Dentists Who Invest

Podcast Episode

Full Transcript

Dr James: 0:41

Fans of the Dentists who Invest podcast. If you feel like there was one particular episode in the back catalog in the anthology of Dentists who Invest podcast episodes that really, really, really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein.

Bilal: 1:17

Welcome to the Dentists who Invest podcast.

Dr James: 1:23

Welcome back everyone to the Dentists who Invest podcast with myself, james Martin. We are joined here today by Bilal Ahmed of Heath Hill Green, a currency firm, and we are going to talk about something super important that we may or may not know about already, but, if we don’t, we should get up to date. We should get ourselves up to speed because it’s changing and it may mean that we’re no longer allowed to work as a limited company, which, as we know, is very lucrative and appealing for a lot of dentists, and that specific subject that I’ve been alluding to up to now is, of course, I R35. For those who don’t know, I know that this sounds like it might be a bit of a dry one, but promise, I promise, you guys stick with us. This is super, super, super important and relevant to every single one of us. So, bilal, welcome on the show, thanks for having me, James. Tremendous buddy. Thank you so much for coming on once again. So, Bilal, I know you’ve been on the podcast before, but there may still be some people out there who have yet to meet you. Can you just give us a little bit of a background about yourself so that we can understand who you are and how you help us dentists? So my name’s.

Bilal: 2:33

Bilal, Chief Accountant at Heathill Green. We’re a tech focused, a cancer practice where we focus all our time and attention on dentists, doctors, anyone that’s really NHS adjacent.

Dr James: 2:47

Awesome, cool, cool, cool. And Bilal and I were chatting off camera about IR35 and Bilal has a self-confessed connoisseur of IR35 and how it’s changed and its ramifications over the years. So there’s no one more component that I think it’s possible that I could have found to speak about this particular subject. So super, super pumped to learn about this and what’s changing. So, bilal, ir35, can you give us the short and sweet what it is and what it means for dentists right now?

Bilal: 3:20

So, in short, it governs the employment status of dentists. So it’s whether you can work as self-employed or limited company or you are employed. I think the general rule is, if it sounds like a duck, walks like a duck, it’s a duck and it’s not an antelope for tax purposes. So you can’t get the creamy, creamy goodness tax savings operating by a limited company if you’re an employee.

Dr James: 3:44

I see. Yes, so at present most dentists even though I don’t know whether it’s a little bit naughty or not, maybe you’ll be able to clear that one up Lots of us can work as limited companies, even though, as you say, we walk like ducks, we talk like ducks, we look like employees. Would I be correct?

Bilal: 4:04

I think nothing’s a bit more to that. And again, one of the reasons why the practice was set up is dentists generally are one of very few industries out there where you’ve done your education, you’ve done your one-year foundation foundation, you’re training here and then you’re almost automatically self-employed, unless you go work for a corporate as an employee. So you will almost know straight away that there’s a difference between when you finished your foundation year on the 31st of August, when you became an associate, that you are treated differently. You’re now taking on all these costs that you didn’t know were going to come your way before. You’re now paying your own tax bill. You’re not benefiting from all the other bits that the other employees did, but really what I have 35 sets to govern and it kicked in from the 1st of April this year and it was broad stroke across everyone. There’s phraseology, there’s chapter 8, chapter 10,. We’re going to ignore all of that. We’re going to try and make it as straightforward as possible. It says what does it mean to anyone listening to this podcast? What it fundamentally says is and again, it kicked in for everyone on the 1st of April this year and it’s been in place for a number of years, but dentists have almost been put to one side, and there’s quite a lot of literature on this on the BDA’s website. So your own governing body talks about this in great detail. Hmrc, in the government, simply said we’re not going to do anything with this until the 1st of April 2023. So we’ve got some breathing space.

Dr James: 5:24

Right, I see. So the changes that we’re going to speak about in just a moment, they’ve already been brought in, they’ve already been solidified and set in concrete, but they don’t actually apply until 2023. 2023, you just said.

Bilal: 5:39

Yeah, so for all industries. Everywhere else, it was the 1st of April this year, 2021.

