if a decision is announced that locums should be taxed as if they were employed, it could present community pharmacy businesses with a backdated claim for tax. This could amount to possibly half a billion pounds and add a tax obligation of many millions of pounds more per year going forward.

HMRC has been examining how locums engage with community pharmacy businesses in order to judge whether this should be considered an employed or a self-employed relationship, according to tax rules. HMRC does not rely on the terms of the ‘self-employed’ contract but evaluates the reality of the contractual relationship between the parties. There are legal factors that dictate the true relationship, which will show whether it is one of employment or self-employment. HMRC will go through the terms in detail to establish this.

If the outcome is that locums are to be taxed as if they are employed, then the PDA believes there are three principal ways in which community pharmacy businesses may respond:

Accept and pay

The first response is to pay what is demanded. Neither citizens nor corporations can simply decide whether or not to pay the taxes requested by HMRC. So, the default position is that any tax must be paid, including backdated obligations.

For locums, this would mean that tax would be deducted before payment by the employer. If this means the locum has a higher tax burden than when they were treated as self-employed, then their post-tax (net) earnings would be reduced, unless they are able to negotiate higher rates.

That will have significant consequences. One employer body, the Company Chemists’ Association, which speaks for eight of the largest chains of community pharmacy businesses, has already been reported as saying that they believe this would cause patients to suffer and pharmacies to close down. To read the media report, click here.

Consequently, some locums may re-examine their relationship with certain employers and conclude that they should not only be treated as employed for tax purposes, but they should also be entitled to the benefits of employment. The situation will depend on each individual set of circumstances and PDA members should contact the PDA Service Centre if they believe this may apply to them.

Regardless of how each locum pharmacist presents themselves, the reality of the relationship, whether employed or self-employed, is subject to the ‘multiple test’ that is set out below. Employment tribunals will examine the contract on a case-by-case basis on each occasion. If found to be employed, then there will be entitlement to sick pay, holiday, and other contractual rights, but also an obligation to pay income tax and NI as an employee.

Challenge the application of the rules/get the rules changed

Disputing the decision is the second major way in which businesses may choose to respond. Businesses may believe that tax regulations have been applied wrongly and try to challenge the HMRC decision.

Businesses may also try to lobby the government to change the tax rules or request a special dispensation to community pharmacy businesses. This would mean asking for the sector to be treated differently from other parts of the economy.

Several of the major community pharmacy employers have been trying to influence the outcome of the review for some time, including by engaging top tax experts to support their case. If, despite those efforts, it’s nevertheless decided that locums should be treated as employees for tax purposes, it would suggest that successfully challenging the rules would be very difficult.

The PDA believes this would likely be an even more challenging argument to win, given the government’s current economic pressures and their need to urgently increase tax income.

Changing employer behaviour

The final major option for how employers may respond to an HMRC decision is to reflect on their own behaviour. By changing their behaviour, they might also change the situation. Of the three major options, this is the one which is almost entirely within the power of the employers themselves, as it does not require HMRC to change their position.

For example, one of the factors considered by HMRC is a pharmacist’s right to substitution. The right to substitution means that if a locum is engaged to provide services, they do not have to undertake the duties personally and could send an alternative pharmacist to do the work instead. The business would still pay the locum, who would pay the alternative as necessary. Community pharmacy businesses generally do not allow this in practice, and so it is one of the business behaviours that could have influenced HMRC to determine that locums are employed.

Self-employed suppliers can also genuinely negotiate rates, but some community pharmacies advertise shifts with predetermined rates or rate caps, indicating a ‘master/servant’ relationship, which is more likely to indicate employment than self-employment. This is another practice which could make HMRC more likely to conclude that locums are employed.

These are just two examples. If community pharmacy businesses have imposed these controls, despite them saying they prefer the idea of locums being self-employed workers, then they are more likely to influenced HMRC to decide that an ‘employed’ status is more appropriate.


The PDA will be observing the reaction of employers to any HMRC decision. The PDA will support pharmacists, whether employed or locum, to understand and exercise their rights accordingly.


Employment status, the ‘multiple test’

The rules for establishing employment status starts with the 3-point test (known as the ‘multiple test’). This is as follows:

1. Personal service – did the worker agree to provide his or her own work and skill in return for payment?

2. Control – did the worker agree, expressly or impliedly, to be subject to a sufficient degree of control for the relationship to be one of master and servant?

3. Contract of service – were the other provisions of the contract consistent with it being a contract of service?

A written agreement is not decisive and the relative bargaining powers should be taken into account to see if the agreement is a sham. The statutory and not contractual interpretation of the agreement must be the starting point to decide if the relationship is one of subordination and dependence.

For any locum pharmacist, the degree of control will always be in place due to the nature of the work. However, there are elements that may show self-employment: such as no requirement for personal service and a clear right to substitute (which, as previously stated, pharmacy businesses resist) and being set up as a business and having other clients.

On the other hand, if someone works consistently 5 days a week for one employer, they are likely to be an employee. Similarly, if someone works for 2 days a week at one pharmacy and 3 for another, they could be classed as an employee of both pharmacies. It all comes down to the multiple test and the specific details of each case.

For PDA members who are not sure about their status, the PDA has a multiple test questionnaire. When completed, the questionnaire will allow the legal team to provide advice upon the likely relationship status with a pharmacy. Pharmacists will then be able to discuss their tax position with their accountant and decide how they wish to conduct their business going forward. If the relationship has been one similar to an employee, the PDA legal team will also be able to advise on potential tax obligations.

For advice, contact the PDA Service Centre.

PDA membership is tax deductible

On the subject of taxation, the PDA would like to remind pharmacists that PDA membership is a tax-deductible expenditure for all members. Find out more here.

Learn more

Not yet a PDA member?

If you have not yet joined the PDA, we encourage you to join today and ask your colleagues to do the same.

Membership is FREE to pharmacy students, trainee pharmacists and for the first three months of being newly qualified.


Read about our key member benefits here.





The Pharmacists' Defence Association is a company limited by guarantee. Registered in England; Company No 4746656.

The Pharmacists' Defence Association is an appointed representative in respect of insurance mediation activities only of
The Pharmacy Insurance Agency Limited which is registered in England and Wales under company number 2591975
and is authorised and regulated by the Financial Conduct Authority (Register No 307063)

The PDA Union is recognised by the Certification Officer as an independent trade union.

Cookie Use

This website uses cookies to help us provide the best user experience. If you continue browsing you are giving your consent to our use of cookies.

General Guidance Resources Surveys PDA Campaigns Regulations Locums Indemnity Arrangements Pre-Regs & Students FAQs Coronavirus (COVID-19)