Following the recent N Sejpal-v-Rodericks Dental case (EAT-2020-001407-AT), there has been discussion in the dental sector about the status of Associates and whether they are self-employed, workers, or both. Worker status is relevant for tax, employment rights including holidays and discrimination claims. Many Associates will prefer self-employment due to the flexibility and tax benefits. However, it could be the case that one could be considered self-employed for tax purposes by HMRC and still be a worker.

Senior Partner at Dental Accountants, Morris & Co, Nick Ledingham explained, “this is an extremely complicated area and there is no ‘one size fits all’ I’m afraid. Employment law is very case specific and in my experience, the issue will not affect all Associates. As ever, it is important to seek specialist advice.”

Nick Ledingham

Chris Davies, Head of Healthcare at JCP Solicitors said: “There are a number of factors to consider when examining any healthcare employment case, with the issue of personal service, in particular, set to be crucial when looking into the issue of an individual’s employment status for employment rights purposes.

“This is an evolving area of the law, and we are monitoring influential cases which could set a precedent such as N Sejpal-v-Rodericks Dental Limited, which has been remitted back to the Employment Tribunal for final determination following a successful appeal to the Employment Appeal Tribunal. This case could have wide-ranging implications for the future of healthcare employment law, so we are watching this carefully.

“Employment rights and the issue of self-employment in the healthcare sector is a highly complex area of law and should be approached with expertise on a case-by-case basis.”

Chris Davies

Dental practices across the country would be wise to keep this particular case under review and to follow the outcome as to how the employment tribunal deals with the questions of:

• whether individuals are carrying on a profession or business undertaking; and
• whether and in what circumstances a party is likely to be considered a client or customer in the context of dental practice relationships with Associates.

Employment cases are very fact specific. However, the outcome of the aforementioned case could potentially have implications for dental practices across the country, who tend to operate on the basis that Dental Associates are self-employed and not employees or workers.

This week has seen publication of the latest results from the NASDAL (National Association of Specialist Dental Accountants and Lawyers) Goodwill Survey statistics. This survey covers the quarter ending 30th April 2022 and includes data on valuations as well as deals completed (i.e., practices bought or sold by NASDAL members’ clients in the period).

The quarter showed a sharp reverse in the recent pattern of increases in goodwill values. Overall, there was a substantial decrease in goodwill as a percentage of fee income in the quarter across all types of practice – deals averaged 143% of gross fees – down from 166% in the quarter to 31^st January 2022.

Private practices saw practice goodwill at 124% of gross fees – a big decrease from 155% in the last quarter. Mixed practice goodwill values were also on the slide as they dropped to 132% of gross fees (189% in the previous quarter). NHS practices did see an increase – they were at 178% of gross fees – up from 141% in the quarter to 31^st January 2022.

Wider concerns?

Mike Blenkharn, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, said, “It is interesting to see a big fall back across many practice goodwill values. We can perhaps speculate that as the market returns to a bit more normality it should be expected that figures fall back a little. It also could be symptomatic of wider concerns in the economy as a whole.

“We have seen a low number of NHS practices come to market this quarter which may have skewed that data somewhat and the rise. However, there is a lack of confidence in the market for NHS practices and it will therefore be interesting to see if this trend in goodwill values continues in future quarters.”

The goodwill figures are collated from accountant and lawyer members of NASDAL in order to give a useful guide to the practice sales market. These figures relate to the quarter ending 30th April 2022.

NASDAL reminds all that as with any averages, these statistics should be treated as a guideline only.

This week has seen publication of the latest results from the NASDAL (National Association of Specialist Dental Accountants and Lawyers) Goodwill Survey statistics. This survey covers the quarter ending 31^st January 2022 and includes data on valuations as well as deals completed (i.e., practices bought or sold by NASDAL members’ clients in the period).

The quarter showed a continuing pattern of increases in goodwill values across the board but with less enthusiasm for NHS dental practices than was seen pre-pandemic.

Overall, there was a significant increase in goodwill as a percentage of fee income in the quarter across all types of practice – deals averaged 166% of gross fees – up from 152% in the quarter to 31^st October 2021 and from 144% for the quarter ending 31st July 2021.

