The community pharmacy sector could face an additional tax bill of at least £550 million for the six years to 2020-21 if all locum pharmacists were classed as employees, according to the Company Chemists Association.

The figure is quoted in an article in the Financial Times, published on December 27, about the HMRC’s long running investigation into whether self-employed locum pharmacists used by pharmacies are employed for tax purposes. The CCA is reported as saying that most of its members were in dispute with HMRC over the issue.

HMRC has concluded all locums used by all pharmacies should be employed for tax purposes. In August 2023, HMRC made a settlement offer to many large pharmacy chains for backdated income tax and employers’ national insurance, the FT reports.

“However, the industry strongly disputed the decision and has accused HMRC of seeking to retrospectively change the way it treats the tax position of self-employed pharmacists. It argued pharmacies had for years followed HMRC-issued guidance, which has since been withdrawn,” the newspaper says.

Locum pharmacists made up about one in five of the workforce, says CCA chief executive Malcolm Harrison, and any “unwarranted” tax bills for companies would put pressure on margins and lead to a closure of pharmacies.

The FT reports that “until recently, sector-specific guidance from HMRC set out in what scenarios pharmacists working as locums could be considered self-employed for tax purposes. However, the agency withdrew that guidance in 2023 and said companies and individuals should instead use its “check employment status for tax” (CEST) tool to assess tax status”.

Commenting after publication of the story, Mr Harrison said: ““We have met with HMRC on several occasions, and they have made it clear to us that they can see no reason why locum pharmacists should be considered anything other than ‘employees’.

“Therefore, we are concerned that HMRC has made a blanket decision that all locums should be treated as employed workers for tax purposes and will seek to claw back retrospective income tax and employers’ NIC across a number of years. Moreover, the sector will face additional future costs of at least £100m per year, through employers’ NIC and other on-costs.

“We are worried that this decision will affect every pharmacy, big or small, across England, Scotland and Wales. Despite this, HMRC have repeatedly refused to evaluate the impact this could have on patients.”