Dental associates brace for impact of employment status changes

A change in HMRC’s guidance on the employment status of associate dentists means there could be implications ahead for dental practices.

Emily Pearson, a Tax Executive in our Worcester office, looks at how the change could bite associate dentists, hygienists and dental therapists.

Self-employment has long been the default status for associates in general dental practice.

However, recent developments in general employment law will result in HMRC withdrawing the longstanding guidance on associates from 6 April 2023.

The withdrawal of this guidance should have little or no impact on the self-employed status of most associate dentists; indeed, HMRC has advised that it sees this merely as a change to its guidance and not as a change to the self-employment status of associate dentists.

However, it is important to note that HMRC will be looking at individual cases rather than accepting that an associate engaged via a BDA or DPA contract will be self-employed.

So, it is essential that the contract between the associate and the practice truly reflects the working arrangements, and the practice owner has fully considered the status of new and existing associates using the relevant tests.

Background:

The UK has a three-tiered employment status framework: self-employment; employment and ‘worker’ status.

Worker status is between an employee, with full employment rights, and being self-employed with no employment rights. It is still a form of self-employment, although workers will usually be included on the payroll.

More information regarding the different statuses can be found in our article: What is employment status and why is it important?

There are a small number of employed associates in the general dental services, but the vast majority are self-employed. This is due largely to contracting arrangements with the NHS.

In England and Wales, practice owners tend to be the NHS contract holder, or the Provider, having tendered for the business. That contract enables them to engage other practitioners to deliver the care to patients.

In Scotland and Northern Ireland, individual NHS dentists have their own NHS contract.

Recent developments:

In 2017, the Taylor review of modern working practices was published.

The government said it would implement recommendations from that report but was not specific on which ones. We await developments, and it is possible that implementation of some of the recommendations could impact on the self-employed status of associate dentists.

More recently, Employment Tribunal and Employment Appeal Tribunal decisions have indicated that some associates may now be considered workers and therefore have employment rights. The most relevant of those rights being protection from unlawful discrimination and paid holiday.

At present, the recent tribunal decisions are believed to be only relevant to practices providing care in England and Wales, in view of the differing contracting arrangements with the NHS in Scotland and Northern Ireland.

As always, much will depend on the individual circumstances of the relationship between the practice owner and associate.

What is the risk for dentists and hygienists?

With a change in guidance, contracts need to be reviewed to ensure that they reflect actual working relationships and as such the correct employment status.

If they are no longer considered self-employed, the associate will be treated as an employee. Given there will be additional costs for the practice if that is the case, it may well be that there are changes to an associate’s remuneration.

For large dental practices the onus will be for the practice owner to determine the status of their associates, and each contract should be reviewed in conjunction with HMRC’s CEST review tool.

If HMRC determines that an associate is not self-employed, the Principal Dentist or practice owner could become liable for the income tax and “employee” national insurance, along with the employer national insurance if there is not an indemnity clause in the contract to recover those costs.

The status of hygienists or dental therapists will also need to be considered. As they may not have the same freedoms and independence as associate dentists, their risk may be greater.

At present, HMRC has not stated whether there will be an amnesty on historical cases but, if not, HMRC could go back four to six years. There could be an offset for the taxes that have already been paid by the associate dentists, but the dental practice could be liable for at least the employer’s national insurance at 13.8%.

This could be very costly to practice owners and we recommend seeking advice on current arrangements.

Pros and cons of worker v self-employment status:

For the associate:

The benefits from being deemed a worker will include paid holiday, more employment rights and potentially more integration with the rest of the practice. However, the downside is that there is likely to be a loss of autonomy in the role with the practice having more control over day-to- day activities, hours of work etc. The associate is also likely to have higher tax and NIC costs.

For the practice:

The practice will have more control over the associate but will also have higher costs due to holiday pay and employer’s national insurance.

What actions are required?

Principal Dentists and practice owners are advised to review contracts for all self-employed workers, and to use an appropriate agreement. Each contract needs to ensure it reflects the true nature of the engagement, and a SDS (Status Determination Statement) should be prepared when relevant.

Associate dentists, hygienists and other dental therapists should also review their contracts.

The Check Employment Status for Tax tool can help determine if the off payroll working rules apply. You may want to consult one of our dental industry specialists.

If HMRC contact you with questions about employment status, seek advice before you respond.

If you have any questions regarding any of the above, please contact your normal Bishop Fleming contact or a member of the Employer Solutions team.