Private practices saw practice goodwill at 155% of gross fees – a large increase from 132% in the last quarter. Mixed practice goodwill values were also on the up as they rose to 189% of gross fees (179% in the previous quarter).

NHS practices did see a slight increase after their big drop in goodwill values in the previous quarter. They were at 141% of gross fees – up from 138% in the quarter to 31^st October 2021.

NHS Practices – less enthusiasm?

Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, said, “I am pleased to see the practice sales market behaving in a resilient fashion and continuing its upturn as we hopefully leave the worst of the pandemic behind. In the many conversations that I have with professional advisors, banks, agents and so on, it is becoming clear – at least anecdotally – that there is less enthusiasm for NHS practices at this time. Whilst the reason for this is uncertain, my view is that it arises as a consequence of a combination of factors – uncertainty about the financial basis of NHS contracts post 31 March 2022, particularly as the current 85% threshold is proving impossible for many practices to achieve, the drift of NHS patients into the private sector during the pandemic, and increasing recruitment problems made worse by reducing enthusiasm for associates to carry out NHS work.

The goodwill figures are collated from accountant and lawyer members of NASDAL in order to give a useful guide to the practice sales market. These figures relate to the quarter ending 31^st January 2022.

NASDAL reminds all that as with any averages, these statistics should be treated as a guideline only.

This week saw the latest results published from the NASDAL (National Association of Specialist Dental Accountants and Lawyers) Goodwill Survey statistics. This survey covers the quarter ending 31^st July 2021 and includes data on valuations as well as deals completed (i.e., practices bought or sold by NASDAL members’ clients in the period).

As the graph illustrates, the quarter saw big jumps both in those deals completed and valuations. In terms of deals done, goodwill as a percentage of fee income in the quarter across all types of practice averaged 144% of gross fees – that was a significant leap from 128% in the quarter to 31^st April 2021. NHS practice goodwill bounced back with practice goodwill at 161% of gross fees – up from 146% in the previous period.

Private practices goodwill values saw a big increase – up to 133% of gross fees from 110% of gross fees in the previous quarter. Mixed practices reduced slightly with values of 145% of gross fees from 156% of gross fees last time.

Normal service resumed?

Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, commented, “In my commentary on the last results, I did say that I was surprised to see big drops in goodwill values and that it had not been my subjective experience. As with all statistics, there can be anomalies.

“It seems that the figures from this latest quarter have borne that out. Why did last quarter’s figures occur? I would be speculating but it could be that there was a backlog of discounted deals that were delayed due to Covid and they all went through in the one quarter.

“Certainly as we move forward, NASDAL members are reporting that the market is robust and that sale prices are not being reduced and are reaching their full potential.”

The goodwill figures are collated from accountant and lawyer members of NASDAL in order to give a useful guide to the practice sales market. These figures relate to the quarter ending 31^st July 2021.

NASDAL reminds all that as with any averages, these statistics should be treated as a guideline only.

The employment status of dental associates has been discussed many times in recent years. Up until now, Associates had always been covered by HMRC Guidance that stated:

Associate’ Dentists
It should be noted that there are standard forms of agreement for ‘associate’ dentists which have been approved by the British Dental Association (BDA) and the Dental Practitioners Association (DPA). These agreements relate to dentists practising as associates in premises run by another dentist. Where these agreements are used and the terms are followed, the income of the associate dentist is assessable under trading income rules and not as employment income. In these circumstances the dentist is liable for Class 2/4 NICs and not Class 1 NICs.

The NHS General Dental Services Contract, which came into force from 1 April 2006, provides for less fluctuation in Associate Dentist’s income. However, providing the Associate Dentist continues to be responsible for paying their share of laboratory fees etc for work relating to their patients and other terms of the standard agreement are followed, the above guidance will still apply.

HMRC has now announced that this guidance for Associate Dentists will be withdrawn with effect from 6 April 2023 and after this date the status of new and ongoing Associate Dentist engagements should be considered in line with ESM0500 and CEST.

