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Dental Associates Update – Employment Status and HMRC

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6 August 2018

Dental Associates Update – Employment Status and HMRC

Changes in the ‘gig economy’ have steadily started to filter into all walks of professional life.

It has been a well-established principle for Dental Associates that they will be classed as self-employed individuals. The caveat to this from HMRC’s internal status manual was that the classification was allowable where the associate practices in a premises which is owned and operated by a different dentist and they are subject to an associate agreement which follows the BDA model (or subject to an agreement which is overall consisted with a BDA or DPA model). The terms of this written agreement, of course, actually had to reflect the reality of the working relationship.

If these key hurdles were overcome then the associate would be liable for Class 2/4 National Insurance not Class 1 and would be self-employed for tax purposes.

HRMC appear to now be swimming against the tide and are sending letters to associate dentists notifying them of HMRC’s intention to review their employment status. What HMRC appear to be looking at is whether it is actually true and correct that associates are self-employed or whether they should be properly classified as employees / workers. This will have a direct impact on what National Insurance is payable and also on what rights individuals associates have.

“Employment status” is a flexible construct and recent judgments from the Court of Appeal in Pimlico Plumbers, Uber, City Sprint, Addison Lee etc  (where “self-employed” individuals have actually been found to actually be workers or employees) have been high profile and show that there is a willingness from the courts to look at how individuals actually trade, in order to establish what their proper status should be.

There are three main rules in respect of being an ‘employee’ – you have to be subject to the control of your employer, you have to be obliged to undertake work when it is offered (and the employer is obliged to offer work) and you are obliged to perform this work yourself. ‘Workers’ are a different type of engagement than being an employee and a worker does not have to accept work when it is offered and a company does not have to offer work (this is common in the zero hours worker style of arrangements) but workers are still bound to perform their services personally. Self-employed individuals can do work when they please, how they please and can send others to do work on their behalf.

The above is the starting point (and is certainly not the end point) on how to establish employment status. The headline judgments in cases such as Pimlico Plumbers show that there is a willingness from the courts to look at employment status in the terms of the reality of the relationship between two parties. Assessments of the proper status for dental associates could hinge on whether those individuals can be said to be in business on their own account or whether they are able to freely send locums to perform their services. It’s worth pointing out that this was what swung the decision for Deliveroo riders who could (amongst other things) allocate a substitute to do their work for them and so were found to be self-employed.

In terms of the HRMC letters to associates – these approaches are a similar tactic as employed by HMRC in other areas of healthcare, for example with many care homes receiving notification of “pending” investigations into the payment of the national minimum wage without a formal investigation actually taking place. It would appear that HMRC are gathering information and responses to assess whether their ongoing classification of associates as being self-employed stacks up in light of the recent rulings from the courts.

If you are an associate dentist or a dental practice owner and wish further to seek advice on tax status, it is going to be a good idea to liaise with your accountants / financial advisers in the first instance. Send them your associate agreement and details of how the relationship works in practice.

If you have received a letter from HMRC as an associate, the BDA have requested that they be informed as soon as possible to allow them to gather information on the approach of HMRC. Enquiries can be sent to Advice.Enquiries@bda.org.

Toby Pochron is an Employment Law Partner at Ironmonger Curtis based in Sheffield. The Employment Law solicitors at Ironmonger Curtis can assist with queries regarding employment status (from an employment law point of view) and can advise on the proper drafting and negotiation of dental associate agreements. If you want an agreement put together or you want to make sure you are best protected, contact our Employment Team.

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