Tax changes for associate dentists

Mar 9, 2023

For many years, HMRC has accepted that Associate dentists are almost always self-employed. However, it has been announced that, as of April 2023, the guidance set out in ESM4030 is to be withdrawn.


What is the current position of Dental Associates?

To date, HMRC has agreed that associate dentists can be considered as self-employed. This means they don’t have to pay PAYE, and instead must pay Class 2/4 NIC instead of Class 1. This understanding was based on the existence of a standard agreement form for associate dentists that had been endorsed by both the British Dental Association (BDA) and the Dental Practitioners Association (DPA).

To qualify for this classification, associate dentists need to be hired by the Principal Dentist/Practice owner through agreements for ‘associates’ and carry out their work as outlined within these agreements.


What is changing?

From April 2023 each Associate’s tax status will be considered on a case-by-case basis. HMRC will no longer simply accept that an Associate is self-employed if engaged on a BDA or DPA contract, and ongoing Associate Dentist engagements should be considered in line with ESM0500 and HMRC’s Check Employment Status for Tax (CEST) tool. This means the practice owner will need to demonstrate self-employment for both new and existing associates using the normal status tests, including CEST.


Potential consequences

If HMRC successfully challenges the classification of the associate dentist on the basis that they believe them to be employed and not self-employed, this will result in additional costs for dental practice who’ll need to consider class 1 National Insurance, sick pay, and holiday pay for all their associates.


How to prepare

Practice owners must be proactive in preparing for upcoming changes by staying informed about the issue and understanding how it affects associates who are engaged through contracts at their practice.

It is advisable to start identifying any workers who are not paid through payroll and are not subject to PAYE and conduct the necessary due diligence as soon as possible. Our expert team are available to assist with this review and advise on any other financial planning aspects of operating in the dental sector.


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