The British Dental Association (BDA) has advised associate dentists to make sure that they comply with self employed rules as HMRC will remove a vital piece of guidance from April
HMRC is due to change an important long-standing piece of advice from April 2023 which means that associate dentists will have to meet off payroll working rules.
The BDA said that ‘HMRC has for many years accepted that associate dentists are almost always self-employed. Its guidance has included mention of our associate agreement in its employment status manual, but as of April, this paragraph will be withdrawn’.
From 6 April 2023, HMRC will be updating the Employment Status Manual (ESM) — ESM4030 to remove specific occupational guidance for associate dentists.
The majority of dentists work as associates, and appear to fall outside of IR35 rules as they pay to use the facilities at the practice, can choose what hours and when to work, and practices cannot tell them how to do their jobs or what type of work to undertake. In addition, professional development, specialist training, registration and indemnity insurance is self-funded.
Currently associate dentists, who use facilities in a dentist practice but are not hired staff members, can reporting earnings as trading income and not as employment income. In these circumstances the dentist is liable for Class 2/4 NICs and not Class 1 NICs. They also do not need to establish IR35 status, but this is set to change, despite claims from HMRC that nothing ‘has changed’.
HMRC said: ‘There has been no change in the rules and removing ESM4030 does not mean we have changed our view on the employment status of associate dentists.
‘In future however, we are asking associate dentists, or those who engage associate dentists, to make an assessment of employment status in the same way as other customers in the dental sector and elsewhere. Check Employment Status Tax (CEST) tool offers a quick and easy way to do this.’
So far, the British Dental Association believes that the removal of the paragraph from the guidance will not affect the status of associate dentists, but it appears that HMRC is expanding the focus of the off payroll rules for the private sector, although it will not open retrospective enquiries into previous practice.
In a statement the BDA said: ‘The withdrawal of this guidance will have no impact on the self-employed status of individual associate dentists. HMRC has told us that this is a change to their guidance, not a change to the self-employed status of associates. They have simply stopped referring to third party advice in their own guidance.
‘The National Association of Dental Accountants and Lawyers, the experts on the dental sector, also believe that the change in guidance will have minimal impact. Furthermore, HMRC will not be using the withdrawal of the guidance as a reason to open retrospective enquiries into periods prior to 6 April 2023.’
However, the BDA said that dental practices should review their associate arrangements.
‘It is vital that practice owners and associates are prepared for the different HMRC approach, which means being aware of the issue and understanding what factors make an associate employed, and those that lean towards self-employment.
‘HMRC will no longer simply accept that an associate is self-employed if engaged on a BDA contract and the terms are being followed. The practice owner will need to demonstrate self-employment for both new and existing associates using the normal status tests,’ the BDA said.
There are an estimated 42,200 dentists registered in the UK.