Associate Status (quo or no)?

karsten3Like many observers (i.e. neither a principal nor an associate) I feel that the self employed (S/E) status of associates (particularly those on fixed contracts as NHS performers, taking little or no risk, not providing kit etc) is likely to be reviewed by HMRC sooner rather than later.

I remember when the majority of hygienists were S/E and the change in the TaxMan’s interpretation of their status in the early 90s necessitated a bigger degree of proof from their accountants to stay classified as S/E.

What made me write this now is most definitely not to throw fuel on the “associates are parasites / principals are greedy” debate, as that has been done to death. Rather to make people aware that HMRC are looking at professions with positions that are traditionally considered S/E and the advantages that can bring.

My thoughts are that everyone needs to be very careful about S/E status whether they be business owners or associates and that it may be time to ensure that the evidence for your status is sound. (“We have always done it this way and there haven’t been any problems” is not an excuse).

With the current government seemingly shy to take on big business over tax – Vodafone, Starbucks, Google, Amazon etc they’ll have to get more from somewhere.

I sometime wonder if this was an extension of the last NHS contract, effectively nationalising NHS practices and then converting the “NHS dentists” (horrible term for a professional to accept) into employees. What did Sir Humphrey aided and abetted by Barry have in mind for the long game?

In the November edition of BDA News, James Goldman gave advice on ensuring that you stay self-employed. Here are some of his tips:

  • Ensure that your contact is clear, honest and in writing.
  • The associate has the right to engage a locum.
  • The associate must be seen to be taking a commercial risk. (Open to debate with a “fixed” contract – my opinion).
  • There is a licence fee arrangement so that the associate pays the practice owner for the use of surgery, equipment & staff.

James does quote a couple of legal cases and concludes that associates are closer in the eyes of the law to lap dancers than valets. In spite of his assurances I still feel that the day is coming when NHS associates (the term performers makes them sound like animals in a circus) will be liable to Tax & NI like other team members.

This from “The Lawyer” is what provoked me to put finger to keyboard:

Salaried partnership is one of the opaque mysteries of the legal profession. Falling in a grey area between having a slice of a firm’s equity and being the tea boy, the title means different things to different firms and almost nothing to clients. Now Britain’s taxman has twigged to the anomaly, realising that – if nothing else – salaried partnership status at LLPs has been a clever tax avoidance wheeze. But the loophole is closing, with our commentators at the London office of Debevoise & Plimpton pointing out that Revenue & Customs has noticed that ‘many LLPs have members engaged on terms more closely resembling those of employees, who work for the business, than of traditional partners, who carry on the business’. All of which will have some pretty profound implications on the national insurance front at large LLP law firms. 

Full article.

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