Incorporating locum work

– The questions you want, answered.

Ireland is an attractive country for medical professionals, not only because of the easily sought roles in a wide range of medical institutions, but also the high professional standards and use of the English language. Working as a locum doctor, pharmacist or nurse in Ireland is particularly rewarding, and if you are a specialist even more so.

Saying that, all doctors who wish to practice in Ireland must be registered with the Irish Medical Council. To check if you are eligible for registration, please visit the IMC website and check it here.

When it comes to taxation, Revenue continues to focus on the issues around employed and self-employed work across a multiplicity of sectors. This work is carried out in conjunction with the Department of Social Protection and the Workplace Relations Commission (as appropriate).

Incorporation of Locum Practices

In recent years, Revenue has paid significant attention to Medical Consultants and, in particular, to those who have incorporated their business. The systematic review, dubbed the “Medical Consultants Project”, began in 2013 and has yielded significant tax settlements over the years.
These days, a number of locums now operate through a limited company. Typically, in these cases, the intermediary (locum company) enters into a contract which sees them supply the services of the individual locum. This contract can be either directly with you (the locum worker) or via an agency. Revenue has carried out reviews on a number of these companies and has identified issues in the following areas:-

Travel

In order for travel expenses to be reimbursed to the employee tax-free, they must be incurred wholly, exclusively and “necessarily” in the performance of the duties of that employment.
This means that travelling from your home to work/the office does not count. In most cases, the normal place of work of an employee/director of an intermediary (locum company) will be the premises of the intermediary’s client, for example, a hospital or office. Obviously, when Revenue audits entities that provide locum services, those companies are failing to treat the reimbursement on some travel expenses as a Benefit in Kind and, therefore, are liable to income tax.

Expenses

Another area that Revenue has focused on is in relation to expenses which they consider not to be deductible for corporation tax purposes but have been claimed by taxpayers as a deduction nonetheless. Ask yourself prior to taking a deduction for any expense whether that expense was “wholly and exclusively incurred for the purposes of the trade” in order to deduce whether it is deemed worthy of an expense. Section 886 of the TCA 1997 obliges a taxpayer to maintain certain records in relation to a business, including records of “all sums of money received and expended in the course of the carrying on or exercising of a trade, profession or other activity”. These matters, among others, are causing problems for taxpayers and this really shouldn’t be the case.

Family Wages

Revenue has also pinpointed wages paid to family members as an issue. As part of their audits, Revenue has come across situations whereby a salary was paid to a family member who was not actually providing any service to the company or, if they were working there, an excessive salary was being paid, not in keeping with the services being provided. On these occasions, Revenue has indicated that the salary, or a proportion thereof, will not be deductible for corporation tax purposes.
Tax and Duty Manual Part 04-06-23 provides further guidance and examples in relation to the payment of wages to family members.

VAT

The provision of staff by an intermediary is an activity liable to VAT. VAT should be charged at 23% on turnover once the turnover exceeds or is expected to exceed the relevant annual threshold.

The questions you want, answered..

Q1. What is the tax treatment of payments to a ‘locum’?

Whether or not an individual is described, correctly or otherwise, as a locum is not the deciding factor. The deciding factor is whether, in relation to an engagement, the individual is engaged under either –

a) contract of service [i.e., an employee]; or b) contract for service [i.e., self-employed]

If they are an employee, then his or her remuneration from that engagement is subject to deductions at source under the PAYE system.

Q2. I own a pharmacy and have engaged a ‘locum’ pharmacist to work for me. What is the correct tax treatment of the payments I make to the locum?

Once again, whether or not an individual is described, correctly or otherwise, as a locum is not the deciding factor. Based on Revenue’s experience to date in such cases, its view is that such ‘‘locum” pharmacists are engaged under a contract of service (i.e. they are employees) and the remuneration from such an engagement is subject to deductions at source under the PAYE system.

We at Fitzgerald Power have spent thirty years offering creative solutions to a diverse range of clients across Ireland, and the UK, and we’re pretty proud of what we’ve helped our clients to achieve. We enable and empower businesses to reach any and every goal. Whatever the job, we don’t offer anything less than the best. We work across a range of sectors, including pharmacy, food & beverage, SME and retail. Please get in touch today if you would like to speak to any of our experts.

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