Service Categories: Dental Associate

The tax pendulum continues to move for associate dentists. HMRC have announced that from April 2023 they will withdraw the paragraph in their guidance which mentions the BDA and DPA standard associate agreement.

What do the changes in IR35 mean for associate dentists and practice owners?

Up until recently, associate dentists were given a blanket concession by HMRC that allows them to be treated as self-employed for tax purposes. 

This has allowed associates to process their income for tax purposes as trading income, as opposed to employment income. 

Starting from April 2023, however, dental practices will be required to use the CEST (Check Employment Status for Tax) test to determine the tax status of all of their dental associates under contract. 

If a dental practice is found to be treating an associate as self-employment, when in fact they act as an employee, they will be liable to additional tax. 

What this means for dentists is that you will now need to determine your employment status (self-employed or employee of the practice) and act accordingly in your day-to-day business.

If you process your tax as a sole trader or limited company, when in fact you are an employee of the practice, you will be subject to added tax. 

This will impact both the associate dentist and also the dental practice employing the dentist.

As a busy dental associate, I have been using Samera Accounting services for over 7 years now and have found them to be highly professional, prompt in correspondence and … extremely helpful to any enquiries which I have had.

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What is IR35? 

IR35 is intended to combat employment tax avoiders who process their tax as though they were sole traders or limited companies, and not in fact employees. 

IR35 is used to establish your employment status; whether you are self-employed, an employee of a limited company or both. It is usually the responsibility of the dental practice for which you work to determine your employment status and process both your tax and their accounts accordingly. 

Previously, NHS dental practices had to pay additional tax if one of their staff was hired via a limited company but in fact operates as an employee. Since 2021, this has also applied to larger private practices. 

As detailed above, from April 2023, HMRC have announced that they will be removing dental associates’ exemption from IR35 rules. 

This means that dental practices will need to calculate their clinical staff’s employment status via the UK Government’s employment status test. 

Click here to find out more about employment status tests on .gov.uk

Am I self-employed or an employee?

How you operate in the dental practice which employs you will factor into whether you are a sole-trader or an employee. 

Self employed dental associates act as either sole-traders or a limited company and process their own accounts and tax. They usually rent the surgery, equipment and consumables from the dental practice in which they work. 

These are some of the things that distinguish employed and self-employed dental associates:

• Self-employed dental associates have clinical independence to choose their own treatments, plans and procedures. 
• Self-employed dental associates have a say in their chosen work hours. 
• Self-employed dental associates must be able to provide a locum substitute in their place should they be unable to work
• Self-employed dental associates can set their own prices and provide additional private work. 
• Self-employed dental associates are not paid holiday pay.
• Self-employed dental associates have professional indemnity insurance cover. 
• Self-employed dental associates pay for equipment maintenance out of their own pocket. 

Determining your IR35 employment status

If you are a dental practice owner or a dental associate unsure of how the IR35 rule changes affect you, we can perform an IR35 review of your practice and contracts to determine the status of yourself or your employees. 

We can review your contracts thoroughly, figure out the correct employment status and help process the accounts and tax to reduce your bill. 

Our specialist dental accountants and tax experts are perfectly placed to help make sure your status is correct and you’re paying the correct tax.

Click here to read our article on Samera Learning Centre.

Making Tax Digital is the UK Government’s initiative to “make it easier for individuals and businesses to get their tax right and keep on top of their affairs.”

The goal is to make the UK’s tax infrastructure as digital as possible. It is hoped that this will make HMRC’s tax system more efficient, effective and easier to use and navigate for businesses. 

Making Tax Digital entails swapping your accounts and tax from paper records to online, digital records. The idea is for as many businesses and sole traders as possible to go completely paperless with their accounts and tax.

Making Tax Digital is split into the following phases: 

• Making Tax Digital for VAT (April 2022)
• Making Tax Digital for Income Tax (April 2024)
• Making Tax Digital for Income Tax Self-Assessment (April 2024)
• Making Tax Digital for Corporation Tax (2026)

So, how will Making Tax Digital affect dentists?

Samera have been my accountant for 7 years and have continued to provide me with accurate accounts and timely submissions. Their digital workflow eases the management of receipts and filing. I have found them to be supportive and knowledgeable particularly during the recent crisis. Thank you.

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Making Tax Digital for Dentists

Making Tax Digital for Dental Associates

The first phase of MTD was introduced in April 2019 in Making Tax Digital for VAT, which regulated business with a taxable turnover over £85,000.

