Payroll investigations are on the up

Spy with long lense
istock_d-keine_aw
Share this content

HMRC collected £819m in additional tax through payroll investigations, a 16% year-on-year jump.

The law firm Pinsent Masons gathered these figures with a Freedom of Information Request. Speaking to AccountingWEB, Pinsent Masons' head of tax investigations Paul Noble said HMRC is targeting the grey area in employment status.
 
“We’ve had this grey area in the middle that makes it difficult to fully categorise people. It’s where all the controversy arises,” he said. “HMRC wants to eradicate as much of the grey as possible and firmly stick as many people in the employed status category. HMRC’s preference is for individuals to be fully employed because tax can be deducted at source and there’s less scope for expenses to be claimed.
 
“So it’s a matter of increasing the tax take but also enhancing the timing of that tax being recovered,” continued Noble.
 
However, an HMRC spokesperson comprehensively denied Pinsent Masons assessment. They said, “Whether you're employed or self employed is never a matter of choice; it is always dictated by the facts and when the wrong tax is being paid we put things right.”
 
But Noble insists the political hot-button issue of employment status is creating trouble for businesses. “The problem you have is that there are issues around tax and social policy running across each other,” he said, referring to the political anxieties over the gig economy.
 
The government recently published its response to the Taylor Report, the investigation into the gig economy. The likely result will be the ‘worker’ category being altered to a ‘dependent contractor’ status, which would straddle the divide between employed and self employed.
 
Dependent contractors wouldn’t be employees, but unlike self-employed workers, they’d have worker rights. It’s expected that a new dependent contractor test will be formulated which places a far greater emphasis on control. 
 
For businesses, the dependent contractor status will eliminate the advantages of using a contractor. Speaking to AccountingWEB at the time, Alastair Kendrick, an employment tax adviser, noted: “there’s massive growth in the number of self-employed people. This test is effectively to curb that number back and put it back into proportion.”
 
So Noble’s reasoning that HMRC is zoning in on employment status isn’t without context. Rebecca Busfield, a partner at Watt Busfield tax investigations, confirmed that she’s seen an increased HMRC focus on "all areas" of employment taxes.
 
“HMRC is doing more cross tax investigations (covering Corporation tax, VAT and PAYE) to save them time and on the assumption that where a business makes errors on one tax, there are likely to be errors in other areas too," said Busfield.
 
“We have also seen more input from HMRC’s labour market team with specialist inspectors coming to meetings to check compliance in relation to the labour supply chain, minimum wage, modern slavery, rights to work in the UK and the construction industry scheme - especially where agents or subcontractors are used.”

About Francois Badenhorst

Francois

Francois is a writer, editor and broadcaster specialising in business.

Replies

Please login or register to join the discussion.

avatar
07th Mar 2018 16:41

look into the murky world of dentists; their practices claim them as self employed and they get away with it for some unknown reason; they expect over 3 months notice but yet the person is technically not even an employee!

Thanks (3)
avatar
08th Mar 2018 13:30

And believe it or not the NHS then gives the 'self-employed' locum dentists maternity pay.

Thanks (2)
avatar
to tcatt31489
08th Mar 2018 15:31

tcatt31489 wrote:

And believe it or not the NHS then gives the 'self-employed' locum dentists maternity pay.

There needs to be a proper investigation into dentistry practices and those who audit them! No accountant or bookkeeper should accept their practices!

Thanks (1)
By govig
to prdaykin
11th Mar 2018 08:40

I think you'll find that NHS dentists owning their own practices have held self employed status since 1948. I'd wager most would love to work as a salaried/employed practitioner without all the responsibility of owning a practice.

I'd check this out properly before apparently suggesting they are doing something wrong.

That said, any dentist still working to (imo) mad NHS rules is a rarity. Most, including those who have previously dedicated decades to NHS work, have had to 'go private' to survive. Private practice owning dentists are surely always self employed. How could they be anything else?

We await your further deliberations with interest.

Thanks (0)
avatar
to govig
11th Mar 2018 10:42

From my experience, individual dentists working in a practice are counted as self employed; I would understand if it was one dentist (who owned the practice) but all dentists on site, (owner of the practice or not) are classed as self employed.

Thanks (0)
By govig
11th Mar 2018 14:58

Well to be definitive, you would have to examine the contracts of the dentists who don't own the practice which would describe the legal relationships.

Admittedly, this dental practice scenario is unusual compared to most businesses but the vast majority of associate dentists have their own contract numbers with the NHS (or the practice in case of private contract) and purely share business expenses with the owner. This is usually determined as a percentage of turnover.