This now means that from April 2023, all Associates’ tax status should be considered on a case-by-case basis depending on the circumstances of each individual dental associate.  

NASDAL Media Officer and Head of Dental Business Unit at UNW, Alan Suggett, said, “Despite the withdrawal of HMRC guidance, the consensus of NASDAL accountants is that there will be no change to the self-employed status for the majority of associates.

“Associates and practice owners are advised to go through the online HMRC CEST test carefully and honestly. The result for the majority of dental associates is likely to be that they should be considered as being self-employed for tax purposes. “However, there could be concern for those Associates whose working arrangements are subject to a higher degree of control than normal.”

NASDAL’s advice to all associates and particularly new associates, is to undertake the CEST test, which is anonymous, and then retain a hard copy of the conclusions arrived at.

NASDAL experienced and expert accountants are in a position to assist and advise dental associates or practice owners who have any queries about HMRC’s new approach.

This week saw the latest survey results published from the NASDAL (National Association of Specialist Dental Accountants and Lawyers) Goodwill statistics. This survey covers the quarter ending 30^th April 2021 and includes data on valuations as well as deals done (i.e., practices bought or sold by NASDAL members’ clients in the period).

Goodwill as a percentage of fee income in the quarter across all types of practice averaged 128% of gross fees – down from 139% in the quarter to January 2021. The big drop was in NHS practice goodwill – down from 191% of gross fees in the previous period to 146% of gross fees this time.

Private practices values stayed steady at 110% of gross fees compared to 114% of gross fees in the previous period. Mixed practices, which can be the most volatile of the three categories, saw quite a leap – up to 156% of gross fees compared with 110% last time.

More realistic valuations?

The graph also illustrates a big drop in valuations. Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, said, “I wonder if the big drop in valuations has seen the dental valuation market catch up with the prices that are actually being paid and is just the market correcting itself.

“In regard to the big drop in NHS practice values, I would have to say that I am somewhat surprised by this. It has certainly not been my subjective experience. I have heard some raise concerns about the long-term effect of the Covid pandemic on the ability of NHS practices particularly to run profitably. While the virus was initially seen to be short-term and something that we might be over in a few months, banks were perhaps willing to lend on previous accounts and figures. As it rumbles on, less so.

“It does seem likely that from a dental perspective there will be longer term implications in regard to PPE, patient numbers, air filtration and so on. Whether this will hit NHS practices hard that needed a good level of patient throughput to be successful, only time will tell.”

The goodwill figures are collated from accountant and lawyer members of NASDAL in order to give a useful guide to the practice sales market. These figures relate to the quarter ending 30^th April 2021.

NASDAL reminds all that as with any averages, these statistics should be treated as a guideline only.

Thursday 25th March saw NASDAL (National Association of Specialist Dental Accountants and Lawyers) hold its annual press conference – this year virtually at BDIA Dental Showcase – and many Principals, Associates and team members, along with the dental media, joined what was an enlightening event with 5 presentations and then an interactive Question & Answer session.

It has been an unusual twelve months and this year’s event reflected this by being billed as a ‘State of the Nation’ press conference dealing as it did with a wide variety of dental related financial and legal matters.

After being welcomed by Nick Ledingham, Chartered Accountant and Senior Partner of Morris & Co, Specialist Dental Accountants and Chairman of NASDAL, the conference heard the latest goodwill value statistics announced by Alan Suggett, specialist dental accountant at UNW and NASDAL Media Officer. These are normally produced on a quarterly basis but due to the pandemic, the latest figures covered the four months that ended 31st January 2021.

Against what many may have expected, the latest period showed very little reduction in practice values due to the pandemic. As with the last survey (which covered the period from 1st April to 30th September 2020), in NASDAL members’ experience, although there have been only limited price reductions, there has been a considerable lengthening of the sales process. Alan commented, “It certainly does show that the UK dental practice sales market is not the dystopian nightmare that some commentators have suggested!”

