Discussion
Hey guys,
Just thought I would post this here before I sought some "professional" advice. I'll become a fully qualified GP in a few months time and just thinking about the next step in my career. Like most of my peers; I just want to locum around for a bit at various GP practices here and there throughout Scotland and North of England. It gives me the freedom rather than being tied down into a partnership etc... so early in my career (plus I can see what areas I want to work in the future.) These locums shifts may be longterm locums (weeks to months) or just a day here or there.
Most doctors are not the most financially-minded individuals and what happens is that the GP surgery pays the doctor personally into his/her bank account. Doctor then ofcourse has to submit taxes and things every year.
However, I've been thinking would it be more tax efficient to set myself up as a business/company so I can then perhaps pay less tax and also claim expenses through it (ie car for travelling/home visits, medical equipment, medical insurance fees etc...) Aslong as the company is mine, I don't really need to withdraw much money and I can also then perhaps invest the money I've accumulated through the company)
I don't know much about the tax structures of companies/dividends etc... but if corporaion tax is 20%, surely that's a lot better than the top rate of tax that I would be paying?
Or put it another way, if I gross say for instance £100k/pa, I'll be left with £64,000 if I did it the regular way. Would I be better of if I set myself up as a business/company?
Hope that makes sense?
Just thought I would post this here before I sought some "professional" advice. I'll become a fully qualified GP in a few months time and just thinking about the next step in my career. Like most of my peers; I just want to locum around for a bit at various GP practices here and there throughout Scotland and North of England. It gives me the freedom rather than being tied down into a partnership etc... so early in my career (plus I can see what areas I want to work in the future.) These locums shifts may be longterm locums (weeks to months) or just a day here or there.
Most doctors are not the most financially-minded individuals and what happens is that the GP surgery pays the doctor personally into his/her bank account. Doctor then ofcourse has to submit taxes and things every year.
However, I've been thinking would it be more tax efficient to set myself up as a business/company so I can then perhaps pay less tax and also claim expenses through it (ie car for travelling/home visits, medical equipment, medical insurance fees etc...) Aslong as the company is mine, I don't really need to withdraw much money and I can also then perhaps invest the money I've accumulated through the company)
I don't know much about the tax structures of companies/dividends etc... but if corporaion tax is 20%, surely that's a lot better than the top rate of tax that I would be paying?
Or put it another way, if I gross say for instance £100k/pa, I'll be left with £64,000 if I did it the regular way. Would I be better of if I set myself up as a business/company?
Hope that makes sense?
Get some professional advice QUICKLY.
Locum income is generally treated as "sole-trader/self employed" income and is taxed accordingly.
For many businesses, operating through a limited company can sometimes help to mitigate taxes BUT that is not the only reasons why companies exist.
There could be professional restrictions on a GP operating as a limited company so you would need to check with your professional body as to what they do and don't allow.
Locum income is generally treated as "sole-trader/self employed" income and is taxed accordingly.
For many businesses, operating through a limited company can sometimes help to mitigate taxes BUT that is not the only reasons why companies exist.
There could be professional restrictions on a GP operating as a limited company so you would need to check with your professional body as to what they do and don't allow.
The whole point is that he SHOULDN'T have been doing it and he has now been found out.
And, as I said, you are on the verge of becoming a professional (not just a commercial businessman) and there may very well be ethical and professional guidelines that you need to follow that prevent or limit your use of limited company status.
You need to check with your professional body as to what you can or can't do.
Just a warning too - HMRC recently announced that they were cracking diown on tax abuse by locum doctors.
And, as I said, you are on the verge of becoming a professional (not just a commercial businessman) and there may very well be ethical and professional guidelines that you need to follow that prevent or limit your use of limited company status.
You need to check with your professional body as to what you can or can't do.
Just a warning too - HMRC recently announced that they were cracking diown on tax abuse by locum doctors.
I am a retired Chartered Accountant had several GP and Consultant clients.
As a GP you will appreciate why Doctors are better at diagnosing illness than the rest of us.
As Eric Mc rightly says you need proper professional advice as quickly as possible.
You do not need the additional worry of dealing with HMRC, VAT, the NHS Paymasters and so on in starting your career.
