HCR Law Events

4 April 2022

Tax toothache for associate dentists

Associate dentists are currently automatically self-employed under professional association contracts.

This automatic designation is being withdrawn, and their employment status determined on a case-by-case basis instead.

To mitigate risks of HMRC investigation, the change means additional responsibility for practice owners, to ensure their associate dentists are not employees.

Existing Concessions for associate dentists practicing in premises run by other dentists

Currently where British Dental Association (BDA) and the Dental Practitioners Association (DPA) agreements are used, and their terms followed, the income of associate dentists is assessable under self employed trading income rules, and not as employment income.

One consequence of this is that associate dentists are liable for Class 2/4 (National Insurance Contributions) NIC in the same way as other self-employed people, rather than Class 1. Another advantage is the expenses it’s potentially possible to set off against self employed income.

This is regardless of the NHS General Dental Services Contract, in force since April 2006 which provides for regular payments akin to a salary, providing the associate dentist continues to be responsible for paying their share of laboratory fees etc for work relating to their patients, and other terms of the standard agreement are followed.

The change in associate dentists’ employment status marks an opportunity for HMRC to increase NI contribution and income tax revenues, and shift responsibility of pension provision away from the state and onto third party employers.


HMRC’s status manual  makes explicit that ‘A dental practitioner may be included in the General Dental List only if an undertaking has been given to provide a general dental service as a principal. In consequence a dental surgery may serve a number of dentists each responsible professionally as a principal’. This suggests the historic policy intention to treat associate dentists as self-employed was to reflect their individual responsibility.

A recent case has highlighted a change in approach – in Hughes v Rattan [2021] EWHC 2032 (QB) a dental practice owner was found to have a non-delegable duty of care to a practice patient and was vicariously liable for the acts and omissions of three self-employed associate dentists conducting treatment. The relationship was found to be sufficiently akin to employment to make it fair and just to impose vicarious liability. This recent decision suggests practices rather than individual dentists are now the appropriate party to sue.

1 year to go – changes proposed by HMRC – 6 April 2023

The special employment status rules for associate dentists are being withdrawn with effect from 6 April 2023 and the status of both new and ongoing associate dentist engagements must be considered on a case-by-case basis in accordance with tax law. HMRC does provide online guidance for determining the status of a worker generally, to determine whether they are employed or self-employed. The following is a non-exhaustive list of issues that are relevant to that employment status:

  • control
  • personal service
  • equipment
  • financial risk
  • basis of payment
  • mutuality of obligation
  • holiday pay, sick pay and pension rights
  • part and parcel of the organisation
  • right to terminate a contract
  • opportunity to profit from sound management
  • personal factors
  • length of engagement
  • intention of the parties

Expressed simply, those dental associates whose working arrangements are subject to a higher degree of control than normal are most likely to see their employment status change, to that of an employee.

What action is needed?

CEST is an online tool provided by HMRC which generates an employment status determination that HMRC will stand by, provided that accurate information reflecting practical reality is inputted; it must reflect the reality of how the relationship operates. CEST is completed anonymously.  It is vital is to keep a copy of the results to support any employment status decision.

In a minority of cases the CEST tool generates indeterminate results and, in such cases, it is advisable to seek advice from an appropriate tax expert.

Likely costs of change

It is likely that from 6 April 2023 many associate dentists will have employed rather than self-employed status and will therefore be subject to different taxes, different and greater NIC payments, and will not be able to claim the same expenses. For example, the self-employed:

  • pay significantly lower NIC. It is at least 15.8% (13.8% + 2%) cheaper in NICs terms to engage a freelance than take on an employee, and the saving rises to 25.8% (13.8% + 12%) if the individual earns below £50,270. This is a saving of over 25% of gross pay. This alone provides a significant fiscal incentive in favour of self-employment.
  • can deduct costs incurred wholly and exclusively for the business, although not travel to and from their place of business. In comparison, employees can only deduct expenses incurred wholly, exclusively and necessarily in the performance of the duties.
  • cash-flow is also reduced for employed workers compared to self-employed, as they are paid salary net after tax.

Associate dentists who find themselves with employed status will therefore pay higher NIC and be unable to claim expenses unless necessary for the performance of their duties. They will, however, be entitled to statutory sick pay and statutory maternity and paternity pay, with all of the associated costs and potential downsides to dental practices.

The responsibility will lie with dental practices to check the employment status of dental associates. Emerging evidence suggests that HMRC has written to many associate dentists reviewing their employment status already. In these circumstances, it is important to seek good quality advice from a tax specialist.

Employment status in  the Employment Tribunal is not directly relevant to HMRC, and employment law cases may not influence HMRC’s determinations.  In particular, if an individual is defined as a worker by the Employment Tribunal, that has not automatically affected their status for tax purposes. Indeed, in some cases the Tribunal has determined that an individual is employed for employment law purposes, but self-employed for tax purposes.

To illustrate some of the differences, in one recent case, Main v SpaDental, the Employment Appeal Tribunal found a dentist attempting to claim holiday pay was in fact self-employed and so not entitled to it. Issues such as the dentist’s autonomy over fees, over his working hours and location, and his responsibility for his own work and correction of errors, played a part in the decision.

But tax decisions are made on different grounds – two recent cases hinged on whether work in specific circumstances constituted a contract of service. That contract was agreed to exist if there was mutual obligation, exercise of control, and other relevant factors consistent with being a contract.

These tests from cases that have been before the courts are likely to be relevant in the context of associate dentists’ employment status under the new scheme.

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About the Author
Sarah Woodall, Head of Tax, Partner (Barrister)

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