Industry guidance
HMRC Enquiry Help for Doctors, dentists and healthcare professionals
HMRC enquiry guidance for doctors, dentists, locums and healthcare practices covering NHS and private income, status and expenses.
At a glance
- Multiple income sources — NHS salary, pension, private fees, locum work — need to be reconciled together
- Locum status is examined closely to see whether the work is genuinely independent
- Expenses need clear apportionment between NHS employment and private practice
- Not all private healthcare services automatically qualify for VAT medical exemption
- Company-based locum arrangements can bring IR35 into the employment status assessment
- Research grants and academic income need separate, clear treatment from clinical earnings
Healthcare professionals often have income from several sources at once — NHS salaried employment, NHS pension contributions, private practice fees, and locum work through agencies or direct engagements — which makes reconciling the full income picture a common starting point for an enquiry. Locums in particular face regular questions about employment status, since HMRC will look at whether a locum genuinely operates independently or is functioning as an employee of the practice or trust engaging them.
Private practice income brings its own record-keeping challenges, especially where fees are received through a room-hire or billing arrangement with a hospital or clinic, and expenses such as professional indemnity insurance, subscriptions and use of home need to be apportioned correctly between NHS and private work. VAT is also relevant for some private healthcare services, since the medical exemption doesn't automatically cover every type of treatment or cosmetic procedure.
Where a locum's status is challenged, HMRC will typically request evidence covering how the engagement was actually performed in practice — including who set the hours, whether the locum could decline shifts or send a substitute, and whether they carried their own indemnity insurance separately from the engaging practice. Written agreements are considered alongside, not instead of, this practical evidence, since HMRC's view is that the reality of the working relationship carries more weight than the label given to it.
Healthcare professionals working through a limited company for private or locum income need to keep company accounts, payroll and dividend records distinct from any NHS employment income, and should be aware that IR35 rules can apply to company-based locum arrangements in some circumstances, adding a further layer to the employment status question. Research grants and academic income, where relevant, also need their own clear treatment separate from clinical earnings.
Tax areas most relevant to doctors, dentists and healthcare professionals
- NHS and private income reconciliation
- Locum employment status
- Professional expenses and subscriptions
- VAT treatment of private medical and cosmetic services
- Pension contribution and annual allowance interactions
- Limited company structures for private or locum healthcare income
- Research grants and academic income treatment
How to prepare
A structured, evidence-led approach from the outset tends to produce a faster and less stressful outcome than responding to each request as it comes in.
- 1
Gather engagement contracts and correspondence for each locum or private role
- 2
Reconcile NHS salary, pension, and private income sources for the full tax year
- 3
Document how each locum engagement was actually performed in practice
- 4
Apportion shared expenses between NHS employment and private practice on a consistent basis
- 5
Check the VAT treatment of any private or cosmetic services provided
- 6
If operating through a limited company, gather company accounts alongside NHS and personal income records
- 7
Separate any research grant or academic income clearly from clinical earnings
What documentation to gather
- P60/P11D records for any NHS or salaried employment
- Private practice income and billing records
- Locum agency statements or direct engagement contracts
- Professional subscription, indemnity insurance and use-of-home records
- VAT treatment records for any private services provided
- Company accounts and dividend records, if operating through a limited company
- Grant agreements and records for any research or academic income received
Common mistakes to avoid
These are the errors we see most frequently in this sector — being aware of them in advance can help you avoid an entirely preventable dispute with HMRC.
Assuming all locum work is automatically self-employed without reviewing each engagement
Applying VAT exemption to cosmetic or non-medical services that don't actually qualify
Using an inconsistent method to apportion expenses between NHS and private work year to year
Not keeping evidence of how a locum engagement was actually carried out in practice
Overlooking pension annual allowance interactions when reconciling total income
Overlooking IR35 considerations for locum work carried out through a limited company
Mixing research grant or academic income in with clinical earnings without separate treatment
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What happens next
Knowing the typical sequence of events helps you feel more in control and know roughly what to expect at each stage.
HMRC reviews income sources and requests evidence of how locum work was actually performed
Expense apportionment methods are checked for consistency and reasonableness
VAT treatment of private services is reviewed against current guidance
Any adjustment is proposed and can be discussed, agreed or disputed
The check closes with a written outcome covering all income streams reviewed
Where locum work runs through a company, IR35 status is assessed alongside general employment status factors
Research grant or academic income is reviewed separately from clinical income sources
Frequently asked questions
The questions we're asked most often by businesses in this sector, answered in plain English.
Is locum income always self-employed?
Not automatically — HMRC assesses each engagement on how independently the locum actually operates, which can mean some locum work is genuinely self-employed and other arrangements look more like employment.
Do I need to pay VAT on private medical services?
Many core medical services are VAT exempt, but some cosmetic or non-medically-necessary treatments can fall outside the exemption, so it's worth checking the specific service against current guidance.
How should I split expenses between NHS and private work?
Costs that relate to both need a reasonable, consistent apportionment method, such as by time spent or income proportion, that you can explain and evidence if HMRC asks.
Can I be both employed and self-employed as a healthcare professional?
Yes, it's common to have salaried NHS employment alongside genuinely self-employed private or locum work, provided each relationship is assessed correctly on its own facts.
How does the pension annual allowance affect my tax position?
Where total pension contributions across NHS and any private arrangements exceed the annual allowance, an additional tax charge can apply, so it's worth reviewing this alongside your wider income position.
What records help support a genuinely self-employed locum arrangement?
Evidence that you controlled how the work was done, could decline shifts, held your own indemnity insurance, and worked for multiple engagers all help support genuine self-employment.
Does IR35 apply to locum doctors working through their own company?
It can, particularly for engagements that closely resemble employment in practice, so company-based locum arrangements need the same working-practices assessment as any other IR35 question.
How is a research grant taxed?
This depends on the nature and terms of the grant, with some treated as taxable income and others potentially outside the scope of tax, so each grant needs checking against its specific terms.
Can I claim training and course costs as a healthcare professional?
Costs that maintain your existing professional skills are generally allowable, though costs for acquiring a wholly new qualification or specialism can be treated differently.
Do I need separate insurance records for tax purposes?
Indemnity insurance costs are generally allowable business expenses, so keeping clear records of premiums paid supports your expense claims if queried.
Are exam and revalidation fees tax deductible?
Fees required to maintain your existing professional registration are generally allowable, though costs to gain an entirely new qualification are usually treated differently.
Does working across several NHS trusts complicate my tax position?
Not usually, since each employment is taxed through its own PAYE, though it's worth checking your tax code and any under or overpayment across multiple employments at year end.
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