Potential tax changes for dental associates

HMRC’s position is changing to one where the employment status of an individual will be determined on a case-by-case basis following the points listed in ESM0500 and using the CEST tool which should be carried out accurately and honestly buy all associates. Largely the previous position of HMRC should not impact the self-employed status of the majority of associate dentists but is in line with HMRC’s goal to stop making reference to third party advice in their own guidance.

What is the current position of dental associates?

To date, many Associate Dentists have relied on the fact that their income is seen to be trading income as opposed to employment income. No PAYE would be due and Class 2/4 NIC would be due rather than Class 1. For this to apply, Associate Dentists are engaged by the Principal Dentist/Practice under agreements for ‘associates’ and are carrying out their work in accordance with the terms outlined within these agreements. These agreements relate to dentists practicing as associates in premises run by another dentist. This position is reflected in the current HMRC manual which states;

“These agreements relate to dentists practicing as associates in premises run by another dentist. Where these agreements are used and the terms are followed, the income of the associate dentist is assessable under trading income rules and not as employment income.”

How is this position changing?

HMRC announced that its guidance for associate dentists will be withdrawn with effect from April 6th 2023. After this date the status of new and ongoing associate dentist engagements should be considered in line with ESM0500 and CEST. All Associates’ tax status should be considered on a case-by-case basis depending on the circumstances of each individual dental associate.

What do the rules in the esm0500 and Cest look at?

  • Does the principal have the right to reject an appropriately qualified substitute sent to undertake the Associate Dentist’s role in their place?
  • Does the principal have the right to decide how the work is undertaken?
  • Who decides working hours?
  • Who decides where the work is undertaken?
  • Who provides equipment, for example, dental chairs or X-ray machines?
  • Would the Associate be responsible for correcting any work, at their own cost?
  • Could the Associate work at another practice simultaneously?

What are the possible consequences?

It has been suggested that even with this withdrawal there will be no change in the self-employed status for the majority of associates. Associates and practice owners are advised to go through the online HMRC CEST test.

If HMRC argue that Associate Dentists are employees, this will result in additional costs for dental practices who’ll need to consider class 1 National Insurance, sick pay, and holiday pay costs, which would have a significant impact on profitability. Associates’ income may also be under pressure, as the engaging practices factor in the additional costs into Associates’ remuneration packages.

If you are an associate or a Principal and are concerned about the change in rules please get in touch with Jason Sidney, Partner (jason.sidney@rudlingsllp.co.uk or 01842 754151)

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