Dr James: 5:44

I see, and specifically for dentists, the government said actually, you guys, you’re over here, you’re a separate category and it applies 2023.

Bilal: 5:51

Yeah, we’re going to come back to you. We need to do a bit more research. We need to work into how you guys work and look into how you guys work, and it will be full-fat IR35 by that point. So really the purpose of this is let’s get in the right shape. So either you know what’s coming, you know why right now, if your employer says, or the practice you work with says you can’t operate by an limited company, but at least you now know why, even when you’re out searching for jobs, it’s to ask that question that says, if you’re an associate that knows they want to operate by an limited company, but then you’ve got practice A and practice B. Practice A says you cannot work with us as an independent company, practice B says you can, then that factors into your decision making.

Dr James: 6:32

Wow, excellent, okay, super useful knowledge. So IR35 at present, what does it mean for us dentists? Because, even though, yes, as you say, it first of April was when it changed for lots of industries, before the first of April 2021, it applied to dentists and then it’s continued to be in the same form since this year for dentists. But my question would be for those out there who don’t know I’m asking this on behalf of the audience, for the benefit of them what did IR35 mean for us dentists prior to 2023, prior to before things are changing. So, in all this time period that we’re looking back upon now, so right now it means nothing as in.

Bilal: 7:16

You can continue as you are. You don’t have to make any changes. Right now, as you’re paying your taxes, as you’re engaging your contracts with your principal, right now it doesn’t mean anything. However, there are large corporates right now that will say you cannot work as an intercompany because they make the assessment. So from an IR35 perspective, you can’t say like if you were the principal and I was gonna come work for you, james. It says I say to you, james, I wanna work as an intercompany. You can say no, we’re a large corporate, we’ve assessed our employees or the people that work with us, and we’ve determined you’re inside of IR35, which means you’re captured by the rules, which means you can’t then work as an intercompany.

Dr James: 7:52

I see but that only virtually applies in the instance that there are large corporate.

Bilal: 7:58

Correct because they’re making that assessment now, ahead of time, because there’s a couple of tests that we have to follow. So the first is the assessment for IR35, and when we talk about IR35, we talk about inside IR35 and outside of IR35. Ir outside of IR35 means it doesn’t apply. Inside of IR35 means you then have to pay the associated taxes.

Dr James: 8:20

Because when you’re inside IR35, let’s make that extra clear you’re determined to be an employee. Correct, Okay, brilliant.

Bilal: 8:27

So let’s take a step back at this point and talk about where it all came from and what it’s actually there to do. So it really kicked off, and where it really took steam was people who were employees sat at the same desk, treated like employees, took holidays, sick pay and all that kind of stuff, but then, for tax purposes, said they were self-employed, when they really not. Now, if we use the most pertinent example of nurses, so nurses working within NHS trusts would get paid via either umbrella companies or as limited companies or self-employed. Now a nurse can’t come in and say I’m not gonna treat that patient, I’m not gonna carry out the orders that you’ve given me, I’m not gonna do what you’ve asked. I’m an independent contractor. I’m going to approach this in my own way. That then goes back to the. If you walk to the doctor, talk to the doctor, it’s an employee. You know a nurse in that regard was an employee, which is why, if you look back at some of the through the legislation, if you Google any of this nurses, ir35, it’ll give you a broader context as to where this has come from. So there’s a couple of rules that we have. There’s a couple of tests that we have to go through ahead of time. That says to test the employment status. That says you, as a dentist, do you get told what treatments you have to carry out? Do you get? Are you told what patients you have to see? Are you told how to carry out the treatments, what materials to use and how you have to do it? Now, most associate dentists, the answer to that is all no, because you’ve made the clinical diagnosis, you’ve chosen the treatment plan and you’ve chosen what materials to use to carry out that treatment plan. You’ve also made the distinction to the patient that says you could do this on NHS or you can do this on private. You know, if they want a super white, indescendable filling, then that’s done generally private. If they want an NHS one, then it’ll stick out like a sore thumb. So you’ve made that choice with the patient. Now, conversely, let’s say that was done over two appointments or two. Yeah, two appointments. Appointment one you come in, you do the diagnosis and then you carry out treatment plan. Treatment plans are gonna be carried out over appointment number two. Let’s say appointment two comes around, you don’t wanna work that day, for whatever reason. You send a super qualified dentist to go carry out your treatment plan. Ultimately, they’re gonna carry out their own assessment to see if the treatment plan you’ve set out is correct. Now you can either that point say filling’s not the right treatment, there, we’re gonna pull it. And then you’ll probably pull it. But if that’s the right clinical diagnosis, but you, as my replacement, get to make that distinction Now let’s take all of that and wrap that into an employee. An employee would never be able to do that, would they?

