Revenue and Locums: Tax Bonanza or Catch 22?

Revenue move on medical locums will boost tax take but may drive up GMS costs for taxpayer.

According to last Thursday’s Irish Times, the Revenue Commissioners are currently ‘negotiating’  with out-of-hours GP services, in relation to PAYE/PRSI tax liabilities on locum doctors.  This news follows recent moves by Revenue to have locum professionals classified as PAYE employees rather than self-employed contractors.  A number of out-of-hours GP companies have already paid large settlement sums to Revenue arising from this change.

Locums are effectively temporary workers who provide holiday and other cover for resident practice doctors. Where a practice hires a locum as an employee, they must pay employers PRSI  (generally 10.75% of salary), and in addition deduct PAYE, PRSI and levies from their locum’s paycheque.  This generates a higher tax yield for Revenue than the previous system where each self-employed locum invoiced the practice for their services, was paid gross, deducted overhead costs in calculating their taxable income, and paid tax and PRSI on this net figure.

Working as a locum doctor can be financially lucrative but presents its own challenges. Most locums work for a range of practices, often in different towns and cities, and frequently move from one practice to another as their services are needed, e.g for holiday cover.  Locums must also budget for periodic spells of unemployment and their schedules being dictated by the needs of the various practices  who hire them.

In addition, by definition locums work in treating and diagnosing other doctors’ patients, with whom they do not have the same level of familiarity and medical history knowledge as enjoyed by a resident practice GP. Hence their work tends to be more difficult and pressurised than that of a resident GP.

The Irish Times article raises fears that the new Revenue approach will cause a scarcity of locums and that medical practices will find it difficult to recruit them. Only time will tell whether this pessimism is justified, and in these recessionary times, it may transpire that locum doctors are generally quite happy to continue working in that capacity, regardless their tax treatment.

On the other hand, if practices find it increasingly difficult to recruit locums, this raises the prospect of heavier burdens on already overworked GPs (with implications for the quality of medical care they provide) and higher recruitment costs for practices.  As any such cost hikes will undoubtedly be passed on to patients, the biggest loser here could well be the taxpayer, who funds GP services for medical card holders through the GMS system.

It would be ironic indeed if the boost to the Exchequer from the Revenue move is lost through higher costs within the GMS medical card system. Did anyone mention Catch-22?

The Irish Times article is here.