Off payroll working, does it apply to the Healthcare sector?
Hayley Benn · Posted on: July 30th 2025 · read
Often referred to as IR35, off payroll working refers to workers that due to their contract of or for service may be deemed as an employee even though they may wish to be seen as self-employed.
Within the healthcare sector there are several roles this may refer to including but not exclusively:-
Locums
Consultants
Registered Nurses
Administrative support
It is important to know the rules and not to find yourself in the uncomfortable position of having to pay additional tax and National Insurance for someone you thought was self-employed.
So how do we determine if they should or shouldn’t be treated as a deemed employee?
Whilst my first advice would be to use the H M Revenue & Customs (HMRC) ‘CEST’ tool, found here this, if answered truthfully can give you peace of mind of the status of the individual.
HMRC have in the past accepted the outcome of the CEST tool, if the results are printed and are truthful, however we have heard of a few cases where the results have been challenged. Therefore, it would be advisable to keep notes as to why the answers were given to back up the result. This then means that if they did find the individual to be a deemed employee, then they would not look at it retrospectively but only going forwards, avoiding late penalties and interest charges.
A copy of the CEST results should be given to the individual, which would be sufficient as the Status Determination Statement in this case.
Key factors to consider in determining employment status:
- Direction Does the practice control when and how the individual performs their work?
- Supervision Is the practice required to supervise the work beyond simply checking its quality?
- Substitution Can the individual send someone else (a substitute) to do the work on their behalf?
- Mutuality of Obligation Is there an ongoing obligation for the practice to provide work and for the individual to accept it?
- Financial Risk If the individual doesn’t show up, do they still get paid? If they don’t complete the work, do they get paid? Where does the financial risk lie?
- Provision of Equipment Does the individual (e.g., a locum) provide their own equipment?
- Place in the Organisation Is the individual seen as part of the organisation by other team members? For example, are they listed on the company website?
- Length of Service Is the contract for a specific, finite period?
Some factors are more important than others, so not all of the above need to be positive to deem an individual as an employee. To be honest, a good test is that, if they seem like an employee and act like one then they probably are.
Let us look at some different scenarios:
Many locum doctors and nurses work through personal service companies (PSCs) or as independent contractors. These arrangements need careful assessment under Off Payroll Working.
Ensuring that locums have the autonomy to choose their assignments, determine their working hours, and can provide a substitute where appropriate are key things to look out for.
Medical consultants and specialists often work across multiple hospitals or practices, providing their services as independent contractors. This is showing that this is common practice and therefore may assist in the argument of being self-employed, but it will still depend on the facts which need to be documented.
Emphasising the independent nature of their work in contracts, highlighting aspects such as specialised expertise, control over work, and financial risk, should be noted down in their record.
When medical federations hire their own members for specific projects or roles, it’s crucial to clearly define the relationship to avoid unintended employment classification.
Ensuring that these roles are project-based, with clear terms of engagement that reflect the temporary and independent nature of the work.
Importance of documentation
Maintaining proper documentation is crucial. This includes:
Written contracts that clearly outline the relationship.
Records of work arrangements and communications.
Evidence of financial risk, such as invoices, receipts for equipment, and records of corrective actions at the individuals expense.
What are the consequences if you do have a deemed employee?
If the individual is found to be inside off payroll working, they are considered a "deemed employee" for tax purposes. This has several tax implications:
- The practice must pay income tax and National Insurance similar to what an employee would pay.
- The practice paying the individual must deduct income tax and employee National Insurance through the Pay As You Earn (PAYE) system.
- The practice must also pay employer National Insurance contributions on top of the individuals fees.
- It is also important to be aware that if deemed an employee then all the rights of an employee go along with this. So potentially opening you up to employment tribunals.
Conclusion
It is really important that all Practices, Federations and PCN Companies take this matter very seriously and make sure that they have assessed each self-employed individual that they engage with, as the financial risk lies with them.
If in doubt, please reach out to your local MHA Healthcare team.
