Do Dentists need Accountants?
The short (and unbiased) answer is yes. The more detailed answer is based on the premise that dentists need an accountant that understands the intricacies behind dental funding, pensions, and general practice.
Associate dentists tend to find themselves in a unique spot when it comes to accounting. The majority are in fact self-employed dentists who make payments to practices (or providers) in return for use of the premise, equipment, materials and staff. In this case, there may be a question mark over whether IR35 rules apply to associate dentists.
To summarise, the IR35 changes brought about in April 2021 meant that larger NHS dental practices pay extra tax if they engage with someone treated as an employee through a limited company. These rules apply to larger practices. They might apply to your practice if two of the following conditions are met
- Annual turnover exceeding £10.2 million
- The balance sheet total exceeds £5.1 million
- More than 50 employees
It isn’t all doom and gloom though, as associate dentists are at little risk from the effects of these changes – so long as the associate is not working in a manner that is consistent with being an actual employee of the provider. To be considered self-employed you must:
- Have clinical freedom – You can choose your own hours
- Can be involved in complaints lodged against you
- Are able to affect your own income, such as providing private services
- Are able to arrange a locum to do some work for you
- Can decide on your own fees
The employment status of being an associate dentist also means the National Insurance class is different to a full-time employed dentist. As income is considered to arise from the trade of services, associates will be subject to Class 2/4 NICs. This means NI rates of £3.05 per week for Class 2, or 2/9% Class 4 NIC depending on your yearly profits.
Will I save if I incorporate?
You can make large tax savings if you incorporate to operate as a limited company. However, this process can actually result in huge pitfalls for you and your financial status, most notably loss of your membership to the NHS pension scheme. Providers are also affected by this loss too, as they can only make pension contributions equivalent to the salary and dividend payments, as opposed to the conventional 43.9% of the NHS contract value. So, in some instances, you could be left with tax losses. In this case, we recommend that you take expert advice and carry out thorough tax planning with a credited accountant to decide on incorporation.
What do I do next?
You, the dentist, should go to an accountant who can answer the following questions:
- Has my ARR form been completed and filed correctly?
- Is my lab bill percentage reasonable? Should my associates be expected to contribute to these fees?
- What would happen if I incorporated my practice?
- How do I pay off my VDP?
At WIM Accountants we can assist you, and we are confident in advising clients about incorporation. We only advocate incorporation when there are clear benefits to the client. If you would like accurate and up to date advice about incorporation, then please contact us.