Healthcare staffing has changed a lot over the last few years. Many private healthcare providers and NHS organisations now rely on locums and self-employed professionals. This is to fill gaps in their workforce.
It definitely offers flexibility. It also helps cover staff shortages. And in many cases, it keeps services running smoothly.
But there is one area that still causes confusion: IR35.
Let us break down exactly what an IR35 medical practice UK setup looks like today.
You’ll get to know everything medical practices need to know about IR35, including:
- Why IR35 Matters for Medical Practices
- The Step-by-Step Compliance Checklist for Practices
- Does IR35 Apply to Every Locum Doctor?
- And much more…
Let’s get into it!
What is IR35 in Healthcare?
IR35 is a piece of UK tax legislation. It is formally known as the Off-Payroll Working Rules. IR35 targets individuals who act like regular employees but bill for their services through a limited company (often called a Personal Service Company or PSC) to pay less tax.
Basically, it is designed to identify “disguised employees”.
The legislation asks one core question: if the limited company did not exist, would this person actually be an employee?
If the honest answer is yes, they fall inside IR35. That means their income gets taxed like employment income. The company structure they use does not matter. Managing this properly is important for any IR35 medical practice UK firm. For a long time, it was up to the contractor (in our world, the locum doctor) to make that call themselves. Not anymore.
Why IR35 Matters for Medical Practices
An IR35 medical practice UK operation frequently engages a wide range of professionals. These include locum doctors, practice managers, consultants, specialist clinicians, pharmacists, dentists, IT contractors, and healthcare administrators.
Many of these professionals operate through limited companies. That is where IR35 becomes relevant. If an IR35 medical practice UK employer hires someone through a personal service company, it may need to determine whether the engagement falls inside or outside IR35.
Remember that the consequences of getting this wrong can be significant.
Who Is Responsible for IR35 Decisions?
The answer depends on the size of the organisation hiring the contractor.
Small Medical Practices
A small organisation is generally one that meets at least two of the following:
| Small Company Threshold | 2026/27 |
| Annual turnover | £15 million or less |
| Balance sheet total | £7.5 million or less |
| Employees | 50 or fewer |
If a strictly private, non-NHS medical practice qualifies as small, the contractor’s limited company is responsible for determining IR35 status. This setup is common across the IR35 medical practice UK landscape for smaller clinics.
Medium and Large Medical Practices
If the practice does not qualify as small, responsibility shifts to the organisation engaging the contractor. Every medium or large IR35 medical practice UK firm must handle these assessments directly.
The practice must:
- Assess employment status
- Issue a Status Determination Statement (SDS)
- Explain the reasons for its decision
- Maintain appropriate records
This is particularly important for larger healthcare groups. And also for private medical organisations.
Practices must take reasonable care when making IR35 determinations. Blanket decisions, failing to review contracts, or ignoring the actual working arrangements may invalidate the determination and leave the practice liable for unpaid tax and National Insurance.
The Three Pillars of Tax Status Determination
How does HMRC decide if a worker is genuinely self-employed or a disguised employee? Well, they decide it by looking past your written contract. They look closely at the daily reality of the working relationship.
When reviewing an IR35 medical practice UK arrangement, you must evaluate three core tests.
1. Control and Direction
Who decides how the work is done? A genuinely self-employed consultant is hired for their expertise. They manage their own clinical approach.
If your practice dictates their specific hours, forces them to follow strict internal non-clinical protocols, or supervises them like standard staff, HMRC views this as high control. High control means the role is inside IR35. This rule applies to every single IR35 medical practice UK audit.
2. Personal Service and Substitution
Can the worker send someone else to do the job? This is the ultimate test. A true business-to-business contract allows for a “substitute.”
If an IR35 locum doctor cannot make it to a shift, can their limited company send another equally qualified doctor in their place? If your practice can reject any substitute because you only want that specific individual, the contract requires personal service. This points directly inside IR35.
3. Mutuality of Obligation (MOO)
Is there an ongoing expectation of work? In a normal employment relationship, the employer must offer work, and the employee must do it.
For an IR35 NHS contractor, there must be no ongoing obligation for the practice to offer further shifts, nor for the contractor to accept them. If you put a locum on a rolling, permanent Friday rota for months on end, this may indicate ongoing mutuality of obligation.
Check Out: How to Handle Payroll for Healthcare Staff?