Because of professional liability, no practice owner in their right mind would want to be professionally liable for the care provided by others and usually have contracts that clarify this beyond doubt.

There has been one very rare test case where it was actually determined that an associate at a practice was employed (ie he was an assistant) but the overwhemling majority are not and never have been.

AFAIK, HMRC have accepted self employed status for this overwhelming majority for 50 or so years since 'assistants' generally became 'associates'.

I therefore believe that your original post of "look into the murky world of dentists; their practices claim them as self employed and they get away with it for some unknown reason" seems way off the mark.

If they were getting away with anything, they would have been challenged within the last few decades rather than in a general HMRC tightening up on employee/self employed status.

Either way, "murky" seems an entirely inappropriate and general perjorative.

Thanks (0)
avatar
to govig
11th Mar 2018 18:18

I think that many employers have to deal with liability; seems unfair that dental practices get away with it; if a chef kills a customer it’s somehow acceptable for liability to fall on the resturant but for a dentist it should be different? I was not referring to NHS by the way. Why should HMRC accept this? So it’s ok to limit an employees rights if hmrc says so? The test for employee vs worker vs self employed should class the dentist as an employee. They DO not equally cover materials; I know this because I know a lot of dentists; they get no paid holiday yet they are treated as employees (it’s as simple as that); they are no treated as partners even though you say that and a contract of service is not valid if it fails an hmrc test no matter what a contract says.

Remember a contract is only valid if it is legal.

Thanks (0)
By govig
11th Mar 2018 15:01

Quote : "No accountant or bookkeeper should accept their practices!"

Well, see above and let us know if you still think such an approach really is appropriate.

Thanks (0)
avatar
to govig
11th Mar 2018 15:04

govig wrote:

Quote : "No accountant or bookkeeper should accept their practices!"

Well, see above and let us know if you still think such an approach is appropriate.

I think the definition of an employee should extend to a dentists who is basically employed as a dentists working for a wage using the tools of the practice to the hours of the practice. They arent in my opinion self employed, they certainty couldn’t use their own money to employ someone to do their job or bring with them their own dental tools! Moreover, the practices treat them as employees not self employed individuals, this is enough reason for in my mind to bring their self employment arguement as redundant. The owner or a practice no, the dentist he “employes” YES!

Thanks (0)
By govig
11th Mar 2018 17:23

If you think they usually work for a monthly wage then that is the source of your misunderstanding. Some no doubt will but they are not associates. This word has a specific definition in dentistry.

Look, I accept they don't neatly fit *your* definition of self-employed but consider the following before further entrenching yourself with your opening mindset.

Generally, an associate dentist, after their initial year's vocational training:

1) has their own contract number with their source of income which is NOT the practice owner (therefore the idea of a 'wage' is straight out of the window.)

2) This contract defines how this dentist works by allocating annual of units of work. Any deviation from this and any other regulatory issue would be between the PCT and that dentist alone, not the practice owner.

3) The are the masters of their own destiny. They choose how to treat their patients and are accordingly responsible for that choice. The owner has to give this clinical freedom to not be held liable in case of mishaps.

4) in the case of medico-legal action, their defence union, not the practice's, would defend them.

5) Their success or otherwise is dependent on their skills alone and not the practice owners. If you are entirely responsible for your businesses success or failure and have to account for it, then this would not normally be attributed to someone who was an employee. An employee would not normally shoulder business risk as an associate would.

6) Whilst the large plant would clearly be owned by the practice principle, most associates have their own favourite tools (which they may carry from practice to practice) and claiming tax relief on them is entirely legitimate.

They have to pay for their own professional indemnity and sickness cover and they are independently registered with the GDC.

7) I accept that they work to normal practice hours but this is hardly a pivotal point. They are probably the same hours that you or I work....

8) The staffing arrangements are however not the associates responsibility but are paid for by the associate in their turnover percentage contribution to the practice overheads. Sharing overheads does not make you an employee.

9) Many dentists work in different practices on different days of the week , each with their own contract number and with practice owners that have no business relationship to each other.

Whilst it will be possible to find badly worded agreements that m'lud may interpret as employment, most use the standard BDA contract which is not so much at the mercy of legal opinion.

I therefore think that a true associate is self-empoyed but accept that standard criteria might not match this view entirely.

HMRC seem to have agreed for decades although past performance cannot be relied on as a prediction for the future.

Talking to some dentists I know, they would love to be employees with a reliable wage, holiday pay and someone else taking all the business risk, but have to work to retirement with self employed risks unless they have a burning desire to be a practice owner.