Benchmarking Statistics – “continued fall in NHS practice profits but better news for Associates”

Ian Simpson, Chartered Accountant and a partner in Humphrey and Co, then presented the Benchmarking Statistics for the year 2019-2020. The NASDAL benchmarking statistics are published annually in March and reflect the finances of dental practices and dentists for the most recent tax year. The NASDAL figures provide a detailed picture of dental practice finances, sourced directly from dentists working privately and in the NHS. They are immensely useful but this year, as the period in question only ran until March 2020, they have limited information to offer about the effect of the pandemic. However, they do make interesting reading. Some of the key points from this year were:

• A continued fall in NHS practice profits – this is perhaps as NHS practices tend to depend more on the use of Associates
• A slight fall in net profit across the market as a whole
• Better news for Associates with an increase in fee income of 3% and an increase in net profit of 2%
• Practice expense ratios stayed very consistent with previous years

Ian Simpson said, “Overall, we have seen results similar to the previous year with a small impact of COVID-19 in Feb/Mar 2020. Net profit of a typical dental practice fell back to £129,178 from £134,387 in 2019 and both NHS and Private practices saw a reduction in profit (NHS – £116,284 in 19/20 down from £124,475 in 18/19; Private – £133,192 in 19/20 down from £140,591 in 18/19). Only mixed practices bucked this trend with a small rise from £132,940 in 18/19 to £134,342.

“What the figures will show for the year of the pandemic is conjecture at this point, but we certainly find ourselves in a very different landscape now from a little over a year ago.”

NHS Quarter 4 – meeting the targets

Alan Suggett then returned to discuss what has happened (in England), since the beginning of January 2020 in terms of Q4 targets and the need to achieve 45% of pre-pandemic activity to avoid any financial penalties by way of ‘clawback’. Alan identified two key issues that were affecting practices.

“First and foremost, my concern is for a small but significant number of practices that will be unable to hit the threshold of 45% of UDA contract amounts and how that ‘cliff edge’ will affect them. The fact that many NHS practices are already hitting this target is good news but irrelevant to those that cannot.”

“Another perhaps unconsidered consequence of the Q4 rules is pay cuts of more than 65% for some self-employed dental associates who carry out NHS work. During the COVID 19 crisis a very important measure of financial protection has been given to NHS associates as so far they have been paid in full. Q4 rules brought this to an end for those associates who work in practices which cannot hit the 45% UDA threshold.

“I feel that a fair compromise is quite simple – remove the ‘cliff edge’ at 36%. I worry that without this change, a small percentage of the total NHS contract holders could be in real trouble. In addition, the associates who work in those practices could suffer a pay cut in excess of 65%.”

“I will leave Heidi to discuss what might happen as of 1st April, suffice to say that there will be no material change in circumstance between 31st March and the following day and therefore I would be surprised to see any movement from the 45% figure.”

Practice sales market – “still buoyant”

Chair of the NASDAL Lawyers Group and partner at Ward Hadaway, Damien Charlton then discussed the Practice Sales market over the last year. As Alan Suggett had already referred to, this was a whole lot busier than many might have expected. What the pandemic did do was slow the entire sales

process. Damien said, “From March 2020 until June 2020 there was a hiatus as society was locked down. Then, volumes of practice sales picked up quickly and NASDAL members saw a particular surge earlier this year as many sought to avoid a potential Capital Gains Tax increase in the Budget that as it turned out, didn’t materialise.”

“To illustrate the added time now involved, it can take up to 20 weeks for the CQC to register a new partnership allocation! As we move forward, it seems that those buying practices are having to do so in more of a ‘blind’ fashion than in is traditional. Even though a practice has been successful in the past, the new world that we find ourselves in, means it is no guarantee of future prosperity.”

The Future – “the reckoning of the end of furlough”

The final presentation was delivered by Heidi Marshall, who is the NASDAL Honorary Secretary and heads up the dental team at Dodd & Co Chartered Accountants. Heidi had the unenviable task – even more so in these times – of considering what may happen in the coming months.

Heidi covered a wide range of areas including Q1 percentages, clawback and the ‘Zoom Boom’ of dentistry. She also shared evidence of mixed practices taking the decision to leave the NHS as they are finding that the numbers no longer add up.

