Incorporating as GP Locum

Hi there,

Long time lurker of the site and keen to hear people's opinions about incorporating, particularly in the wake of the recent tax commision finding linked below.

So basically, I'm a qualified GP, and I'm currently giving serious thought to incorporating in order to facilitate working as a locum. I would plan to provide cover for GP's around a certain part of the country for their holiday's etc, and then seek remuneration from them via invoice.

I'm aware that there were some issues with Consultants incorporating previously, but I believe that was a different kettle of fish altogether. My role would essentially be as a contractor for GP's, seeing their patients as an independent practitioner to facilitate their time away.

I've done some homework, and I'm aware of some potential issues with this:

- The potential need to charge VAT
-The difference between "contract of service" and "contract for service"

However, fortuitously enough, the tax appeals commission have recently issued a ruling that might be a game-changer if my layman's understanding is correct?
link here:



I could be, potentially, working in dozens of practices every year. I don't think it's feasible to become a PAYE employee every single time, even with the new online system. I believe incorporation to be a logical and reasonable approach to organising my business rather than simply a tax vehicle, but I'd be really keen to hear people's thoughts.

Many thanks!

L.

So basically, how many GP's have you consulted about the the attractiveness of your proposed services's? So basically, do they see it as a viable alternative to hiring in a retired parent, aunt or uncle to cover the fortnight's holiday's?

Hi mathepac.

So seeking locum cover is very much the norm when GPs take time away from the practice for holidays etc, and I have no concerns about the attractiveness of the proposition. My query is strictly concerning the viability of doing it under the auspices of a corporation rather than PAYE, for the logistical reasons cited above

Thanks.

L.

If you look at the very very bottom of the decision, the last thing it says is that the Commission has been asked to sign a case stated for the High Court, which means Revenue are bringing it further, so it's really only halftime in the match, as anything could happen when the high court hear the legal arguments...

I read most of the Tax Appeals' Judgement.

I think your situation is perfectly analogous for VAT and that you wouldn't be obliged to charge it.

Am less familiar with income tax law, but I think you would be just like any other consultant with multiple clients. You just pay by self assessment based on aggregate income for year in question.

NoRegretsCoyote said:

I read most of the Tax Appeals' Judgement.

I think your situation is perfectly analogous for VAT and that you wouldn't be obliged to charge it.

Am less familiar with income tax law, but I think you would be just like any other consultant with multiple clients. You just pay by self assessment based on aggregate income for year in question.

Click to expand...

Thank you very much for the reply and the helpful input.

The individual in question in the judgement registered an unlimited company for reasons not immediately obvious to me, I'd be inclined to incorporate with a limited entity (subject to accountant advice), but it looks like the way to go anyway, upcoming high court judgement notwithstanding

torblednam said:

If you look at the very very bottom of the decision, the last thing it says is that the Commission has been asked to sign a case stated for the High Court, which means Revenue are bringing it further, so it's really only halftime in the match, as anything could happen when the high court hear the legal arguments...

Click to expand...

I saw that alright, I recognise it ain't over yet!

There are complex issues behind those medical incorporation cases. As I understand it, medics were fiddling the valuation of the ‘goodwill’ attached to their practices with a view to then abusing the Retirement Relief provisions and extracting excessive amounts tax-free. And as there was a prohibition on medics incorporating in the first place, my understanding is that these exercises tended to involve an artificial disaggregation of all other non-medical services carried out by a medical practice. Given that a locum merely supplies his or her services, I’m not sure it’s possible for him or her to bill through a corporate but I’m happy to stand corrected.

The VAT issue, as I understand it, stems from the fact that medical services are not VATable whereas other disaggregated services are. So the medics should have been charging themselves VAT internally within the practice but weren’t on the basis that they thought some kind of ‘VAT Group’ existed.

This stuff goes on with all professions where there’s a ban on incorporation. The professional basically splits the business into two parts: the final piece of the jigsaw which is the provision of the final part of the service and then all of the other elements which support the provision of that service. Those other elements are then parked in a company which is owned by the professional. So the doctor charges me €65 to see him. And his company charges him €50 for the provision of the secretary, equipment, room, stationery, etc. The company can then make large employer pension contributions for the doctor thus circumventing the percentage of salary/€115k maximum salary rules.

The unlimited company part is usually confidentiality related (i.e. to stop people looking at accounts via the CRO).

Gordon Gekko said:

There are complex issues behind those medical incorporation cases. As I understand it, medics were fiddling the valuation of the ‘goodwill’ attached to their practices with a view to then abusing the Retirement Relief provisions and extracting excessive amounts tax-free. And as there was a prohibition on medics incorporating in the first place, my understanding is that these exercises tended to involve an artificial disaggregation of all other non-medical services carried out by a medical practice. Given that a locum merely supplies his or her services, I’m not sure it’s possible for him or her to bill through a corporate but I’m happy to stand corrected.

The VAT issue, as I understand it, stems from the fact that medical services are not VATable whereas other disaggregated services are. So the medics should have been charging themselves VAT internally within the practice but weren’t on the basis that they thought some kind of ‘VAT Group’ existed.

Click to expand...

Thanks Gordon. I get the impression I'm walking into a minefield! I think your interpretation of prior events is bang on- when it came to the Consultants it seems they became unstuck because of their approach to goodwill. I wasn't aware of there being an absolute prohibition on medics incorporating, and haven't seen it mentioned in other places where this topic discussed, but as I say I'm a complete layman in these matters! The issue always seemed to be how tax was handled, rather than the legality of incorporating in the first place. The GP in the tax appeals judgement incorporated as an unlimited liability company- perhaps he did this as a means of avoiding the artificial disaggregation that you speak of? There are a significant number of accountants advertising their services who seem to advocate incorporation, so not sure where I stand currently!

To my mind incorporating as a locum would be for wholly legitimate reasons, as the alternative is potentially becoming an PAYE employee 20 times per year or more in order to keep the revenue happy, with them being indifferent to the fact that I'd be a true independent contractor. I guess the sensible move would be just to await the High Court Judgement and stay PAYE until then at least.