Dr James: 10:48

Oh, I see. And who does that impact specifically, then, bilal.

Bilal: 10:53

So from a company’s perspective, it’s the size of the company who have then got to make the distinction on their employees. So if you’re a company that makes over £10M or has more than £5M on your balance sheet, or employees more than 50 employees, if you satisfy two of those tests, then you have to test all of your employees for their employment status.

Dr James: 11:14

I see, I see, I see, okay, brilliant. So now we’ve got a nice little synopsis of how IR35 presently impacts dentists and their working conditions. Is there anything more you’d like to chuck on top of that, or happy to draw a line under that, bilal?

Bilal: 11:28

So let’s draw a line under that bit and then, well, I guess you’ve got a few more questions for me.

Dr James: 11:33

Absolutely Well. The natural progression is what’s changing and what do we need to think about going forwards?

Bilal: 11:39

It’s a really good question. So what you need to think about is substantial really. So if we talk about the large corporates at the moment and if anyone’s worked with them and then left them to then go back to a smaller, a smaller, independently on practice, you understand why you would be governed inside of IR35. So things like you know they’re KPI-driven. You have to have this many bums in your seats that you convert to this many outcomes. You’re governed by the types of materials you can use, and if you’ve made a clinical diagnosis that doesn’t agree with their cost model, they might say, no, you can’t do that, find something else. So then that really muddies the waters on whether you’re truly independent or not. And if we talk about the impact of this, it’s purely a cash perspective. That says, if you as an associate were earning about 50 grand a year, you’re currently only paying 9% national insurance over about 8.5 grand, and I as the principal, as a practice owner, don’t pay any national insurance on your behalf. But if I now have to employ you and you still want to earn that 50 grand, I now have to pay 13.8% on everything I pay you over 8.5 thousand pounds. So on a 50 grand salary, we’re talking nearly 5.5 grand. I think it’s about 5.7k. Now you as the employee now have gone from paying 9% national insurance to 12% national insurance. That’s an additional 3% over and above about 9.5 thousand pounds. So the national insurance you pay versus the national insurance the employee pays are different thresholds. So now that’s risen from 9% to 12% to 3% increase and again on about 50k. You’re looking at about 1200 quid. So your pocket’s now been hit and your principal’s pocket’s now been hit.

Dr James: 13:23

Real quick, guys. I put together a special report for Dentist entitled the Seven Costs and Potentially Disasters Mistakes the Dentist make whenever it comes to their finances. Most of the time, Dentists are going through these issues and they don’t even necessarily realise that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistuneinvestcom forward slash podcast report or, alternatively, you can download it using the link in the description. This report details the seven most common issues. However, most importantly, it also shows you how to fix them. I’m really looking forward to hearing your thoughts. Right, awesome, so that’s how it will affect us. Should we now define to be within IR35? But what’s changing going forward in 2023 is that they’re tightening up the rules as to who’s in and who’s out. I’m correct in saying that, right?

Bilal: 14:23

So the rules by which someone’s assessed isn’t changing, it’s just that Dentists were put to one side. So it was simply. The rules won’t change. How we assess you doesn’t change, it’s just Dentists were put to one side.

Dr James: 14:35

Right. So it’s more that we need to be wary that this is going to change in future and also clear it up with our employers. That’s the crux of what you’re saying. Awesome, that’s brilliant, that’s brilliant.

