Self employed status for Dental Associates under threat as HMRC launch investigation

A financial crisis may be on the horizon for many dental practices, especially large corporate dental bodies, if HMRC rule that Dental Associates - and other groups of dental practice employees who have previously been regarded as self employed - are to be treated as employees.

Earlier this year, HMRC wrote to circa 50 large dental practices, principally located across the North of England, to explore the activities of Dental Associates with a view to challenging their employment status. [A Dental Associate works within a dental practice and to all intents and purposes, they will have their own patient list and will share the costs of running that list with the principal (the owner), for an agreed percentage of their fee income, whatever that may be.]

Should HMRC determine that Dental Associates are to be treated as employees, the respective dental practices, whether large corporate bodies or small local practices, will be responsible for significant additional costs in the form of employer National Insurance Contributions (NICs), which are not recoverable costs. Furthermore, cash flow issues may materialise if ‘employed’ status is determined through the acceleration of tax and NIC liabilities payable to HMRC. As employees, Dental Associates will have to be paid via ‘pay as you earn’ (PAYE) whereby the employer deducts tax and employee NIC on a monthly basis and pays this to HMRC, alongside the employers NICs.

The decreasing value of NHS work and staff shortages have already had a significant impact on the profit of large corporate dental bodies, some of which have posted significant losses whilst others have started to restructure, disposing of the less profitable dental facilities within their portfolios.

Meeting additional non-recoverable costs will force the dental profession to review the nature of services provided (NHS and/or private) and the manner in which it delivers them, all of which may have significant implications for dental patients!

Further updates will be provided as HMRC reveals the outcome of its investigation.

If your Dental Practice or Associate has been challenged by HMRC over employee status, or have any queries regarding this please contact Morag.

Contact Morag

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