A decent Accountant will save you a lot of money and cost you nothing over time.
Get one. Peace of mind is priceless.
As a GP you will appreciate why Doctors are better at diagnosing illness than the rest of us.
As Eric Mc rightly says you need proper professional advice as quickly as possible.
You do not need the additional worry of dealing with HMRC, VAT, the NHS Paymasters and so on in starting your career.
A decent Accountant will save you a lot of money and cost you nothing over time.
Get one. Peace of mind is priceless.
Edited by Steffan on Thursday 1st March 18:47
Ofcourse I wouldn't do anything that goes against my own values nor the regulations of the GMC/RCGP (I don't think they say much on the subject, but ofcourse will need to find out.) I do not want to avoid tax, but pay as little as possible in a legal manner so I can invest more for the future. Everyone in the country has a right to do that if they do so wish (aslong as they stick to the rules) - I don't see why doing so is an ethical issue and quite frankly don't think it's any of the GMC's business (if indeed they have a rule on it.) As long as I'm not breaking the law, I have as much right as the next person to legally minimise the tax I pay. The NHS is being increasingly privatised and all sorts of ltd companies tender for jobs these days - I don't think professional regulations will be the stumbling block here.
Is this how contracters/freelancers normally conduct their business - through setting up companies?
I've heard of a group of GP's combining together and forming a ltd company; I've always wondered why combine if you can go it alone. Maybe this is to get past the HMRC view that a single persons ltd co would be taxed as if they were in sole employment - if you have a group of GP's perhaps the HMRC can't use that view?
Just brainstorming here. We had a session on locuming and managing finances on wednesday, but I missed it as I was in London sitting an exam - gutted I missed it!
Edit: Thanks Steffan and Eric - I know I need to get professional advice before I put any of this in motion, was just seeing if I could gleam any useful info before I do that.
Is this how contracters/freelancers normally conduct their business - through setting up companies?
I've heard of a group of GP's combining together and forming a ltd company; I've always wondered why combine if you can go it alone. Maybe this is to get past the HMRC view that a single persons ltd co would be taxed as if they were in sole employment - if you have a group of GP's perhaps the HMRC can't use that view?
Just brainstorming here. We had a session on locuming and managing finances on wednesday, but I missed it as I was in London sitting an exam - gutted I missed it!
Edit: Thanks Steffan and Eric - I know I need to get professional advice before I put any of this in motion, was just seeing if I could gleam any useful info before I do that.
Edited by zuby84 on Thursday 1st March 18:41
zuby84 said:
Ofcourse I wouldn't do anything that goes against my own values nor the regulations of the GMC/RCGP (I don't think they say much on the subject, but ofcourse will need to find out.) I do not want to avoid tax, but pay as little as possible in a legal manner so I can invest more for the future. Everyone in the country has a right to do that if they do so wish (aslong as they stick to the rules) - I don't see why doing so is an ethical issue and quite frankly don't think it's any of the GMC's business (if indeed they have a rule on it.) As long as I'm not breaking the law, I have as much right as the next person to legally minimise the tax I pay. The NHS is being increasingly privatised and all sorts of ltd companies tender for jobs these days - I don't think professional regulations will be the stumbling block here.
Is this how contracters/freelancers normally conduct their business - through setting up companies?
I've heard of a group of GP's combining together and forming a ltd company; I've always wondered why combine if you can go it alone. Maybe this is to get past the HMRC view that a single persons ltd co would be taxed as if they were in sole employment - if you have a group of GP's perhaps the HMRC can't use that view?
Just brainstorming here. We had a session on locuming and managing finances on wednesday, but I missed it as I was in London sitting an exam - gutted I missed it!
Edit: Thanks Steffan and Eric - I know I need to get professional advice before I put any of this in motion, was just seeing if I could gleam any useful info before I do that.
Choose your Accountant carefully. Let him worry about all the bureaucracy. Is this how contracters/freelancers normally conduct their business - through setting up companies?
I've heard of a group of GP's combining together and forming a ltd company; I've always wondered why combine if you can go it alone. Maybe this is to get past the HMRC view that a single persons ltd co would be taxed as if they were in sole employment - if you have a group of GP's perhaps the HMRC can't use that view?
