The HMRC began an enquiry into the tax status of locums engaged in community pharmacy in 2019. In August 2023, the HMRC wrote to all affected community pharmacies setting out their intended approach to compliance enquiries for the tax years ending 6 April 2023 and prior years.
The HMRC review began before the Covid-19 pandemic. There has always been a possibility that the outcome would be that the HMRC would conclude that the way community pharmacy businesses engage locums could indicate they should be treated as employees for taxation purposes.
Throughout the HMRC investigation, the PDA has called upon employers to consider how their own behaviour would impact the assessment made by the HMRC. The PDA has encouraged those pharmacy businesses to ensure they treat locums as genuinely self-employed contractors. Instead over this period, employers and some locum agencies have chosen to exert more control over locums. For example by removing the ability to negotiate rates, which the PDA believes undermines their status as self-employed contractors.
The PDA also believes that the practice of the four NHS organisations across the UK to provide access to training, payments, and other resources primarily via community pharmacy businesses distorts the position of locums. A pharmacy contractor-led model reinforces the impression of a ‘master/servant’ relationship. The PDA continues to push for the locum population to be treated as separate, self-employed entities.
A recent Financial Times article has highlighted that the HMRC is currently in dispute with some major community pharmacy contractors after its enquiry concluded that locum pharmacists should be considered as employees for tax purposes.
Previous years
The taxation demand for previous years is being directed to community pharmacy businesses and each business will have a choice as to whether to continue challenging the employment status of the locum pharmacists or whether to settle the dispute. Community pharmacies who decide not to settle at this point can expect the current HMRC enquiries on the matter to continue.
The current tax year
HMRC have told the PDA that, “To determine status from 6 April 2023 onwards, we have advised the sector as we did in May/June of this year … they should continue to use our Employment Status Manual and Check Employment Status for Tax (CEST) tool.”
As tax returns are completed for the current year in the next few months, locums should ask their tax advisors what this means for their own tax affairs.
Looking forward
The HMRC have reached their conclusion based on the evidence of the established working relationships dictated by community pharmacy businesses. The employment status for tax as derived from the CEST tool will continue to reflect the genuine relationship between locums and community pharmacy businesses.
The PDA repeats the call to community pharmacy businesses to treat locums as self- employed suppliers in practice so that the actual relationship as seen by the HMRC will reflect a tax status of self-employed persons.
The PDA will update members as more information becomes available.
Related support from the PDA
- Claiming back the tax on your PDA membership
- PDA membership includes access to a 24-hour legal and tax advice helpline
Learn more
- HMRC to withdraw sector specific guidance on self-employed status
- Community pharmacy employers should consider how their behaviour influences HMRC decision on tax status of locums
- Government perform double U-turn on IR35
- PDA comment as large employers respond to HMRC investigation into tax status of locums
- Locums report being told to reduce agreed shift rates or be cancelled
- PDA urges locums to ensure they are ready for roll out of IR35 into private sector
- UK pharmacy operators hit out at HMRC tax probe into locum staff
- Check employment status for tax
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