So you think you would like to incorporate!

Prior to 2006, life was simple – dentists were unable to incorporate and therefore neither accountants nor dentists nor associates gave even a second thought as to how much their lives might be improved if only they could trade is limited companies.

Then in 2006 came changes to the Dentists Act!

Since then, provided you have a majority of GDC registered directors, you are able to form and trade as a limited company and enjoy the tax benefits which may ensue as a result.

So far so good!

If you have a private practice, life has continued to be good and you can incorporate to your heart’s content!

Unfortunately the same cannot be said for Principals of NHS practices.

The reason for this is simply that in order for the incorporation to be effective a new NHS contract has to be issued in the name of the limited company, and that can only be achieved with the consent of your friendly local NHS contract manager.

Initially PCT’s were generally happy to agree to issue new contracts in the name of the limited companies. They then started to realise that people were disposing of their practices by selling the shares in their limited companies, and thus the PCT’s had lost control over the identity of the dentists that they were contracting with.

At that point, an NHS principal’s ability to incorporate depended entirely on the attitude of their local PCT. Every PCT in the country seemed to have a different attitude to incorporation, and even the same PCT appeared to change their mind from time to time, depending primarily, it appeared, on what side of the bed the contract manager got out of that morning.

There were those PCTs who continued to be happy to agree – although it would be fair to say that these were very much in the minority.

Most would agree, but only on the basis that what is known as a “change of control” clause was inserted into the new contract. So that if there was a change in shareholder, then the PCT would have the right to terminate the contract (thus a principle could save some tax, but in the course of doing so could lose the entire goodwill value of their practice!).

Matters were further complicated by virtue of the fact that each PCT seemed to have different wording for their change of control clause – some were reasonable and others entirely not so.

And then there were some PCT’s who simply said, “no!”.

This was obviously a wholly unsatisfactory state of affairs.

In April 2013, NHS England issued guidance to the LATs stating in terms that, provided there had been no issues with the performance of the contract, they should allow incorporation.

“Hallelujah!” We thought in our innocence.

Despite the guidance issued by NHS England, different LATs have chosen to implement and interpret the guidance in different manners.

Some are insisting that the principal guarantees the performance of the contract by the limited company – which would not be unreasonable, except for the fact that the guarantee is generally worded in such a manner that it will continue even after the sale of the practice.

Others are still insisting that the change of control clauses are inserted – and the wording of these is still wholly inconsistent.

Worst of all, there is one PCT that I have spoken to recently who advised that they, ‘did not like the guidance issued by NHS England’, (apparently and conveniently forgetting that they are part of this organisation) and that they were, therefore, refusing to process any incorporation applications until revised guidance was issued which was more to their liking.

In other words we are back in a situation with an LAT saying “no”.

Therefore, despite changes in governance and the guidance issued by NHS England, the LATs still appear very much to be acting as if they are a law unto themselves.

We are therefore back in the position where, at least so far as incorporation is concerned, NHS practitioners are very much the poor cousins compared to their professional colleagues in private practice.

John Grant of Goodman Grant Lawyers for Dentists – a NASDAL member

For more information call John Grant on 0113 834 3705 or email [email protected]




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