Bilal: 14:48

I think the crux is a good word. Why were you even having this conversation? Was my wife sent me a screenshot on something someone posted on the dentist to invest for a Facebook group? Was this is coming, it’s happening. It’s a bit of a scare mongering and I think that I’m grateful for this platform is to sort of quell those flames a little bit. That says it’s not as scary as everyone thinks it is Because, like I said, we’ve got until the 1st of April 2023. That says you’ve now got plenty of time to make sure your contracts are in line, making sure that how you treat your independent contract is completely different to how you treat your employees, having your contract set up in the right way. What implications that has ahead of time. Speaking to specialists, legal providers who work in this space because they absolutely work in this space I mean this is not a new thing. It might be a new thing on the dental radar, but in the wider corporate environment, it’s been around for over a decade.

Dr James: 16:27

That’s awesome. You know what I think it would be super helpful for us to do at this point, just to make it tremendously clear to anybody who’s listening what they need to worry about. Let’s look at it from the point of view of associates and let’s look at it from the point of view of principal dentists. Let’s just distill precisely what you would advise each one of those parties going forward, how they should take this into account. Let’s go associates first.

Bilal: 16:51

Cool? From an associate perspective, it’s very much. Can I operate by a limited company? We discussed this to death in our previous podcast. It’s not going to impact everybody because if you choose to stay within the pension scheme superannuation, you’re by default self-employed anyway. Your employment test is still tested, but the impact to you is significantly lower than what it would have been if you were operating by a limited company. From an associate’s perspective, if you’ve created an entire business plan, a tax strategy based on your limited company, you might be earning 150 grand a year, but you’re only taking out 50K using all this money to invest and diversify your portfolio. You need to think about that strategy that says is the employer or is the practice I’m currently working for? Will they fall inside of IR35? Do I now need to go find another job? If you’re a brand new associate that’s going into the working environment for the first time, it’s really one of the considerations you have to make that says, hey, if I fall inside of IR35, will I even be paid anywhere near what an associate down the road at an independent practice would be? Because the cost is significantly higher. Why is that? There’s things that you can do with your principles now, because the goal is to work together, because I as a principal don’t want to pay the additional national insurance, but I also don’t want to be breaking the law that says, if I have to, then I’ve either got to capture all the right people that I need to and make them aware of it ahead of time, or I work with my associates now to create those physical walls that says you are not an employee, you do not come out on team nights out, you do not come out to these kinds of things. Now, from a brand new associate’s perspective associate’s perspective that’s quite hard for me to say. That can be quite emotional that says why am I being treated differently? But you have to have the distinction in place. So things like you know, you can’t come to Christmas parties, you can’t come to these kinds of things. These are employee-only events. If you want to come as independent contractor, you have to pay to attend, because an employee wouldn’t have to do that. So it’s having those distinctions in place. Now, that’s from an associate’s perspective. And again, it only really implicates everyone that wants to work for an employee company or currently is working for an employee company, because you’ll be used to having far greater cash flow than you’ve been used to, because you’re now going to. If you’re earning over 150K, then you’re now going to be start getting taxed up 45% on anything over 100 or 50 grand, so your tax bills is going to rise considerably. But it’s also going to impact your entire strategy. You know your investment strategy, your diversification strategy or even your retirement strategy. It could make a significant impact on all of this tremendous.

Dr James: 19:33

Yeah, I mean, that’s an amazing summary of what we need to look out for associates, and I think the thing that’s stuck in the most when you were speaking about was just how much this difference this makes in terms of national insurance contributions and how much this can affect negotiations between associates and employees. Associates and employers beg your pardon and what that will mean for their pay packet. Absolutely that’s huge. That’s a massive shaving off their earnings. 100 awesome associates we have nailed. What about principal dentists and practice owners, etc so let’s start with.

