With the withdrawal of dental specific guidance in ESM4030, employment status should instead be considered by dentists in line with the Check Employment Status for Tax (CEST) tool available at gov.uk. Both the practice and the associate should answer the questions on the tool to arrive at an answer on whether the associate is self-employed or an employee. HMRC will stand by the determination given by the tool provided the questions have been answered correctly.
In all cases HMRC will look at what happens in practice and how this compares to the terms and conditions of the associate contract in place, and whether these are being adhered to, before deciding if the associate dentist is employed on a self-employed basis in the practice or on an employed basis.
Where the associate is found to be an employee, the dental practice will be liable for Class 1 National insurance contributions, as well as statutory employment payments including holiday and sickness pay, and pension costs.
Employment Status Tests
The CEST tool is split into several sections which should be looked at collectively to gain an overall picture.
Substitute and helpers
This section has been the most talked about since HMRC withdrew the ESM guidance and one the regulator is most likely to challenge. It asks if the associate is required to do the work themselves. If there is an unrestricted and genuine right for the individual to send a substitute in their place, and the practice is obliged to accept the substitute, then it is unlikely the individual is an employee. Also, does the worker personally pay the substitute they provide? If both these conditions apply, then the individual cannot be deemed an employee.
Working arrangements
The questions in this section look at the control the dental practice has over the associate. They include how much control is exercised by the practice in terms of how, where and when the work is done and what the work is, and also general level of supervision. Not all will apply to dentists, the associate would not be moved from his task of carrying out dental services to another job, for example.
Worker’s financial risk
This is perhaps the most important section to determine self-employment status. The questions aim to measure the level of financial risk to the individual and prove if they are genuinely in business on their own account and can make a profit (or loss) from it. Questions include whether the associate provides their own equipment and if they must rectify any mistakes at their own expense. Where the associate is paid a percentage of sales generated or funds some of their own equipment, this is most likely to be seen by HMRC as self-employment.
Worker’s involvement
This section looks at how integrated the associate is into the practice. Questions include what benefits the practice provides to the associate and do they have any management responsibilities, such as undertaking staff appraisals, hiring staff and deciding how much to pay someone. Answering yes to any of these responsibilities, would indicate the associate is employed.
Worker’s contracts
The answers to some of these questions in this final section will depend on the associate contract in place. However, to show self-employment status, the terms of the contract need to state that the associate’s use of the practice facilities is subject to a licence fee and provide a clear outline of the associate’s financial responsibilities. Where there are any ownership rights or restrictions of trade, these should also be included in the contract.
Determining the outcome
On completion of the questions, the CEST tool provides a result of either employment, self-employment or cannot determine status. Unfortunately, the tool is not perfect at making an assessment where the case is borderline and often returns an ’unable to determine’ outcome. In this case, professional advice should be sought.