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Is the Self-Employed Status of Associates Under Threat?

From time to time discussion breaks out among dentists regarding the validity of the status of Associates as self-employed business people for tax and other purposes. The recent UBER and Pimlico Plumbers Employment Tribunal Cases have brought the issue of tax status to the fore again causing alarm in some dental quarters. 

In each of these cases so called self-employed business people were classified as “Workers” and were therefore not deemed to be self-employed. These cases were pursued by the workers, rather than by HM Revenue & Customs, and focused on holiday and sick pay entitlement rather than whether or not PAYE tax should have been deducted from earnings. 

Despite the recent Tribunal decisions, Associates, and Principals engaging Associates, should not be too concerned about tax status and being forced to deal with associate income under PAYE. This is on the understanding that Associates are engaged under “standard forms of agreement” and, most importantly, both parties carry out their business under the terms of the agreement.

The tax status of Associates in the eyes of HM Revenue & Customs was clarified shortly after the introduction of “New” NHS Contract in April 2006. At that time an urban myth grew up that the new GDS Contract changes spelled the end of self-employed Associates.  The apprehension was that Associates would receive a set payment each month for NHS work. This would look like a salary payment which should be subject to employment taxes under PAYE.

Thankfully these concerns proved to be unfounded and, following representations from Morris & Co, HMRC updated their guidance manuals to recognise the new contract. This guidance remains unchanged despite yet another scare in 2007 caused by an article published in the Times Online suggesting that associate dentists were about to be targeted by HMRC. At that time HMRC advised Morris & Co that ….. “the new standard general dental Associates contract which came into force on 1 April 2006 did not affect our existing published guidance stating that, where standard forms of agreement for associate dentists which have been approved by BDA and GDPA are used and followed, the associate dentist is regarded as self-employed for tax and NI purposes”.

As things currently stand HMRC guidance contained in the “Employment Status Manual ESM4030 Particular Occupations: Dentists” states:

“It should be noted that there are standard forms of agreement for ‘associate’ dentists which have been approved by the British Dental Association (BDA) and the Dental Practitioners Association (DPA) (sic). These agreements relate to dentists practicing as Associates in premises run by another dentist. Where these agreements are used and the terms are followed, the income of the associate dentist is assessable under trading income rules and not as employment income. In these circumstances the dentist is liable for Class 2/4 NICs and not Class 1 NICs.”

Whist the recent Tribunal cases do highlight issues surrounding employment status it seems that HMRC remain content that, as long as dentists play the game properly, Associates can continue to safely be regarded as self-employed.