Bilal: 20:07

Let’s start with the bit that everyone’s interested in cash. How does it impact my, my pocket? And again, using that 50,000 pounds example, that says if you were paying an associate today 50,000 pounds, then you’re now you’re still gonna have to pay them the same amount. You have to remain competitive in the marketplace. But by employing them at that sort of 50,000 pound rate, you now incur 13.8% national insurance on anything over an half grand, which is about five and a half grand, which you now got to build that into your business model. And I said, do you have adequate cash flow? Cash flow, are you charging the right amount to your patients? Are you able to renegotiate your NHS contract? Do you even stay NHS? Because is it even worth it facilitating it? And do you sort of pivot towards more private practice? Because are you going to be able to attract the type of associates that you want, that that will be able to earn you the kind of money that you become accustomed to? And beyond all of that is the attraction and retention. Now, can you keep them and will they? Will they stay with you? Because if you’re a large corporate and there’s sort of an independent principal down the road offering like flight UDA value, is it even worth it for the associate? So, from a business perspective, can you? Can you? Can you attract, retain and train the employees of the level of employees that you want and really does this business become viable for you going forward? I mean, if you were talking 10 associate practice on about 50 grand a year, that’s extra 50,000 pounds of cost that you’ve got to pay for in essence. But all it’s not all doom and gloom, because you can now maybe adapt the way you work. That says we might not be as strict as we are, will give our associates that bit of yarn. That says they fall, they satisfy the rules, because it’s not straightforward. That says, just because you earn over 1010 million pounds where you’ve got five million pound of assets or you’ve got more than 50 employees, everyone’s are 35, it’s everyone’s inside of by 35. It’s not that there’s some tests. That says right, if you do satisfy those, then you do now have to test all your employees. Now, before we go into that, there’s a government tool that they’ve put out themselves. It’s a CST tool. So check in point states tool. If you just do the HMRC CST, it’ll take you to a sample questions about four or five questions, but which will give you your starting point. That says this will start coaching your mindset. That says you know, do I need to do something? However, if you, if the, even the tool, says no, you’re not or you’re outside of by 35, don’t take that in the bait, because there are companies in other spaces that have used that as part of the evidence to say we’re not and they’ve gone. Yeah, that’s not enough. Even HMRC’s own tool is not enough to satisfy. So there are independent companies out there that you need to work with. That will. It’s shocking, isn’t it? It’s mad yeah, yeah, their. Their own tool wasn’t enough to say, yeah, they’re outside of by 35, but there are. There are law firms that work in the space. So if I was a principal about satisfy these rules even if I wasn’t, I want to make sure on the right side of the rules is, you would now not need to start speaking to legal firms to start getting your contracts in order to get your contract reviewed, speak to your practice managers. That says if an associate turns at ten minutes late and they’re self employed, you do not do return to workforce because they’re not employees, they’re independent contractors. How you manage them is different. You know they don’t need to book time off sick. They need they. They pretty much just let you know they’re not going to be there as a courtesy and if they, they need to send a super replacement. Look as an independent contractor. If you’ve got a diary book that day and the dentist is not turning up and it’s cost you a grant to go get a local and to go cover that, that only made you found a credit. It’s not unreasonable to say, well, you know, only five hundred could. You didn’t turn up. So whether you exercise that right or not is different. But to have that clause in your contract is important Because there should be an independent contract. If you were a builder that worked on my house, you didn’t turn up and you completely destroyed something. I would charge you for that. I think. Beyond this is the question of liability. Now that says we’re ready, in the space of liability, shifting more towards practices. But now if you’re an employee that works for a practice and you do something that brings in litigation that litigation does generally fall back on the practice, then Because you are an employee of the practice and then that opens up some litigation as well.

Dr James: 24:33

Yes, amazing. Thank you so much for summarizing that. So, in essence, what you’re saying is there needs to be 110% clarity going forward, whether or not we have dentists working for us who are employees or self-employed. And for those principal dentists out there who are listening, it’s best off getting advice how you can foolproof yourself so that there’s no confusion there going forward, because it completely changes the landscape from a legal point of view and from also a financial point of view of your relationship with your employees.

