Under tax IR35 legislation due to come into force on 6 th April 2023, ‘dental associates’ may no longer be classified as self-employed. From 6th April 2023 businesses will be obliged to consider whether IR35 applies to their engagements with personal service companies. This means an associate or hygienist can no longer determine their own IR35 status, and the person/department who hired them, will be the deciding authority instead.
The corporate dental groups rely on the status of associates to be self-employed. If upon HMRC scrutinising an associate’s status, they are unable to show that they are self-employed, they will be reclassified as employees and will no longer qualify for tax relief on expenses.
If an associate is deemed an employee, the practice will pay Class 1 National Insurance contributions and provide benefits to their ‘employees’ which will be costlier than the lower rate Class 2/4 national contributions for self-employed associates.
If HMRC decides that an associate is an employee, it is the owner of the practice – the ‘principal’ – who will be charged with the unpaid PAYE and employer’s National Insurance contributions.
It is now extremely important to look carefully at associate and hygienist agreements. In the case where an associate is deemed to be an employee, there will need to be contractual indemnity clause in relation to tax in favour of the principal, so the principal can recover this tax liability from the associate or hygienist.
If you require advice on this, please contact Dental Solicitors Jacobs Legal on 0161 792 8142 or Jonathan directly on info@jacobs-legal.co.uk or 07776 132339.