UK Dental Professionals Being Targeted By HMRC

As per change in IR35 rules for freelancers in public sector in April 2017, HMRC is currently busy in challenging the employment status of dentists working for big dental companies on freelancing basis. Among these big dental companies, many companies did a lot of work for National Health Service (NHS) too.

HMRC IR35 Rules For Freelancer Working In Dental Companies

After implementation of IR35 rules for freelancers in public sector, freelancer can no longer determine their own IR35 status and the person or the department who hired the freelancer will be the deciding authority. HMRC told that every individual or department need to use IR35 test in order to determine the status of the freelancer and the departments who obtain it wrong will face financial penalties from them. However in 2018, around 54% of contractors who sat in the test passed it whereas 46% failed the test or the result is undefined. In 2018, HMRC send written notices to around 50 dentists in the north of England to know their working practices as well as self-employed tax status. HMRC says that the individuals working as freelancers are employees of big dental companies whereas dentists say that they are freelancers providing services to big dental companies on freelancing basis. HMRC also says that all freelancer dentists are employees working for big dental companies, therefore, these companies need to pay employer’s national insurance & provide employees with benefits too. It can create greater impact on dentists financially and their take home salary may reduce by 40%.

Also Read: How To Save Tax As Dental Or Healthcare Professional?

Dentists Targeted By HMRC Over Tax Evasion

As per statistics report 2018, There are around 35000 dental practitioners employed in UK who are providing general primary care dental services to patients by working inside NHS or through private practice or by combination of both.

HMRC has taken an unusual step by writing to a representative sample of dental associates and inviting them in order to attend the meeting and define their engagement as associates to HMRC. May be around 50 associates received such a letter. If you will see the Rodrigues decision (employment tribunal), you will see how closely he analyzed the relationship of large dental business IDH & its former associates and later found him to be an employee.

It is not only an issue of concern for associates & hygienists but it is also an issue of concern for their principal.

HMRC Launches Online Tax Guide For Dentists

In case if HMRC decides that an associate is an employee, it is principal who will be charged with unpaid PAYE & employer’s NIC. Most of the associates & hygienists agreements are well written and contains a contractual indemnity clause in relation to tax in favour of the principal. Principal may settle this liability by recovering it from associate or hygienist. It is good for associates, hygienists and principals that some options are still available with them that can reduce the risk arising over their tax paying status.

The first & the foremost step which can help associates or hygienists are simple amendments to their agreements. These amendments to the agreements may assure HMRC that associates or hygienists are genuinely self-employed. Recently, British dental association updated its template agreements in order to specifically deal with this risk.

As dental practice may not have access to these agreements, they may require further guidance in order to protect themselves from HMRC’S IR35 rules for public sector in case of freelancers.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.