Dental News
Autumn 2019

Welcome to our Autumn 2019 Dental News

In this issue we take a look at

IR35 and the employment status of associates

Student loan over payment – check statements

Christmas and staff entertaining

Changes to Capital Gains Tax deadline for property disposals

Tax Investigation Service

IR35 and the employment status of associates

HM Revenue & Customs are currently undertaking a review of the self-employed tax status of dental associates, and over the past year, we have been made aware of instances where HMRC have written to dentists to enquire into their dental associate employment status. 

The review and approach adopted by HM Revenue & Customs is aimed at gathering information from dentists in respect of their practicing arrangements to determine and potentially challenge their employment status.

Currently, the HMRC internal manual, essentially the guidance book which HMRC inspectors follow, states that a dental associate is self-employed for tax purposes provided that they are responsible for paying their share of laboratory fees and any other business costs for work relating to their patients and work in accordance with the clauses set out within a standard BDA or DPAS dental associate agreement.

The relationship between associate and practice is normally outlined within the associate agreement and centres on the associate providing services to the patients of a practice using the practice’s premises, equipment, materials and staff in return for a percentage of the treatment fees received by the practice.

Based on how most associates operate, the majority of dental associates will continue to be self-employed. Until the review is concluded, there is nothing to worry about at this stage, however it is useful to continually review the following factors when determining employment status as it will be depended on the terms and conditions of each engagement :-

Areas that may indicate self employment

The following factors can determine whether an associate is self employed

  1. Substitution A dental associate is usually responsible for arranging cover if they are unable to provide their services, wholly at their expense and discretion. 
  1. Ability to locum: the dental associate is ultimately running their own business and therefore is responsible whether it succeeds and fails and therefore has the ability to work at several practices at one time.
  1. Supervision, direction and control: A dental associate should be able to decide how, when and where they are able to do their own work and should be free to hire other people to do the work for the dental associate at their own expense and possibly provide the main items of equipment to do as they are normally responsible for meeting their contractual obligations such as NHS or private targets.
  1. Provision of equipment: Dental associates will usually provide some of their own equipment or materials (e.g. Loupes).

The BDA has recently updated it’s template dental associate agreements which give dental associates more control over how they work and have recommended that associates review their contracts with their principals to adopt the new model agreements where appropriate.

HMRC also provide an employment status indicator tool that is available on the HMRC website. The service can be used for current or future engagements in the public sector and should also be used when reassessing the status where there have been changes to the engagement or the way the work has been performed.

This can be accessed by clicking on the following link:-

https://www.gov.uk/guidance/check-employment-status-for-tax

Our opinion is that following the HMRC review, the blanket agreement that dental associates are self-employed might be removed, but based on how most associates work, the majority of dental associates will continue to be self-employed. If there are any further developments, we shall keep you informed.

Should the associate be trading as a limited company and as long as they would meet self-employment status, IR35 shall not apply.

Should you wish to discuss the above, please feel free to contact a member of the dental team.

Student loans

There has been media coverage with researchers recently discovering that there is more than £28m of overpayments on student loans in England held by the government. This is as a result of student loan repayments continuing to be taken even though the student loan has been paid off entirely.

Student loan repayments are made automatically through the tax system and will continue until the student loan has been settled in full. This will apply whether you are employed or self-employed. For individuals who are employed, student loan repayments will be collected via the PAYE tax system and self-employed individuals will have student loan repayments administered through the Self Assessment tax system.

The Student Loans Company (SLC) issue loan statements in April every year. It is important that you provide this when forwarding your accounting and tax records.

When completing a Self Assessment Tax Return, in addition to calculating your tax and National Insurance Contributions liability, we will automatically calculate your student loan repayment.

We shall review the student loan balance outstanding and consider whether HM Revenue & Customs should be informed. If necessary, an entry on your Self Assessment Tax Return will be included to notify HMRC that the student loan will be fully repaid within the next two years.

If the automatically calculated student loan repayment calculated is greater than the actual balance outstanding, in order that you do not overpay, you can contact The Student Loan Company directly and make a final payment to them.

