Will ‘£1bn freelancers tax raid’ hit dentists?

by Tax

In the Budget the chancellor could reveal a £1bn raid on freelancers working in “disguised employment” in the private sector, according to the Sunday Times (October 29).

Sounds like bad news for associates and practice owners. Are they at risk?

We asked tax expert Simon Vincent at Hive Business

“A few years ago there was a promise in a Budget saying there wouldn’t be any more tax rises, so the hunt is on for more creative wheezes from the Treasury.

If this one comes to pass, whoever pays a worker will have responsibility for making sure they pay the right tax. Companies will have to decide whether a worker is a genuine freelancer, or a contractor who is doing the same job as an employee. If it’s the latter they will be obliged to employ the worker so they’re taxed at source.

This would flip the onus from individual to company, which would no doubt add to the cost and the hassle of doing business. Interestingly, it’s being framed as another moral crusade, “levelling the playing field between salaried staff and freelancers”. In reality, contractors get paid more because they can be hired and fired more easily.

At the moment, anything that might be in the November 22 Budget is speculation, but we do know that this rule has already come into force in public bodies like the NHS via updates to the IR35 legislation. There’s no statutory route of appeal, so once the NHS has decided you’re not a contractor, you can’t get them to change their minds.

Could dentists be affected? As it stands, no. Associate dentists working under the BDA model contract have a special concession with HMRC that recognises them as self-employed, and IR35 only applies to would-be employees.

While there’s no suggestion that HMRC’s position towards dentists will change, that very thing is happening across the Irish Sea, where in a test case a practice owner is being asked for backdated VAT on his associates.

Dental services are VAT-exempt, but Irish revenue authorities have decided to make a technical argument that the practice itself is supplying dental services to patients, rather than the associates. One hopes the counter argument, that the supply of dental services is made by associates as undisclosed agents of the clinic, will prevail. If the practice owner doesn’t settle first. That would open the floodgates.

Back in the UK, I expect further changes to IR35 are in the pipeline, whether they come in this Budget or the next. It’s going to be an administrative nightmare and will push everyone’s tax up. But I don’t think it’s going to bother dentists. These rules only impact those who would be employees but for working via their own company, a situation that many IT workers and oil workers find themselves in.”

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Simon Vincent

“Associates working under the BDA model contract have a special concession with HMRC”

Simon Vincent, senior tax accountant at Hive Business

Author: Guest