Heidi particularly focused on the end of furlough and that September 2021 will see a real reckoning in many sectors. “I think that we will see the true impact of what the end of furlough will mean for our economy. Potentially hundreds of thousands of people could find themselves out of work and that will certainly mean a reduction in enquiries for elective dentistry but perhaps even the more regular dental care too?”

Nick Ledingham, of Morris & Co, Specialist Dental Accountants and Chairman of NASDAL concluded, “I am pleased to see that the UK dental sector has reacted to the challenge that Covid has provided in a typically robust fashion, but it has been a tough 12 months for many and the future is still uncertain.

“Now, more than ever, it is important that dental practices take specialist advice so that they can understand and react to changes in their business situation.”

Many dentists (both Principals and Associates) will be aware that there was a Supreme Court judgement last Friday that ruled Uber drivers must be treated as workers rather than self-employed.

The five key facts in the Uber judgement were:

1. Remuneration was controlled by Uber including the amount paid to drivers and whether to refund passengers.
2. Drivers have no ability to negotiate the terms they contract with Uber on or the terms on which they transport passengers.
3. Once the driver is logged into the Uber App, they have limited power over their operations, placing them in a position of subordination. For example, the driver is not informed of the intended destination before accepting the fare and Uber can log the driver out if their acceptances or cancellations are unsatisfactory.
4. Uber exercise significant control over the service provided to passengers as the cars are vetted, the software is integral, Uber control the information provided to drivers, and drivers are monitored.
5. The relationship between the driver and the passenger is restricted to a minimum, preventing the driver from establishing a relationship which benefits their ‘business’ as a driver, which is specifically prohibited by Uber in any event.

This has meant that the political hot potato of whether Associates should be self-employed or not has again risen its head. From a tax perspective, this has been covered in previous NASDAL (National Association of Specialist Dental Accountants and Lawyers) releases and the position is still very clear – HMRC guidance contained in “Employment Status Manual ESM4030 Particular occupations: dentists” states:

“It should be noted that there are standard forms of agreement for ‘associate’ dentists which have been approved by the British Dental Association (BDA) and the Dental Practitioners Association (DPA)(sic). These agreements relate to dentists practicing as associates in premises run by another dentist.

“Where these agreements are used and the terms are followed, the income of the associate dentist is assessable under trading income rules and not as employment income. In these circumstances the dentist is liable for Class 2/4 NICs and not Class 1 NICs.

“The NHS General Dental Services Contract, which came into force from 1 April 2006, provides for less fluctuation in Associate Dentist’s income. However, providing the Associate Dentist continues to be responsible for paying their share of laboratory fees etc. for work relating to their patients and other terms of the standard agreement are followed, the above guidance will still apply.”

Alan Suggett, specialist dental accountant and partner in UNW LLP, said, “What is perhaps less clear now is that arguably an Associate could be considered self-employed by HMRC and yet be a ‘worker’ from an employment law perspective. Perhaps where the Associates are different to most Uber drivers is that they want to be self-employed.”

Some have expressed concern that these potential employment rights could have an effect on the vicarious liability of the Associate as well as worker benefits. If Principals became liable for maternity leave and holidays, this could drive Associate pay down and employment might actually be a more attractive option for all moving forward. However, one of the key factors in the judgement is that the Uber drivers could not substitute or send a locum in to do their work. They had to perform it personally. This is not always the case for dentists. They usually have the right to substitute in their contract and this is why it is key that contracts are abided by and not changed without expert advice.

UNW employment tax partner Lee Muter added, “The Uber case is more to do with employment rights obtained for the individual drivers as being “workers” which is a separate category within employment law, probably a hybrid between an employee and self-employed, rather than affecting the status for tax purposes. One of the quirky things about this is that the driver could still potentially be classed as self-employed for tax purposes but a worker for employment law purposes, so having potentially the best of both world in that they could obtain some valuable employment rights such as holiday pay, etc but also have the flexibility and other benefits associated with being self-employed for tax.”