Since 6th April 2023, 'dental associates'  may not satisfy the classification of self-employed, under tax IR35 legislation. 


Practices are now obliged to consider whether IR35 applies to their engagements with personal service companies. This means that an associate or hygienist no longer determines their own IR35 status, and the principal 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 and other benefits which only apply to self-employed contractors.


If an associate dentist or hygienist 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 therefore 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 a 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 us or call Settlement Agreement Solicitors on  0161 792 8142 or email Jonathan directly at info@jacobs-legal.co.uk 

Principal vs. Associate-Led Dental Practices: A Financial Analysis

20 September 2024
Understanding the Leadership Structure The leadership structure of a dental practice can significantly impact its financial performance. There are two primary models: Principal-led and Associate-led. Principal-led: In this model, the principal dentist owns and operates the practice, assuming full financial and management responsibility. Associate-led: Here, the dentist is a self-employed contractor to the practice, the principal dentist having the responsibility to provide patients and where necessary, to offer assistance and advice. Financial Implications Income Distribution: Principal-led: The principal dentist retains all profits after expenses, potentially leading to higher income but also greater financial risk. Associate-led : Associates receive a percentage of the fees that they generate as income, providing more financial stability but limiting earning potential. Overhead Costs: Principal-led: The principal dentist is responsible for all overhead costs, which can be substantial. Associate-led: The Associate is responsible for a share of the lab expenses that they generate Debt and Risk: Principal-led: The principal dentist is personally liable for any debts or financial obligations incurred by the practice. Associate-led: The associate is not responsible for the practice’s debts and liabilities. Succession Planning: Principal-led: Succession planning can be more complex, as the principal dentist must find a suitable successor or sell the practice. Associate-led: Succession planning can be easier, as associates may have an option to purchase the practice or continue working under new ownership. Financial Considerations When evaluating the financial implications of a Principal vs. Associate-led practice, consider the following factors: Personal financial goals: Are you seeking higher income potential or a more stable income stream? Risk tolerance: How comfortable are you with assuming personal financial risk? Long-term goals: What are your plans for the future of your dental career? Local market trends: Are there any trends that favour one model over the other in your opinion and experience? Conclusion The choice between a Principal-led or Associate-led dental practice sale and purchase depends on your individual circumstances and financial goals. By carefully considering the financial implications of each model, you can make an informed decision that aligns with your professional aspirations and long-term success. Feel free to contact us for more help and advice.

Purchase Completed in York

19 August 2024
Congratulations to Joanne Nurse on the acquisition of a share in Adventurers Day Nursery in York. Joanne now becomes co-owner of the nursery with Helen Nurse. Many thanks to everyone involved in the transaction, especially Amardeep Nangla for his work done on the property side and all those at Barclays Bank who helped facilitate this transaction. All at Jacobs Legal wish Helen and Joanne all the best for the future and much success in the years to come.
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