Bilal: 25:06

So if we bring in some case studies from the big wide world out there. So what’s quite pertinent right now? Amazon, so Amazon drivers, are all generally self-employed. However, they’re now unionizing to sort of coin a phrase, not coin a phrase, but it’s not actually unionizing. With all bonding together to bring some clarity, I can’t get my words out, so it’s almost a class action. So they’re all coming together to go to Amazon to say well, we’re actually employees. We can’t determine how many parcels we take out. You tell us how long we have to work. If we don’t work, we get fired and all these bits and pieces that go along with it. Now, what the wider case work is saying here is, if Amazon is found to be within IR35 and these people should admit employees, they will have to pay them 10,000 pounds in back pay per year that they work with a company. But Amazon being the size of the company they are, they will have had their contracts completely looked over and I’m guessing they’re going to be okay on the back of this. Because if you look at it from the dual perspective that says, if you don’t take what you take out, we just won’t call you again. That says, if you, as an independent supplier, I need you to go. It’s like your gas supplier. You want your gas supply to supply you gas. If they say, well, I don’t fancy supplying it Tuesday, I’m not going to, I’m not really going to give it to you on Wednesday afternoon, I’m not going to give it Saturday morning, you’ll just go find another supplier. So it’s not as it’s not as black and white that says, well as an independent contractor can turn down, work. Well, yeah, you can, but I won’t call you back in again. So there’s two sides to that coin. So you’re incentivized to work as hard as possible, but then you get the tax benefits. So and sort of stepping back and looking at a case that exists if anyone wants to look, I think it’s Pimlico Plumbers where in London they were deemed to be inside of IF-35. The reason why they were deemed to be inside of IF-35 was they satisfied all the rules, but the one rule they fell down on was the right to substitution. So the right to substitution says you can have any qualified dentists with an active, active GDC registration coming and cover your day because they’re trained, they’re qualified, they’ve got the adequate insurances in place. Where the plumbers fell down on this was they could only get a plumber within their network of plumbers. So it wasn’t an absolute right of substitution. It was a right of substitution to an extent, and that’s what they fell down on. Now, if you look at the logistics industry, so you’ve got Hermes, dpd, yodel, amazon, dhl, fedex. The majority of their workforce are self-employed. These are independent contractors that work either limited companies are back registered or self-employed, again back registered. So it’s not a case of all doom and gloom. It’s a case of making sure you work with the right legal teams ahead of time to make sure you satisfy rules. I mean, dpd, for instance, has something like 15,000 drivers and over Christmas they’ll probably have close to 20,000 drivers, and they’re actually employed based. There’s probably a tenth of that I’m not even a tenth of that, it’s probably about 5% of that. So how are companies of this size still on the right side of the rules?

Dr James: 28:12

You just nailed the whole essence of this podcast in that one sentence, when you said just making sure that you’re working with the right legal teams so that there’s clarity. That is the essence of this podcast. So I think we’ve hit the nail on the head Good stuff, good stuff, good stuff, good stuff, balal. Thank you so much for that and thank you so much for giving up your time today, balal. There will no doubt be people listening to this who think to themselves actually, maybe Balal could help me on the front of IR35 or from an accountancy point of view. How might someone reach out to you Should they be interested in doing that?

Bilal: 28:44

So the website which I keep saying is being built it is still being built, but there’s a contact form on there, so that’s wwwethylgreencouk. We’re on socials. So we’re on Facebook, which is at Heathle Green. We’re on Instagram, again at Heathle Green. We find the contact through Instagram works best because that’s where most people find us. There’s a link in the bio that allows you to put time in the diary to have a conversation. We are working with specialist legal firms at the moment that will give you a more detailed assessment for IR35 purposes, which we’ll put you in touch with. And again I mean I make this point where everyone wear objective and again wear mass in the incentive eyes for you not to change your employment status because we go out of business. So we want you to go work with these legal firms to make sure you’re in the right place at the right time. We don’t get anything from that. We just want to make sure that you’ve been put in the right direction. From an associate’s perspective, you can do an IR35 test which will be underwritten by that company that says if you’re later found to be inside of IR35, anything that comes back to you will be covered by them.

Dr James: 29:44

Or, of course, there is, of course, contact you via the group Denton Soon Invest Bilal Midd. That’s the other way, of course. Awesome, correct, nice one. Thank you so much for that, bilal. We’re going to draw a line under proceedings today. Thank you for that wonderful podcast. It’s been a pleasure, as usual, to chat to you. I hope you have a tremendous day, my friend.

Bilal: 30:00

Thank you, you too.

Dr James: 30:03

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