Alternatively, we can contact HM Revenue & Customs and request for an “informal stand-over” of your student loan. HM Revenue & Customs will effectively “ignore” any potential repayment on the basis that the borrower will arrange with The Student Loans Company to settle the amount outside of the Self Assessment Tax Return.

Christmas Gifts

At this time of year, it is worth revisiting the tax rules surrounding Christmas gifts and parties:- 

Client Christmas gifts

  • Businesses cannot claim a tax deduction for client entertaining (such as a meal or Christmas drinks for clients)
  • Where clients attend your Christmas party, the costs have to be apportioned between them and employees for tax purposes
  • Business gifts to clients are not normally allowed as a deduction against profits – they are treated in the same way as business entertaining.

There are exceptions:-

  1. Gifts of free samples of your products are 100% tax-deductible
  2. Gifts carrying your business advertising or branding are tax-deductible (e.g. mugs, diaries or pens), but only up to £50 per person per annum. However, gifts of food, drink, tobacco and vouchers receive no tax deduction.
  3. Christmas cards to clients and prospects are considered an office expense and are deductible, provided they carry a clear advertisement for the company sending them.
  4. VAT on client entertaining is not recoverable. You can reclaim the input VAT on gifts acquired for business purposes, which would include gifts for customers which meet the above conditions.

Staff Christmas gifts

A gift to an employee is tax-deductible provided that it is wholly and exclusively incurred for the purpose of your business. A seasonal gift is considered to pass this test. A gift made by an employer to an employee is not taxed as an employment benefit provided that it meets the criteria for being a trivial benefit. A trivial benefit is one that is non-contractual, costs £50 or less per employee, is not cash or a voucher, and is not for services performed. If the cost exceeds £50, the whole benefit is taxed, not just the excess.

HMRC have traditionally treated the following seasonal gifts as ‘trivial’ benefits:-

  1. A turkey
  2. A box of chocolates
  3. A bottle of ordinary wine

Staff Christmas parties

Provided the staff Christmas party meets certain rules, they are free of tax and National Insurance Contributions.

The party must be open to all employees and the cost to the employer must not exceed £150 per head (including VAT, taxis and overnight accommodation), this being the total cost of the party divided by the total number of people attending (including non-employees).

Where the cost is less than £150 per head, the unused element could be spent on another staff function (perhaps in the summer) – provided the annual aggregate spend does not exceed the £150 per head limit. If the limit is exceeded, you can choose the lower costing event as taxable.

Changes to Capital Gains Tax deadline for property disposals

Residential property gains

Although no capital gains tax will arise on the disposal of a property which has been the owner’s only or main residence throughout the period of ownership, a liability may arise on the disposal of a residential property which is or has at some point been a second home or which has been let.

Prior to 6 April 2020, where capital gains tax is payable on a gain arising on the disposal of a residential property, the gain is notified to HMRC on the self-assessment return and the tax is payable by 31 January after the end of the tax year in which the disposal took place.

However, from 6 April 2020, taxpayers will be required to make a payment on account of the capital gains tax liability arising on the disposal of a residential property. The taxpayer will also be required to make a return to HMRC giving notice of the disposal. The return must be delivered to HMRC within 30 days of the date of completion of the disposal. Payment of any associated tax must be made within the same window.

Capital gains tax on chargeable residential property gains is payable at higher capital gains tax rates of 18% and 28%.

If you are planning on disposing of a second home or buy-to-let property on or after 6 April 2020, speak to your professional adviser to understand how the new return and payment rules will affect you.

Tax Investigation Service

Time consuming and expensive HMRC tax investigations are on the increase, any individual or organisation is at risk of an investigation even if you have done nothing wrong.

Humphrey & Co has offered a Tax Investigation Service (TIS) to our clients for several years now, and we invite all our clients to share in the protection offered. Tax investigations can be costly. Investing a small amount into our tax investigation service now means that you will receive complete support if HMRC targets you.

We believe that we know you and your business best and we want to be there for you when you need us most. We will manage your case from start to finish, reducing stress and providing peace of mind.

Please visit our website for further information on the Tax Investigation Service and how it can protect you.