After years of discussion, changes to HMRC’s employment status guidance for dentists will kick in from 6th April 2023. Under these new rules, if you’re an associate and want to be considered self-employed, you’ll need to work in a way that truly reflects this. If not, you’ll be deemed an employee of the practice you work within.

To date, most associates have benefited from an HMRC dispensation that states they are self-employed if they have a model British Dental Association (BDA) contract and work under those terms. Now, however, HMRC is withdrawing this dispensation.

This change is being made to better align contracts with the reality of working arrangements. Ultimately, it’s said to tackle the issue of so-called “self-employed” workers acting as employees, but with none of an employee’s rights. HMRC’s argument is that this will give workers more rights and protections, although (yes, you’ve guessed it) the happy upside is that they’ll also be generating more tax. This isn’t limited to the dental sector: there have been several high-profile cases around employment rights in recent years, involving everyone from television presenters to Uber drivers.

The first thing to state is that if you’re already definitively self-employed and act as such, nothing will change for you. In this case, it’s still important to ensure that you have an associate agreement in place that describes a self-employment relationship, but beyond that, you can carry on as you are. However, concern is greatest among those associates who, with everything now up in the air, aren’t sure if they really are self-employed after all.

The confusion is understandable because even if you’ve had a BDA contract stating you’re self-employed, the real marker of your status is how you actually operate. To decide whether you’re an employee or self-employed, you need to consider how you’re working, which trumps any contract you might have in place.

Somewhat unhelpfully, the criteria used to determine self-employment varies on a case-by-case basis, with only some markers applying to dentists. The difference often lies in the details. These details are around how much freedom you really have when it comes to choosing what you do and how you do it. This includes whether you have complete freedom over how and when you work, whether you provide some of your own tools, if you take your own financial risks, and if the practice is obliged to give you work (although this is far from a complete list).

If you’re unsure, ask yourself some questions. Can I choose my days of work? Can I deploy a locum if I want one? Do I have clinical freedom, and the freedom to turn down work? For most associates, the answers here will be yes. However, if the answer is no – if your activities are decided by the practice owner – it’s better to face this now.

The reassuring reality is that most associates who consider themselves self-employed probably are self-employed. Many corporates took steps to determine this back when IR35 changes came into place to tackle off-payroll working. And, if your status was formerly a little “woolly”, rest assured: HMRC has already stated that it won’t be taking a retrospective view. It’s only interested in ongoing issues from 6th April 2023 onwards, so whatever happened in the past can be set aside. Any penalties or tax shortfalls incurred from getting it wrong going forward won’t be borne by the associate, but by the practice owner, making the risk all theirs.

It’s worth noting that associates trading via a limited company are somewhat outside these rules. Companies cannot be employed, and so the practice cannot be at fault for determining employment status incorrectly. Instead, however, the associate is responsible for determining the employment status of the arrangement as though the company did not exist, and to tax themselves using IR35 rules if appropriate. The underlying relationship is therefore still important, but the blame is shifted.

If you’re not self-employed after all, this is the time to gain clarity. Despite what HMRC says, nobody wins financially (other than HMRC) by associates becoming employees. If your practice makes you employed, you’d gain paid holiday and sick leave, but you’d ultimately earn less and would have fewer opportunities to claim expenses. For the practice, there’s the additional cost of PAYE and National Insurance, and the added risk that your associates might leave to become self-employed elsewhere.

If you’d like to know more about the change, the BDA has produced an informative video with the tax barrister Jolyon Maugham QC. HMRC has also created its own online tool to check your employment status, though this has been criticised for using incorrect and subjective answers, and opening users up to the accusation of answering incorrectly.

By far the best course of action is to seek independent advice. If you’d like to discuss your employment status, or if you’re a practice owner keen to get things right, get in touch so that we can help.