Finally, do any of your clients actually claim a monthly wage to an associate as an expense? Y'now, the same every month....year in year out... If they do then you may well have a point, IN THEIR CASE, and their associates might well be employed assistants.

You have yet to present evidence that indicates murky business practices or that they are "getting away with it". Unless you can, and it applies across the board, I think you should withdraw those accusations.

Anyone initially reading this would be led to thinking that ALL dentists are potentially "at it" although you do seem to now accept that the word 'dentist' does require further definition : )

Thanks (2)
avatar
to govig
11th Mar 2018 18:25

govig wrote:

If you think they usually work for a monthly wage then that is the source of your misunderstanding. Some no doubt will but they are not associates. This word has a specific definition in dentistry.

Look, I accept they don't neatly fit *your* definition of self-employed but consider the following before further entrenching yourself with your opening mindset.

Generally, an associate dentist, after their initial year's vocational training:

1) has their own contract number with their source of income which is NOT the practice owner (therefore the idea of a 'wage' is straight out of the window.)

2) This contract defines how this dentist works by allocating annual of units of work. Any deviation from this and any other regulatory issue would be between the PCT and that dentist alone, not the practice owner.

3) The are the masters of their own destiny. They choose how to treat their patients and are accordingly responsible for that choice. The owner has to give this clinical freedom to not be held liable in case of mishaps.

4) in the case of medico-legal action, their defence union, not the practice's, would defend them.

5) Their success or otherwise is dependent on their skills alone and not the practice owners. If you are entirely responsible for your businesses success or failure and have to account for it, then this would not normally be attributed to someone who was an employee. An employee would not normally shoulder business risk as an associate would.

6) Whilst the large plant would clearly be owned by the practice principle, most associates have their own favourite tools (which they may carry from practice to practice) and claiming tax relief on them is entirely legitimate.

They have to pay for their own professional indemnity and sickness cover and they are independently registered with the GDC.

7) I accept that they work to normal practice hours but this is hardly a pivotal point. They are probably the same hours that you or I work....

8) The staffing arrangements are however not the associates responsibility but are paid for by the associate in their turnover percentage contribution to the practice overheads. Sharing overheads does not make you an employee.

9) Many dentists work in different practices on different days of the week , each with their own contract number and with practice owners that have no business relationship to each other.

Whilst it will be possible to find badly worded agreements that m'lud may interpret as employment, most use the standard BDA contract which is not so much at the mercy of legal opinion.

I therefore think that a true associate is self-empoyed but accept that standard criteria might not match this view entirely.

HMRC seem to have agreed for decades although past performance cannot be relied on as a prediction for the future.

Talking to some dentists I know, they would love to be employees with a reliable wage, holiday pay and someone else taking all the business risk, but have to work to retirement with self employed risks unless they have a burning desire to be a practice owner.

Finally, do any of your clients actually claim a monthly wage to an associate as an expense? Y'now, the same every month....year in year out... If they do then you may well have a point, IN THEIR CASE, and their associates might well be employed assistants.

You have yet to present evidence that indicates murky business practices or that they are "getting away with it". Unless you can, and it applies across the board, I think you should withdraw those accusations.

Anyone initially reading this would be led to thinking that ALL dentists are potentially "at it" although you do seem to now accept that the word 'dentist' does require further definition : )

I know a dentist that is required to be exclusive at a practise. Is required to work using the tools of the practice. Cannot bring her own equipment to the surgery and cannot employ people to help her. She is treated de facto as an employee. In her opinion she believes she is an employee yet receives no statutory rights as a result. I know this is true of other dentists and health professionals. For instance, she wanted to leave the practice and she was required to give 3 months notice. She was never given a service contract and has her timetable written for her. In my mind she is an employee regardless if HMRC says she is not. This is mostly a legal argument and not an accounting one but it is nevertheless true in my mind.

Thanks (0)
By govig
12th Mar 2018 09:21

That is anecdotal evidence. I know many (dozens) associate dentists who have complete clinical freedom. Complete clinical freedom is hardly what you are describing.

Who pays this dentist? Is it the PCT or the practice owner? Does the dentist actually pay the practice owner for a share of overheads? Do employees normally do this? No.

I think you might find that the notice period relates to PCT requirements (the paymasters, remember), not the practice itself.

I am not aware that this self-employed associate principle has been challenged by HMRC since associates existed (decades, and at least 5 of them) so why are you challenging it now with your unnecessary character denigration.