Just brainstorming here. We had a session on locuming and managing finances on wednesday, but I missed it as I was in London sitting an exam - gutted I missed it!
Edit: Thanks Steffan and Eric - I know I need to get professional advice before I put any of this in motion, was just seeing if I could gleam any useful info before I do that.
Edited by zuby84 on Thursday 1st March 18:41
He/She will know exactly how to set up the necessary business mechanisms giving you maximum income and minimum taxation with the law.
Leaves you to concentrate on the patients.
I have been employing docotors - locums and fulltime, independent and NHS for almost 20 years - some of our doctors work through limited companies etc. there is no professional reason not to do as far as I am aware but the tax side is where most of these docs are totally ignorant. HMRC have a habit of nailing the locum company for unpaid tax if johnny foreigner locum pisses off from the Uk leaving an empty limited company bank account. One of the standard questions that comes up in HMRC inspections/investigations - ask me how I know!
HMRC are very much targeting many doctors Esp consultants in last 2 years or so who might be good docs but really have been falling foul of claiming expenses etc especially when claiming travel between two or more places of work as many see patients in their home and Eric will see the obvious trap there.
The accountant who deals with most of our doctors' tax sits on HMRC committees and therefore all is squeaky clean. All my experience re this is don't mess with immigration, GMC and HMRC
As has been said, take professional advice fast
PS I sit on various committees re revalidation in the independent and locum sector with the GMC etc and your financial structure of your practice has no bearing other than where it relates to issues of probity ie don't do dodgy deals!
Also worth speaking to http://www.nasgp.org.uk/news/np_resource.htm
Make sure your revalidation "pathway" is crystal clear whichever route you choose.
HTH
HMRC are very much targeting many doctors Esp consultants in last 2 years or so who might be good docs but really have been falling foul of claiming expenses etc especially when claiming travel between two or more places of work as many see patients in their home and Eric will see the obvious trap there.
The accountant who deals with most of our doctors' tax sits on HMRC committees and therefore all is squeaky clean. All my experience re this is don't mess with immigration, GMC and HMRC
As has been said, take professional advice fast
PS I sit on various committees re revalidation in the independent and locum sector with the GMC etc and your financial structure of your practice has no bearing other than where it relates to issues of probity ie don't do dodgy deals!
Also worth speaking to http://www.nasgp.org.uk/news/np_resource.htm
Make sure your revalidation "pathway" is crystal clear whichever route you choose.
HTH
As others have said, there is nothing wrong with setting up a Ltd Co whilst you expect to be working for more than one employer for the foreseeable future.
The rules are fairly generous so that you will usually pay less tax than on a PAYE basis without breaking any rules or laws and from what you have said about living on less than your earnings and leaving some in the company to invest, this can be a tax-efficient way of doing so.
The downside is that you will have to do some extra admin after you have spent all week dealing with patients. Speak to an accountant ASAP to get proper advice. I'll also pm you a company that specialises in matching locums with the NHS and they may be able to help you further, but obviously they are not going to provide independent professional advice.
The rules are fairly generous so that you will usually pay less tax than on a PAYE basis without breaking any rules or laws and from what you have said about living on less than your earnings and leaving some in the company to invest, this can be a tax-efficient way of doing so.
The downside is that you will have to do some extra admin after you have spent all week dealing with patients. Speak to an accountant ASAP to get proper advice. I'll also pm you a company that specialises in matching locums with the NHS and they may be able to help you further, but obviously they are not going to provide independent professional advice.
sideways sid said:
As others have said, there is nothing wrong with setting up a Ltd Co whilst you expect to be working for more than one employer for the foreseeable future.
The rules are fairly generous so that you will usually pay less tax than on a PAYE basis without breaking any rules or laws and from what you have said about living on less than your earnings and leaving some in the company to invest, this can be a tax-efficient way of doing so.
The downside is that you will have to do some extra admin after you have spent all week dealing with patients. Speak to an accountant ASAP to get proper advice. I'll also pm you a company that specialises in matching locums with the NHS and they may be able to help you further, but obviously they are not going to provide independent professional advice.
