Dental Associate status under review by HMRC – impact for you and for Principals

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

Call +44 (0)330 024 3200 and discover how we can help you.

by Debbie Wilson, Associate


In recent months, news started to surface that a number of dental associates have been receiving letters from HMRC, informing them that their employment status for tax purposes is under review. So what’s it all about and why now?

Self-employed or worker?

In April 2017, HMRC updated their Employment Status Manual. The purpose of the document is to provide guidance on issues relating to the employment status of individuals. It’s a big document, containing sections on particular occupations with detailed guidance on how the income of individuals in that profession should be treated for tax purposes.

One of these sections relates to dentists, with a specific sub-section on dental associates. If you read that short paragraph, the issue becomes clear.

There are standard forms of agreement for dental associates approved by the BDA (British Dental Association) and DPA (Dental Practitioners Association). It specifically relates to dental associates working on premises that are run by another dentist (the ‘principal’).

Now, what HMRC are saying is that, where these agreements are in use and the terms of the agreement are followed, the income received by the dental associate will be taxed under trading income rules (i.e. self-employed), rather than employment income rules (i.e. worker).

However, according to employment law, there’s something called The Standard General Dental Services Contract, which is based on the National Health Service Act 2006 and came into force the same year.

According to this standard, classifying dental associates as self-employed is not that straightforward and less flexibility exists in how their expenses should be treated.

On the back of this, HMRC has stated in their Employment Status Manual that, providing the dental associate “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 above guidance will still apply”, meaning they will continue to be classified as self-employed.

The big issue is therefore that there exists a bit of a contradiction. HMRC has one agreement in place for classifying the employment status of dental associates, but this agreement is not entirely in sync with what is stated under law. But it’s been like that for a number of years, with HMRC happily accepting dental associates as self-employed.

So the question is, if the National Health Service Act has been enforced since 2006 and HMRC’s Employment Status Manual was updated over a year ago, why the sudden change of heart to start reviewing the employment status of dental associates now?

It’s a good question. Some people are of the opinion that it is because of the rulings in the recent number of high-profile court cases relating to similar circumstances, including Uber, Pimlico Plumbers and CitySprint. Others simply believe the move by HMRC is in an effort to collect more tax revenue. Whatever the reason might be, the employment status review is very much underway and if you are a dental associate, at the very least, you should be aware of it.

What should you do if you receive a letter?

The official statement from the BDA is to contact your accountant before responding. And this is very good advice.

There are numerous consequences if your employment status suddenly changes from self-employed to worker. The number one concern would be the scope of the financial impact.

As an employee, you might not enjoy as many tax benefits as a self-employed dental associate while you will also have to pay Class 1 NIC’s, instead of the lower rate Class 2/4 NIC’s.

There are of course also benefits to being classed as an employee, including statutory holiday/sick/maternity/paternity pay, guaranteed minimum wage and protection against unfair dismissal.

Implication for principals

A change in the employment status for dental associates will also have a significant impact on dental principals running a dental practice, both financially as well as administrative.

There are three main aspects to be aware of that can have the biggest and most immediate impact:

Payroll (PAYE)

If dental associates become employees or workers, you will need to add them to your payroll and pay them through HMRC’s PAYE (Pay As You Earn) system.

Through the PAYE system, it’s the employer’s responsibility to deduct tax and NI contributions (Employee Class 1 NIC’s, mentioned above) from employee salaries, as well as pay Employer Class 1 NI contributions on all employee earnings (including Class 1A and 1B contributions on employee expenses and benefits). Contribution rates are contingent on very specific earning thresholds.

Other common payroll deductions include pension contributions and student loan repayments.

Workplace Pensions

The Pensions Act 2008 requires all employers to offer workplace pensions and must enrol eligible employees into the scheme. This is also known as ‘automatic enrolment.’

As an employer, you have to contribute a minimum of 2% of eligible earnings to your employees’ pension plan (this will increase to 3% in April 2019).

The qualifying workplace pension for NHS employees is the NHS Pension Scheme. All eligible employees should therefore auto-enrolled into it.

This scheme requires employers to contribute 14.38% of employee’s pensionable pay, while employees will contribute according to a tiered table based on their earnings bracket (ranging between 5% and 14.5%).

Although employers are required by law to automatically enrol employees into a workplace pension, the employee has the right to opt out of the scheme at any time.

Employee Rights

Under employment law workers and employees have certain rights and employers have certain responsibilities. Understandably, this is a vast area of legislation and there are a lot of legal and administrative requirements dental principals will have to comply with if the employment status of dental associates changes.

Some of the more common stipulations to keep in mind include the following:

The list is not exhaustive and there are of course many other requirements that can, and will, apply to your specific situation. Employment law doesn’t cover self-employed people in most cases so many dental principals would not have had to deal with these requirements in the past.

The important thing here is to beware of the possible effects on your practice and plan in advance to make provisions for these additional financial and administrative obligations.

In short, there’s a lot to consider. If you are unsure as to the full impact this will have on your employment income or on the bottom line of your dental practice, please get in touch with us, we will be happy to discuss the possible impact scenarios with you in more detail.

Contact Debbie Wilson on +44 (0)330 024 3200 or email

Do you need extra information?

Debbie Wilson - Director at Hillier Hopkins

If you are thinking of selling an asset (personal company shares, holiday home, land etc), Debbie can help you to achieve your aims in the most tax efficient way.

Contact Debbie at or on +44 (0)20 7004 7139