Employment status and intermediary risks for locum doctors cannot be resolved merely by describing an engagement as self-employed, paying a limited company or placing an agency between the clinician and the hospital. The tax treatment depends on the contractual chain and the practical working arrangements, with different legislation potentially applying to direct engagements, agency work, personal service companies and umbrella-company arrangements.
Healthcare engagements require particular care because clinical governance, personal service and the hospital’s control over how services are delivered can be highly relevant to the status analysis.
Employment status and intermediary risks in direct locum engagements
A doctor acting as a locum is not automatically self-employed. The word describes the function being performed rather than the tax status. A locum genuinely standing in for another practitioner under an independent arrangement may have a different position from a doctor engaged as part of an established clinical team.
The relevant employment-status guidance for locum doctors requires the terms of each engagement to be examined in the normal way. Personal service, control, mutual obligations, financial risk, integration, substitution rights and the individual’s wider business organisation can all contribute to the conclusion.
A written consultancy agreement is therefore only one part of the evidence. If the actual arrangements require the doctor to work predetermined shifts personally, follow organisational procedures, accept direction within the hospital structure and bear little commercial risk, the tax position may differ from the contractual label.
Agency doctors face a separate statutory risk
Where an agency supplies an individual doctor personally to a hospital, nursing home or GP practice, the agency legislation may require PAYE even if the doctor would prefer to invoice as self-employed.
Clinical governance makes this particularly significant. The current guidance on agency-supplied doctors indicates that doctors supplied by medical agencies will commonly be subject to supervision, direction or control by a consultant or another person responsible for clinical governance. Where the statutory agency conditions are met, the agency is required to operate PAYE and Class 1 National Insurance.
The use of an agency should therefore trigger a separate analysis from an ordinary direct engagement. Registering as self-employed or submitting an invoice does not override the agency legislation.
Employment status and intermediary risks where a personal service company is used
Where the clinician provides services through a personal service company, the off-payroll working rules must be considered. For public-sector bodies such as NHS organisations, the client is generally responsible for determining whether the doctor would have been an employee if engaged directly and, where the rules apply, issuing a status determination statement.
The same client-led regime applies to medium and large private-sector clients. Where the private-sector client is small, responsibility generally remains with the worker’s intermediary.
The off-payroll working rules for clients require the client to take reasonable care when making the status determination. The existence of the company does not therefore convert what would otherwise be an employment relationship into an outside-IR35 engagement.
Contract reviews should also identify the real client. In healthcare supply chains involving agencies, managed-service providers and outsourced clinical services, the organisation receiving the doctor’s work is not always automatically the statutory client if a genuinely contracted-out service sits between the parties.
Umbrella-company risk changed from 6 April 2026
There is a further layer for locums employed by umbrella companies. From 6 April 2026, new PAYE rules apply to labour supply chains containing umbrella companies or certain other labour-supply businesses.
Where an agency has the direct contract with the end client to supply the worker, that agency is responsible for ensuring that PAYE is operated correctly by the umbrella company. Where there is no agency, the responsibility falls to the end client. HMRC can recover PAYE underpayments from the relevant agency or end client where the umbrella has not accounted for them correctly. The current PAYE rules for umbrella-company labour supply chains apply to payments made on or after 6 April 2026.
This is particularly relevant to healthcare organisations and recruitment businesses using large temporary workforces. Due diligence can no longer be confined to checking that an umbrella company produces payslips.
One engagement can engage several different tax regimes
The correct order is to identify who contracts with whom, whether the clinician is working personally, whether an agency rule applies, whether a personal service company is involved and which party carries the off-payroll responsibility. Umbrella rules then need to be considered where the clinician is actually employed by an umbrella company.
Locum companies should align salary, dividends and contractual arrangements with the underlying payroll and PAYE treatment rather than assuming that company ownership determines status. Doctors considering whether to contract personally or through a company should obtain specialist tax advice before entering a new agency or NHS engagement, particularly where the contractual chain changes during the year.
Disclaimer: This article is provided for general guidance only and does not constitute personal tax, legal or financial advice. The correct tax treatment depends on the specific facts, applicable legislation and HMRC practice at the relevant time. You should contact us for advice tailored to your circumstances before taking or refraining from any action.
