Business miles are miles incurred through journeys undertaken on behalf of a business. For example, from one trading site to another or to a client or supplier site.

An employee will normally have a commute to a place of work and these miles are not considered to be business miles. However, if an employee then undertakes a journey to a client of the business that journey would be regarded as business miles.

With regard to a self-employed Locum their place of work is usually their home address being also the trading address. A journey to a client’s premises etc from home is, therefore, a business journey. If the self-employed Locum then undertakes a journey to another client location this is also considered business miles.

Please note someone paid through an umbrella payroll is treated in the same way as an employee and cannot claim home to work as a business journey.

Business miles not reimbursed by an employer can be claimed as a tax allowable expense by an employee and a self-employed person at 45 pence per mile for the first 10,000 miles and 25 pence per mile for any additional miles in a tax year.

Furlough payments should have been made by an employer through the normal payroll system with the relevant tax and national insurance deducted and paid over to HMRC.

All income including payments from an employer should be disclosed on the self-assessment tax return. Any income tax liability will be calculated on the total income and any tax already paid, such as under PAYE, then deducted to calculate the income tax due.

Locums, as self employed, may have been able to claim a grant under Self Employment Income Support Scheme. Any SEISS grant received is liable to tax and NI in the tax year it was received and should be declared on the tax return.

A fifth grant is due to be made available soon and, again, can be claimed if all the conditions are fulfilled. Any fifth SEISS grant claimed will be taxable in the 2021/2022 tax year.

An employee can claim tax relief for any business expenses that they have incurred on behalf of their employer that has not been reimbursed.

The Government directive to work from home if possible has led to an HMRC concession for 2020/2021 and 2021/2022 with regard to the home working tax allowance. The home working allowance from 06 April 2020 is £6 per week or £26 per tax month. The concession means that even if you only worked from home on one day in 2020/2021 and/or 2021/2022 you can claim the full annual allowance of £312 per tax year.

Other tax allowable allowances, such as uniform allowance are available but are dependent upon the individual’s circumstances. The uniform allowance is available if you are an employee and you have to clean your work uniform and spend your own money on repairing or replacing anything you need to do your job.

A tax-free allowance of £1,000 is available for property and self-employment trading income. If your annual gross trading income from your locum work is £1,000 or less, you may not have to tell HMRC about the income. Please note that the £1,000 refers to your income before the deduction of expenses and is not an allowance to be deducted if your income is greater than £1,000. If your income is greater than £1,000 in any tax year you must declare your self-employment income and expenses on your tax return.

Your employer should provide you with a P60 following the end of the tax year. If you have ceased your employment and have a leaving date within the tax year you should have received a P45. If you received a P45 you should not receive a P60.

If you do not have your P60 then you should in the first instance approach your employer for a copy. If they are unable to provide a copy you can contact HMRC and ask them to provide you with details of what has been filed as your employment income and deductions in the year.

If you commenced your self-employment in July 2021 you will need to complete a self- assessment tax return for the tax year 2021/2022. You should inform HMRC that you are self employed by 05 October 2022 and obtain a copy of your Unique Tax Reference. You do not have to wait until 05 October 2022 to do inform HMRC of your status.

You do not need to register if your self-employment income is less than £1,000 in the tax year. Please note this is income before the deduction of expenses.

The type of expense that you can claim as tax allowable will depend on the type of work you are doing.

As an employee you can claim any business expenses you have incurred on behalf of your employer provided that they have not been reimbursed by your employer.

As a self-employed locum you should be able to claim any business expenses against your locum income provided those expenses were incurred in generating that locum income. You then deduct your business expenses from your business income to calculate your profit.

If you are self-funding a course that will benefit your employer and it is allied to your work, then you should be able to claim the training as a tax allowable expense.

Other expenses you may wish to consider are:

All self-employed locum income where the income amount is greater than £1,000 in the tax year should be declared on a self-assessment tax return. Please note that the £1,000 refers to your income before the deduction of expenses and the £1,000 trading allowance is not a deduction. Once your locum income is greater than £1,000 you should declare the total to HMRC.

Do not forget to claim your self-employment expenses. In some instances, particularly if you are only starting in self-employment, it may be worth declaring even if your income is less than £1,000. Where your tax allowable expenses exceed your income, you can carry forward any loss to be set off against future income.

If you are receiving more than £1,000 locum income, then you should complete a self-assessment tax return for the tax year. A return is required even if you have significant business expenses which result in a loss. Remember any losses can be carried forward indefinitely and offset against future profits.

If your self-employed income before the deduction of any expenses is less than £1,000 in a tax year then you may not be required to file a self-assessment tax return. You should, however, consider if your locum income is likely to increase in future years. If you have significant tax allowable expenses which result in a loss you can carry forward any loss to offset against any future locum profits.

IR35 refers to whether an individual working as a locum through their own limited company should really be treated as an employee for tax purposes. Originally this decision was made by the individual concerned. As of April 2021, the decision for large companies, and as of April 2017 the public sector, has shifted to the business paying the individual.

If you are deemed to “fail” IR35 the business paying your fees will deduct income tax and employee’s national insurance through the PAYE system.

Those locums who are working as self-employed are still expected to make their own decision regarding their employment status based on their contract and actual working practices.

We have not come across a “R” tax code. There is a “BR” tax code which means that everything is taxed at basic rate (2021/22 20%) with no personal allowances. The BR code is usually used where there is more than one source of income and any tax allowances are being offset against one of the other incomes. I wonder if it is the BR tax code that you have heard about.

The self-assessment tax return each year is specific for that year and will have been adapted accordingly. For example, the 2020/2021 tax return has additional spaces for claims under SEISS.

As far as we are aware at this juncture there have been no changes to the way in which the returns are to be filed or any deadlines associated with them.

April 2020 did see the introduction of the Off Payroll Working legislation. If you are working through your own personal service company for a large business the decision as to whether you are effectively an employee and “fail” IR35 has passed to the business paying you. If you are a locum working as self-employed the responsibility for the decision should still be with you.

IR35 assesses whether you are effectively an employee and should be taxed as such. The decision is made based on the work contract and the reality of the working circumstances.

The decision as to who is affected by IR35 passed to the paying business in the Public Sector in April 2017 and to larger businesses where they are paying a personal service company in April 2021. Self-employed locums should still be making that decision for themselves.

In considering the IR35 situation with regard to an individual contract you need to consider 3 main principals:

Other factors are also taken into account and each contract should be considered separately. If you are concerned about a particular contract you can have it reviewed by an IR35 expert.

You are only affected by the new Off Payroll Working legislation if you are working through your own Personal Service Company (PSC) and for a large business. If the employer believes you fail IR35 they will deduct PAYE and NI from your payment.

You should, however, if you are working as a self-employed locum consider whether the IR35 rules would apply to each of the individual contracts and situations that you work under as this will help you to determine your employment status.

Remember you should consider every contract regardless of how long the contract is for.

If you have been self employed at any time during a tax year you will need to complete a self-assessment tax return unless your self-employed income before the deduction of expenses is less than £1,000.

You should declare all your income whether it is taxed at source or not. A tax liability is calculated based on your income less tax allowable expenses and allowances. Any tax already paid is deducted from the total liability to give you the amount of tax that needs to be paid or refunded.

If your professional fees have been paid for by your employer or you have already received an allowance in your tax code, you should not claim again on your tax return. Relief is only allowed once for the tax allowable expenses.

Should the adjustment be made through your tax code do check that HMRC are allowing the correct amount as they may be using a previous year’s value.

For more information or enquires, please contact our accountancy partners at Foremans LLP via email at ian.broomhall@foremansllp.com