On 6th April 2024 (originally scheduled for 2023 but pushed back due to issues arising from COVID-19), Self Assessment tax payers will also need to abide by the Making Tax Digital for Income Tax regulations. 

These new regulations in 2024 will only apply to Self Assessment taxpayers who file a taxable income above £10,000 a year. As a dentist, you almost certainly will.

Click here to listen to our podcasts on how dentists can reduce their tax bill.

For the most part, these new regulations will apply on 6th April of the 3rd trading year to businesses that begin trading after 6th April 2023. 

After 6th April 2024, you will have to use digital software to hold and process digital records of your accounts and tax. Paper records of your accounts and tax will no longer be allowed by law. 

The software you use to hold and process your digital records must be Making Tax Digital compliant. 

You can find a list of compliant software on the .gov.uk website here.

Your Self Assessment tax return will also change. You will instead be required to submit 5 reports throughout the year. These are, 4 quarterly summaries of your accounts, as well as an end-of-year report. 

The dates you will be required to submit these returns are: 

• 5th August
• 5th November
• 5th February
• 5th May

The end of year return must be filed by 31st January after each relevant tax year. Your tax bill will also need to be paid by 31st January following the relevant year, but you will be able to make tax payments throughout the year if you wish. 

You can find out more about accounts and tax for dental associates here.

Making Tax Digital for Dental Practices

Before April 2022, only businesses with a taxable turnover exceeding £85,000 must keep digital records and abide by Making Tax Digital regulations. After April 2022, all VAT-registered businesses must do the same. 

You can sign up to the scheme early voluntarily, no matter your taxable turnover. This may be worth doing, in only to give yourself more time to get used to the new process. 

Click here to watch our webinar on using Xero and Hubdoc for your dental practice accounts.

It is also required that your practice uses digital accounting software that is compliant with Making Tax Digital, such as Xero. You will need to keep your digital records for 6 years. 

You can find a list of compliant software on the .gov.uk website here.

Here is a list of example records you will need to keep from the UK Government website: 

• your business name, address and VAT registration number
• any VAT accounting schemes you use
• the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)
• the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)
• any adjustments you make to a return
• the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell
• the rate of VAT charged on goods and services you supply
• reverse charge transactions – where you record the VAT on both the sale price and the purchase price of goods and services you buy
• your total daily gross takings if you use a retail scheme
• items you can reclaim VAT on if you use the Flat Rate Scheme
• your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You can find out more about accounts and tax for dental practices here.

Making Tax Digital With Samera

From 1st April 2022 we will no longer be accepting paper records for our accountancy clients. All accountancy and tax records will need to be in digital format. 

We only use software that is compliant with the Making Tax Digital scheme. We are a Xero Gold Partner and have been pioneering digital accountancy for dentists for years. 

When you go digital with our dental accountants, your accounts and tax are received, processed and stored safely, securely and easily. 

All you need to do is scan your receipts and invoices, upload them to Hubdoc and we will do the rest! 

The process is quick, simple and safe – which means you save time, effort and money.

Click here to read our articles Samera.

Dental Tax Advice

Our team at Samera has extensive experience in offering a whole array of tax planning for dentists and their businesses.

• From basic tax planning to complicated tax investigations, it is imperative you have a team not only well versed in tax laws but also understand the Dental sector.
• We have extensive experience in understanding your needs and then planning and implementing a solution to meet your needs.

You can find out more about tax saving strategies for dentists here.

Areas we can usually identify tax savings include:

• Structuring payroll for Directors
• Profit extraction planning
• Use of assets, i.e., company car and capital allowances
• Claimable expenses
• Company restructuring
• Dividend planning
• Future growth prospects
• Succession planning
• Anything specific related to the shareholding and matters of interest

Dental Practice Tax Planning

Most Dentists have asked the question: Self Employed or Limited Liability?

As a firm with extensive experience in incorporating Dental Practices, we have built up much experience in this area. Sole traders, partnerships and expense sharing arrangements can all be incorporated, but it is so important this is done right first time, else considerable problems can manifest later on.

If you feel need an expert in this area (which we strongly suggest) please get in touch with us!

Dental Incorporation Overview

As of the 31st July 2006 new legal reforms have allowed dental practices to incorporate and begin trading as limited companies. The majority of the company directors must be registered with the GDC as dentists or dental care professionals.

Accountancy goes the extra mile to solve your problems. Overall Samera is a fantastic team, and always had a good experience every time I reached them.

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