We understand that Revenue has written in recent weeks to the Irish Medical Organisation to set out its position on the operation of PAYE on locums and the treatment of cases from earlier years. Revenue's view is that “generally speaking these doctors are employees”. We are publishing the relevant extracts of the correspondence, as provided to us by Revenue.

Many Chartered Accountants in practice will have come across cases where Revenue challenged the non-operation of PAYE in medical practices, and indeed it was a topic of some debate at the tax stream of Chartered Accountants Ireland's Annual Conference in May. Revenue wrote to the Irish Medical Organisation on 24 May on a range of issues, and the following extracts are reproduced without prejudice:

“Doctors engaged in GP practices

Having considered the position of doctors engaged for short-term work in GP practices, where such doctors are paid by the hour/week/month etc., it is the Revenue view that generally speaking these doctors are employees. The payments made to them by GP's should be subject to the appropriate deductions under the PAYE system for tax, PRSI and income levies. However, it is accepted that there may be exceptional cases where the terms of engagement differ from the norm and in these instances Revenue is prepared to look at these on a case-by-case basis. Revenue will consider each case on its own merits and in cases of doubt a submission outlining the terms and conditions of the engagement should be submitted by the GP to their local Revenue District for consideration.

On the issue of a concessionary treatment for holiday relief, the engagement of short-term employees whether for holiday relief or for other reasons is a common occurrence in many sectors and professions. A key fundamental to the fair operation of the PAYE system is a level playing field and common treatment for all employees regardless of the length of their engagement with an employer or the sector in which they work. A concessionary treatment for one group of employees would undermine the PAYE system and in our view create a dangerous precedent. Therefore it is not possible to allow any concessionary treatment to doctors employed for short periods in GP practices.

Where doctors were engaged by a practice and the PAYE system was not applied in 2009 to the payments, this can be rectified immediately provided the case is not already under audit or investigation. The GP should submit a Supplementary Form P35 to the Office of the Collector General by using the Self Correction rules as set out in paragraph 10.5 of the Code of Practice for Revenue Auditors (available on our website at www.revenue.ie) on or before 15th February 2011. They should include a computation of the correct tax, PRSI, levies and statutory interest payable and submit the payment with the submission. This will avoid penalties being charged. For 2010, any additional tax, PRSI and levies accrued so far on foot of payments to GP's should also be remitted to Revenue through the monthly/quarterly P30 process.

In the context of a Revenue audit, a decision to open earlier years will be taken in accordance with the Revenue Code of Practice for Auditors mentioned above. Some cases may already be under audit, others may be selected in the future. Revenue will take a pragmatic approach where it can be shown that the income has already been declared by the “locum” doctor under self-assessment.

In this context, GP's who are not under audit or investigation, may wish to consider whether or not an unprompted voluntary disclosure is warranted for all the years affected.

As discussed at the meeting, Revenue has already instigated enquiries with all GP's in one region regarding the engagement of doctors by GP practices. These enquiries may be extended to other regions over time. In the meantime, Revenue advises that all GP's should seek to regularise the tax situation with regard to doctors engaged by them immediately. Failure to do so may increase the likelihood of being selected for audit.”