Summary Comparison of IR35 Status Factors
| Status Factor | Inside IR35 (Employee Status) | Outside IR35 (Self-Employed Status) |
| Control | Practice dictates specific hours, tasks, and non-clinical methods. | Workers have high autonomy over how they deliver the medical service. |
| Substitution | Only the specific doctor or nurse can show up for the shift. | The worker’s company can send an alternative qualified professional. |
| Mutuality (MOO) | Rolling, long-term rota with expected ongoing weekly hours. | Ad-hoc shifts, clear end dates, no obligation to offer or accept work. |
| Financial Risk | The worker takes no financial risk and uses all clinic equipment. | Workers cover their own insurance, training, and pay for professional indemnity insurance, training, subscriptions, or correct work at their own cost. |
The Step-by-Step Compliance Checklist for Practices
To keep your practice safe this year, you need a repeatable process for every single non-salaried worker you engage. A comprehensive approach saves an IR35 medical practice UK from costly compliance errors.
Step 1: Identify the Contracting Party
Check how you are paying the worker. If they are a sole trader, standard self-employment rules apply. IR35 only triggers when they are working through an intermediary, like their own limited company.
Step 2: Use the CEST Tool with Caution
HMRC provides an online tool called Check Employment Status for Tax (CEST). It can be useful. But it has flaws. It famously ignores certain legal nuances around mutuality of obligation. If you use it, make sure your answers exactly mirror the real daily working conditions. And not just what you wish they were. Do not forget to save a copy of the results for your tax files. This step is really important for tracking your IR35 medical practice UK compliance trail.
Step 3: Issue the Status Determination Statement (SDS)
The SDS should be provided before the first payment is made, not necessarily before the shift. Give this document directly to the worker and to the recruitment agency if you used one.
Step 4: Run a Disagreement Process
Contractors have the legal right to challenge your decision. You must have a system to receive these challenges. Also, you must respond formally within 45 days. If you ignore a challenge, your practice is legally deemed the fee-payer. This means the entire direct tax and payroll liability shifts to your practice.
What Happens When a Role is Inside IR35?
If your assessment shows the worker acts like an employee, they are deemed inside IR35. This changes how you process their invoices significantly. This is also an important concern under the rules governing an IR35 medical practice UK setup.
The entity that pays the worker’s limited company must deduct PAYE tax and Employee National Insurance Contributions. Apprenticeship Levy may also apply where relevant. Yes, directly from the invoice total.
Crucially, your medical practice must also pay Employer National Insurance Contributions on top of those fees. It represents a major financial shift for an IR35 medical practice UK budget. The worker does not get practice benefits like pension contributions, but they are taxed like staff.
Does IR35 Apply to Every Locum Doctor?
No. An IR35 locum doctor is not automatically inside IR35. Each engagement must be assessed individually. HMRC looks at factors, including control, substitution rights, financial risk, and day-to-day working practices. Two locum doctors working in similar settings could have different outcomes. The specific details of the arrangement matter under the IR35 medical practice UK framework.
Are NHS Contractors Automatically Inside IR35?
No. An IR35 NHS contractor is not automatically caught by the rules. A status determination should be carried out based on the actual working relationship. This remains standard procedure for an IR35 medical practice UK compliance audit. However, NHS organisations generally have responsibility for making these assessments. The outcome depends on the facts of each engagement.
What is a Status Determination Statement?
A Status Determination Statement, often called an SDS, is a document explaining whether a contract falls inside or outside IR35. It must include the reasons behind the decision. You cannot simply guess or apply a blanket policy. According to HMRC’s off-payroll working guidance, blanket determinations do not demonstrate reasonable care. This can include declaring all locums “inside IR35” without checking individual circumstances.
Every IR35 medical practice UK operator must avoid this error.
If you fail to do this, your medical practice is legally deemed the “fee-payer.” That means you are liable for the missing income tax and National Insurance contributions.
The Bottom Line
Knowing the rules around an IR35 medical practice UK setup is no longer optional for healthcare management teams. Whether you engage an IR35 locum doctor, work with an IR35 NHS contractor, or hire specialist healthcare professionals through limited companies, you must get their status right.
When medical practices review arrangements carefully, keep proper records, and seek advice when needed, they put themselves in a much stronger position to avoid unnecessary tax risks.
From NHS pension charges to private practice expenses, there’s a lot that general accountants miss. See exactly what we can save you — get a quote and find out in minutes.
How CruseBurke Can Help
At CruseBurke, we have made it our mission to protect the finances of those who spend their lives protecting others. Our team of specialist healthcare accountants understands the complexities of healthcare finances.
If you need help with IR35 medical practice UK, or any accounting service, such as bookkeeping for healthcare, payroll for healthcare, or year-end accounts for healthcare, reach out to us today. We would love to discuss how we can make life easier for your healthcare clinic!
Disclaimer: The general information provided in this “What Medical Practices Need to Know About IR35” about employers liability insurance includes text and graphics. It does not intend to disregard any of the professional advice in the future as well.