Has HMRC specifically challenged this dentist you are describing? Are there others?

C'mon, we need to know.

Thanks (0)
to govig
12th Mar 2018 14:55

govig wrote:

That is anecdotal evidence. I know many (dozens) associate dentists who have complete clinical freedom.

Effectively you are saying "Yours is anecdotal evidence. Mine is people I know. "

Could you clarify the difference between the two please?

Because you are essentially dismissing (quite rudely in my opinion) prdaykins claim they know dentists that DON'T have clinical freedom because you personally don't know any. Taking prdaykins description at face value, do you accept that such people should be treated as employees?

Thanks (0)
By govig
12th Mar 2018 15:51

It is anedotal because it refers to one person and that one person's circumstances which could be (read: is) wildly different from the norm. From prd's scant description it hardly sounds like his example dentist is an associate. However further information, despite being requested all the way through this thread has not been forthcoming to further determine either way why prd has this 'employee' mindset and a quite unjustified poor opinion of that profession.

What I am aware of is the norm (close family member is a GDP and I personally know dozens of GDPs some of whom I have consulted throughout this thread) and that comes in the form of those working under the usual BDA associate agreement. Have a look at BDA website and read it for yourself and then come back to us with your opinion on whether you still think associates working under such an agreement could be regarded as employees.

If prd wants to cherry pick unusual arrangements to shore up an apparently suspect opinion then fine, but it will be challenged perhaps robustly. It's a shame you can't differentiate between rudenes and robust, evidence based debate though....

The bottom line is that dentists working for local authority clinics are employees. A few dentists working in general practice may just be depending on circumstances (clinical freedom being just one but a crucial one) but the vast majority are not for the reasons aforementioned.

So do you, stepurhan, think dentistry is a murky world where its workers are mostly "up to something"? It looks like it, if you take such views at face value but apparently reject the face value of counter discussion.

I am still puzzled why anything is being made of this when HMRC don't seem to be generally challenging the very long-standing status quo.

Have you any personal experience to the contrary? If so, let's hear it.

Thanks (0)
avatar
to govig
13th Mar 2018 01:29

So your logic is; HMRC say it’s fine so it is... no comment! I would argue that employers nic isn’t being paid and employers contribution to pension etc etc etc. Perhaps as HMRC let Panamanian “residents” get away with their practices no fuss should of been made. Companies and employers should continue to pay higher rates of tax to make up the shortfall.

Thanks (0)
to govig
13th Mar 2018 09:47

govig wrote:

It is anedotal because it refers to one person and that one person's circumstances which could be (read: is) wildly different from the norm.

Anecdotal means from personal experience, and hence possibly unreliable. You claiming to have multiple examples of your view is as much anecdotal as prd having a single example of their view. The plural of anecdote is not data.

So this statement

Quote:

What I am aware of is the norm (close family member is a GDP and I personally know dozens of GDPs some of whom I have consulted throughout this thread)

is meaningless because it is still anecdotal evidence. It is only the norm in as much as it is your personal experience. At best the following sentence.
Quote:
Have a look at BDA website and read it for yourself and then come back to us with your opinion on whether you still think associates working under such an agreement could be regarded as employees.

is evidence of what SHOULD be the norm. It still rests on your assumption that the majority of dentists adhere to the BDA contract arrangements. An assumption that, again, is solely based on your personal experience (anecdotal evidence).

Let me be clear. I don't deal with any dentists at all, so I have no personal anecdotal evidence to add to the pot. What I object to is you dismissing prd's experience as clearly incorrect solely because it does not agree with your own experience. You are not, as you put it, "challenging robustly". You are flat out saying that prd is incorrect. You are not engaging in "evidence based debate" because your only "evidence" is your own anecdotal claims.

So, rather than dismissing prd's claims, I will ask you again to try engaging with it. Do you agree that, if the situation is as prd described (not as it should be according to the BDA) is that a dodgy evasion of employment obligations or not?

Thanks (0)
By govig
13th Mar 2018 09:34

Well, the Panamanian reference is an entire red herring. These practitioners will be paying national insurance and uk income tax . Are you suggesting otherwise?

Regarding your perception of my logic, I'd say you have somewhat simplified matters. Dental Associates (the specific definition remember) have been around for 50 years and officialdom has been entirely happy about their self-employed status for all that time.

Prd has apparently decided, seemingly based on a random single sample, that 'his' sample practitioner does not seem to meet prd's criteria of self employment. Fine, it's a view but to then unreasonably extrapolate the sample data to infer that all associate dentists should have employment status seems entirely unreasonable.

