HMRC have advised that they are removing parts ESM2063 and ESM4270 from their Employment Status Manual with effect from 30 June 2023. This text refers specifically to locum pharmacists and has been updated today to confirm it is being withdrawn.
PDA representatives attended a confidential HMRC briefing in advance of the announcement and HMRC stated that the removal of this text from their manual does not change the facts of anybody’s tax status. HMRC want companies and individuals in all sectors to refer to the general guidance and use the CEST (check employment status for Tax) tool to assess tax status.
HMRC said they want a fair and level playing field across all sectors and therefore they are removing any guidance that may have given the impression that any sector specific arrangements could determine a person’s tax status. A similar change to the Employment Status Manual impacted Dentists from 6 April this year when specific guidance relating to Associate Dentists was also withdrawn.
The HMRC told the PDA: “Removing these specific pieces of guidance does not mean HMRC has changed its view on the employment status of locum pharmacists. The rules on employment status remain unchanged as they stem from case law. Businesses in the pharmacy sector should be looking at the facts of the engagement in line with case law and that should continue after 30 June 2023. Employment status is determined by the terms of any contract, the facts of how the individual works and case law. So nothing changes in practical terms. As set out in ESM4270 a written document by itself cannot determine employment status.”
HMRC review of locum status
The ongoing HMRC examination of the tax status of locums continues. This HMRC activity commenced before the pandemic and should hopefully conclude in the near future. HMRC reiterate that if they determine locums should have previously been considered as employees for tax purposes they will seek to claim any owed tax from the employers concerned.
The HMRC said: “Where HMRC have existing open enquiries, retail [community] pharmacies should continue to engage with their HMRC customer compliance manager or relevant compliance teams. HMRC is committed to collecting any outstanding tax and NICs should our fact finding conclude that locum pharmacists have been incorrectly classified as self-employment. Our compliance enquiries are based on facts of the case and the enquiry periods that are open. Removing the guidance is unrelated to our ongoing compliance enquiries.
The Guidance to be withdrawn
This is the wording to be removed from HMRC’s Employment Status Manual
ESM2063 – Agency and temporary workers: agency legislation – provisions from 6 April 2014: supervision, direction or control example – locum pharmacist
Part 2, Chapter 7 Income Tax (Earnings and Pensions) Act 2003, Part 2, Chapter 7, section 44(2)(a)
Social Security (Categorisation of Earners) Regulations 1978, Schedule 1, Part 1, paragraph 2
Locum pharmacist
Sarah is a fully qualified pharmacist who, for the last five years, has preferred to work as a locum, as it offers her regular work, flexibility, and various locations to work on short engagements. Sarah obtains all of her work through an employment agency.
The employment agency contact Sarah to advise there is a vacancy available to work in a privately run pharmacy/shop in a small market town. It is to provide cover whilst the proprietor/pharmacist is on holiday for three weeks. Sarah is given the proprietors contact details and they meet to discuss the engagement. The proprietor tells Sarah she will be working in the pharmacy at the rear of the shop and will be dispensing prescriptions to customers and providing advice to them as necessary. The Pharmacy also has two sales assistants who will deal with general sales, hand over the dispensed prescriptions to the customers and assist Sarah as necessary. It is agreed Sarah will take the engagement.
Sarah sets to work on her first day, and for the next three weeks she dispenses prescriptions and gives out general advice to customers. Sarah also monitors the stock levels of the medicines and instructs the sales staff to order new stocks where appropriate.
Throughout her engagement, Sarah was not subjected to any form of supervision or direction or control from anyone as to the manner in which she provided her services, nor did anyone have a ‘right’ to supervise or direct or control Sarah in her work, as she was fully qualified and very experienced in her field. Sarah was only ever accompanied in the pharmacy by the two sales assistants, neither of whom was qualified to oversee and instruct Sarah in her work. Being an experienced pharmacist, Sarah knew exactly how to dispense prescriptions and give advice to customers without needing any intervention of anyone, and she did this work as she saw fit. The agency legislation will not apply to this scenario.
However, had Sarah’s arrangement been different – whereby she had been brought in to assist the proprietor/chief pharmacist to dispense prescriptions and Sarah had also been told she might also be required to work alongside the sales staff in the shop serving customers, stocking shelves, and ordering stock as instructed – then, as would have been the case with the sales assistants, the proprietor would have had a right to subject Sarah to supervision, direction, or control as to the manner in which she provided her services and this would be sufficient for this condition of the agency legislation to be met.
ESM4270 – Particular occupations: locum pharmacists
A ’locum’ pharmacist is a pharmacist who is standing in temporarily for another pharmacist. It is not always the case that the tax/NICs treatment of a locum will follow the tax/NICs treatment of the pharmacist replaced.
It is the terms upon which the locum is engaged (written, oral, or implied) that determine status, not the duties performed by the regular pharmacist.
Where the locum is:
- engaged on a sessional or daily basis, and
- performs only the statutory requirements of a pharmacist’s job, which is essentially dispensing and supervision of the sale of `pharmacy only’ medicines, and advising on medicines for the treatment of common ailments
the engagement is likely to amount to self-employment.
If, however, the locum takes over the full range of duties of the employed pharmacist which may include:
- supervision of staff more generally
- cashing-up
- re-ordering non-pharmacy stock such as perfumes, sunglasses, toothpaste, and so on
the pharmacist is more likely to be an employee.
There is a standardised form of agreement devised by the National Pharmaceutical Association (NPA) which is commonly utilised for the engagement of locum pharmacists. The Pharmacists’ Defence Association (PDA) also provides its members with a suggested contract for locum services
A written document by itself cannot determine status since you may also need to consider:
- oral and implied terms
- the extent to which the written terms are followed.
Where you are satisfied that the NPA or PDA agreement is followed, it is likely that the locum will be self-employed. Where the status of the locum remains in doubt, the instructions at ESM0500 onwards should be followed.
The removal of the above guidance was also communicated in the HMRC’s June 2023 issue of the Employer Bulletin
Learn more
- Employers behaviour impacts HMRC decision ( November 2022)
- Government perform double U-turn on IR35 ( November 2022)
- PDA comment as large employers respond to HMRC investigation into tax status of locums (November 2021)
- Locums report being told to reduce agreed shift rates or be cancelled (July 2022)
- PDA urges locums to ensure they are ready for roll out of IR35 into private sector (February 2021)
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