IR35 quickly became one of the most hotly debated and politicised pieces of tax legislation that HMRC have announced in a long time. We’ve written about this topic in the past and the legislation isn’t exactly new – its first form came out way back in 2000. However the shift of the onus from contractor to contractee, some high profile cases involving a number of TV presenters (including our hero Lorraine Kelly, victorious in her fight against the Revenue) and the chaotic sprint to roll out the new laws mean IR35 is firmly in the mind of many at the moment.
With the COVID-19 crisis, HMRC have taken the wise decision to delay rolling out the new rules until April 2021 at the earliest, but this doesn’t mean the spotlight has gone away from IR35.
Given the limelight the topic is getting, there’s a raft of inaccurate and, frankly, misleading comments being batted around about the new rules. As we’ve discussed before, this is perhaps the single most dangerous element of the legislation. The rules are so confusing, and there’s so little clarity provided by HMRC (intentional? Who knows) that the key risk is dental groups take the least risky route and simply apply the rules without properly considering each situation and the underlying circumstances.
So, where do associates who operate through a limited company stand?
1. Remember, the rules changes only directly impact ‘medium to large’ size corporates. To fit into this category, the employer must meet two of the three following conditions:
- More than 50 employees;
- Turnover of more than £10.2 million;
- Assets of more than £5.1 million.
If the practices you work at do not meet these conditions, the rules are unchanged. The practice does not need to assess your employment status (however existing IR35 rules remain in play).
2. The BDA has released their own statement explaining they believe ‘the IR35 rules pose little risks as regards associate dentists’. Therefore, if you are contracted with your practices under the standard BDA or DPA contract – and are actually operating in line with the contractual terms – you have less to worry about. This is because the standard BDA associate agreement helps demonstrate that you are self-employed. Operating through a limited company does not impact this underlying assumption, nor does the changes to IR35.
3. There are factors you can do to demonstrate your status as self-employed, rather than employed. Crucially, things such as the freedom (to some degree) to choose your working hours/days and the ability to earn more income by providing private treatment help show your independence. You should be considering if you are able to easily prove these points. Each case should be assessed on its own merits and it is not possible to place importance on any one factor above another.
Clearly, however, this is unfortunately still a complicated and confusing area of tax law. And whilst we can build confidence in an associate’s status, there is a risk other advisers or corporates may not think carefully enough.
Touching briefly on hygienists, it has long been a general feeling that, unlike associate dentists, hygiene professionals do not have the same level of freedoms and independence, and as such their status as self-employed has been a much greater risk. Fundamentally, the way they operate is simply different to an associate dentist and as such HMRC’s intentions to target those who should be employed should come as an even greater warning signal to practices thoroughly review the status of your hygienists.
If you’re worried about your self-employed status, or how your associate service company may be affected by these changes, get in touch with Hive today for a more in-depth analysis of your position.