Umbrella Companies for Veterinary Locums
If you are a veterinary locum coming to the UK to work in a veterinary practice, you have an option as to your employment status. You can be self-employed, and look after all your affairs, such as tax, yourself, or you could join an umbrella company or Managed Service Company (MSC) that works together with the recruitment agency.

The Inland Revenue Department (IRD) provides information as a guide to veterinary locums that can be used to determine their employment status. What these suggest is that you can only register as self-employed if you can answer 'Yes' to certain questions, such as do you provide all your own major equipment to carry out your job (not just a stethoscope and your knowledge), do you have the right to employ others to carry out your work, and can you decide what work to accept and where and when to do it.

Obviously, veterinary locums generally cannot answer 'yes' to these questions, and so cannot be regarded as self-employed in the eyes of the IRD. You therefore have to operate as a limited company if you work for a veterinary practice as a locum vet or locum vet nurse. For many, the time and expense of setting themselves up to be a limited company is hardly worth their while. Keep in mind now that your options are:

  • Sole trader or partnership (i.e. self-employed): this is no longer acceptable to most veterinary practices due to the IRD questioning the tax status of locums as being self-employed.

  • Forming a Limited Company, which is the most cost effective way to manage your tax affairs in the long run

  • Paying tax by PAYE through the agency that recruited you: some do not permit this, but if yours does, you would then pay full National Insurance and Income Tax on all your earnings, and you would also be unable to claim expenses for subsistence and accommodation while you were working. If you claim expenses this is the least economical way of dealing with your tax status as a veterinary locum in the UK.

  • An Umbrella Company, which we shall discuss now.

  • A Managed Service Company discussed briefly below.

In basic terms, when you join an umbrella company, you effectively become an employee of the umbrella and are paid by the umbrella with all PAYE tax deducted along with National Insurance contributions. The umbrella company will invoice your client (employer) if you are working for a veterinary surgery or your agency if you work for the agency. Your veterinary practice pays the umbrella company the invoice which is your gross income, and the umbrella deducts tax and NI, adds any expenses you have claimed for, deducts their fee, and deposits your net income into your bank account.

This is a very simple way of getting paid as a veterinary locum, and setting it is up is very quick. You do not have to worry about tax returns and accounts, but, while an umbrella also pays you expenses for subsistence, travelling, accommodation and professional memberships, you are responsible for the keeping the receipts for these. The advantage of an umbrella over setting yourself up as a Limited Company is largely one of convenience, and best if you don't understand the UK tax system. It's turnkey: sign the form and you get paid! If you intend working in the UK for a long period of time, then you are best advised to start your own limited company.

Umbrella Dispensations
Under IR35 (tax legislation involving contractors - a veterinary locum is a contractor under its terms), Umbrella companies are given dispensations on certain expenses, and so they do not have to complete a P11D (expense return form) to declare them. This is to your benefit, though you should keep receipts for the expenses you claim. This is another benefit of an umbrella: as previously stated, working as a PAYE employee for the agency will not enable you to claim expenses.

Managed Service Company (MSC)
An option to an umbrella company is a Managed Service Company (MSC). In an Umbrella scheme, you would be an employee or 'worker' of the Limited Company (the umbrella company). In an MSC you are not an employee, but a shareholder. You are provided to the veterinary practice that pays the MSC for your services. You receive the greater part of that payment plus a dividend. Because dividends are taxed more favourably than income, you will gain from that. However, new rules introduced in the 2008 budget have made tax changes that have made, at least for the time being, umbrella companies more favourable to your overall net income than an MSC.

It is not easy for veterinary surgeons or locum veterinary nurses to come to the UK to work as locums to determine the best way to arrange their income, tax and expenses. As should be evident, there are several options, and the apparent best of these, a Limited Company, is the longest, most difficult and most expensive to arrange.

It is likely most economical for a visiting veterinary locum to work on a PAYE basis with an agency if they have no expenses to claim, but otherwise, at least for the time being, a limited company likely offers most financial return.


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