Just don't refer to any of the people you work for as "employers" or else you will be exposing yourself terribly to IR35.The rules are fairly generous so that you will usually pay less tax than on a PAYE basis without breaking any rules or laws and from what you have said about living on less than your earnings and leaving some in the company to invest, this can be a tax-efficient way of doing so.
The downside is that you will have to do some extra admin after you have spent all week dealing with patients. Speak to an accountant ASAP to get proper advice. I'll also pm you a company that specialises in matching locums with the NHS and they may be able to help you further, but obviously they are not going to provide independent professional advice.
Eric Mc said:
sideways sid said:
As others have said, there is nothing wrong with setting up a Ltd Co whilst you expect to be working for more than one employer for the foreseeable future.
The rules are fairly generous so that you will usually pay less tax than on a PAYE basis without breaking any rules or laws and from what you have said about living on less than your earnings and leaving some in the company to invest, this can be a tax-efficient way of doing so.
The downside is that you will have to do some extra admin after you have spent all week dealing with patients. Speak to an accountant ASAP to get proper advice. I'll also pm you a company that specialises in matching locums with the NHS and they may be able to help you further, but obviously they are not going to provide independent professional advice.
Just don't refer to any of the people you work for as "employers" or else you will be exposing yourself terribly to IR35.The rules are fairly generous so that you will usually pay less tax than on a PAYE basis without breaking any rules or laws and from what you have said about living on less than your earnings and leaving some in the company to invest, this can be a tax-efficient way of doing so.
The downside is that you will have to do some extra admin after you have spent all week dealing with patients. Speak to an accountant ASAP to get proper advice. I'll also pm you a company that specialises in matching locums with the NHS and they may be able to help you further, but obviously they are not going to provide independent professional advice.
It amaze me how many subcontractors are unaware of IR35 which is pretty draconian in its effects. With unfortunate and expensive results, ignorance being no defence at at, nor a plea in mitigation.
Steffan said:
Eric Mc said:
sideways sid said:
As others have said, there is nothing wrong with setting up a Ltd Co whilst you expect to be working for more than one employer for the foreseeable future.
The rules are fairly generous so that you will usually pay less tax than on a PAYE basis without breaking any rules or laws and from what you have said about living on less than your earnings and leaving some in the company to invest, this can be a tax-efficient way of doing so.
The downside is that you will have to do some extra admin after you have spent all week dealing with patients. Speak to an accountant ASAP to get proper advice. I'll also pm you a company that specialises in matching locums with the NHS and they may be able to help you further, but obviously they are not going to provide independent professional advice.
Just don't refer to any of the people you work for as "employers" or else you will be exposing yourself terribly to IR35.The rules are fairly generous so that you will usually pay less tax than on a PAYE basis without breaking any rules or laws and from what you have said about living on less than your earnings and leaving some in the company to invest, this can be a tax-efficient way of doing so.
The downside is that you will have to do some extra admin after you have spent all week dealing with patients. Speak to an accountant ASAP to get proper advice. I'll also pm you a company that specialises in matching locums with the NHS and they may be able to help you further, but obviously they are not going to provide independent professional advice.
It amaze me how many subcontractors are unaware of IR35 which is pretty draconian in its effects. With unfortunate and expensive results, ignorance being no defence at at, nor a plea in mitigation.
Perhaps.
Multiple jobs is not, in itself, a gauarantee taht some or all of the engagements won't fall under IR35. If the OP goes down the limited company path, he needs to be VERY careful with the terms and conditions of each and every engagement he undertakes as a locum to ensure that none of them fall into the IR35 trap.
With HMRC on the warpath against locums at the moment, it is a dangerous time.
I am expecting to see quite a few doctor/locum cases passing through the tax tribunal and appeal system over the next few months.
Multiple jobs is not, in itself, a gauarantee taht some or all of the engagements won't fall under IR35. If the OP goes down the limited company path, he needs to be VERY careful with the terms and conditions of each and every engagement he undertakes as a locum to ensure that none of them fall into the IR35 trap.
With HMRC on the warpath against locums at the moment, it is a dangerous time.
I am expecting to see quite a few doctor/locum cases passing through the tax tribunal and appeal system over the next few months.
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