Beware of your VAT position if you are an incorporated locum doctor.  Depending on whether you invoice the agency (who invoices the client for your services) or the end client directly (usually an NHS healthcare trust), you may face differing VAT treatments.  The provision of locum services by an agency is generally deemed the provision on personnel and is chargeable to VAT.

We are aware of other “VAT savings schemes” being operated by NHS trusts in the North East of the country where the agencies are getting round this rule by setting up the introduction from which they get paid vatable commission but the locum companies contract with and bill the trusts directly.

The interesting thing is that these locum agencies are not making it clear to the locum doctor’s that they are involved in what is a potentially a tax avoidance scheme.  The agreements which the locum doctor’s company signs up to also have terms that the pay rate quoted (to the locum) is a “VAT inclusive” rate.  What this means is that a locum doctor who registers for VAT accepts a lower VAT exclusive pay rate or is less employable because he/she is 20% more expensive than their Non-VAT registered colleagues.

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