If a dentist received a wage (about the same every month) working on the prescription of a practice owner, who would by default have to then be (partly or more likely fully) medico-legally liable, prd might have the start of a point. The VAST majority of associate dentists do not work like this.

In the absence of further justification, there seems no basis at all to challenge HMRC's very long standing view that such dentists are self employed . I am still puzzled why you would really want to anyway apart from suddenly wanting to become a bastion of assumed employee's rights : )

Thanks (0)
By govig
13th Mar 2018 11:17

Quote "So, rather than dismissing prd's claims, I will ask you again to try engaging with it. Do you agree that, if the situation is as prd described (not as it should be according to the BDA) is that a dodgy evasion of employment obligations or not?"

That is hardly the case as anyone taking the time to read and understand all my earlier posts should be able to work out.

I have consistently asked prd to answer specific points to hopefully debate each in turn and all that has been forthcoming is an anecdote based on a sample of one practitioner. Perhaps that's where there has been a failure to engage?

I also have trouble in accepting your postulation that I am also using anecdotal evidence anyway. I live with someone who has been an associate (and a practice owner for a few years ) since the 70s under various incarnations of the BDA agreement along with experiences all their colleagues and professional friends.

Do you really think that any resulting data is anecodotal and considering the status quo and HMRC's long standing acceptance of it anyway? C'mon....!

Anyway, not knowing any dentists, do YOU think a dentist who doesn't receive a regular wage or having to work to the prescription of the boss etc etc (see earlier posts) an employee?

Discussing that might be a start instead of taking up the cudgels on someone else's behalf.

Thanks (0)
to govig
14th Mar 2018 10:00

govig wrote:

I also have trouble in accepting your postulation that I am also using anecdotal evidence anyway. I live with someone who has been an associate (and a practice owner for a few years ) since the 70s under various incarnations of the BDA agreement along with experiences all their colleagues and professional friends.

Do you really think that any resulting data is anecodotal and considering the status quo and HMRC's long standing acceptance of it anyway? C'mon....!

Yes, I do say that the resulting evidence is anecdotal, because it precisely meets the definition of anecdotal evidence.

https://www.merriam-webster.com/dictionary/anecdotal%20evidence

https://en.wikipedia.org/wiki/Anecdotal_evidence

Let me try to make this simple for you. There are 46,000 dental practices in the UK (source : https://www.statista.com/statistics/318885/numbers-of-dental-practitione...) Let's say for the sake of argument that each of them has a single associate. That's 46,000 associates.

You say you know "dozens" of associates that operate in a particular way. In absence of a particular figure, let's say you know 144 (a dozen dozen).

So you know 0.3% of the total associates in the UK. Does that strike you as a statistically significant figure to you? Are you really saying you can make definitive statements about all 46,000 from that?

Yet that is exactly what you are doing. Yes, prd has put forward only a single example. However, it is a single example where someone is being forced into self-employment, as an associate dentist, when all the facts, as given by prd indicate otherwise. You are just dismissing this because you are CERTAIN (from your 0.3% experience) that this cannot be the case.

So, to summarise, how do you KNOW your 0.3% personal experience is the norm? How do you KNOW the other 99.7% isn't operating on a totally different basis to the one you are familiar with (even if that contravenes the BDA rules they SHOULD be following).

Thanks (0)
By govig
15th Mar 2018 11:16

It is noted that you have completely failed to debate any of the points introduced in this debate other than my perceived sampling method.

Instead you choose to fight someone else's corner and add sprinklings of derogatory stuff like "let me try and make this simple for you."

Instead of trying to statististically dissassemble my arguments, ask yourself if someone lives with a GDP who has spent 40 years in the profession, having worked as associate and principle, been a BDA member, read 40 years worth of dental publications and been to 40 years worth of conferences etc etc they are likely to have got the gist of the profession by now. Well a damn site more than prd and his sample of one anyway.

So how about you answer this question. Who owns the dentist associates goodwill? Employees usually have no rights to goodwill so if associates have a right to it, that would be inconvenient for the view you appear to hold. Mind you we still don't know your view due to failure to debate the points ....

Thanks (0)
avatar
to govig
15th Mar 2018 17:46

Man chill out. I was just saying that from my knowledge -as far as I’ve seen- there are more than a few dentists who employ people claiming their self employed. Relax dude.

Thanks (1)
By govig
16th Mar 2018 19:28

Perfectly relaxed, thanks. So what about this inconvenient 'employee' goodwill then?

Thanks (0)

Related content