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The traditional structure of running dental practices through a partnership or as a sole trader is no longer the norm. The alternative of practising through a limited company has become increasingly popular, and is often the first choice for a new practice, often encouraged by accountancy advice.

Incorporation is not a new concept – indeed it has been an option for dentists to operate as a dental body corporate (“DBC”) for several years, since the NHS (General Dental Services) (Scotland) Regulations 2010 (“the  Regulations”) came into effect and allowed a DBC to make arrangements with relevant NHS Health Boards to provide general dental services (“GDS”) i.e. to become contractors in their own right by joining sub part A of the first part of the dental list.  The use of DBCs is growing in popularity, with both practice purchasers and existing practice owners being swayed by the supposed tax advantages of operating in such a way. However, many lawyers and accountants do not fully appreciate the potential issues associated with incorporation and as a result, dentists are often not advised of the risks in operating in such a way.  When the various strands of incorporation are taken together and scrutinised as a whole, various concerns come to light and therefore whilst the Regulations may well permit a dentist to operate through a DBC, dentists should be aware that the concept of a DBC does not necessarily sit well with other NHS legislation and documents i.e. the Statement of Dental Remuneration (“SDR”) and the NHS superannuation scheme.

For clarity, when we refer to incorporation in the context of this article, we are referring to both (i) practices which have formerly been operated by sole traders or partnerships that decide to incorporate; and (ii) existing practices that are being purchased by new limited companies.  These are two separate types of incorporation, however the issues and concerns that arise in connection with each are largely the same.

So what are the issues?


The drive for incorporation is traditionally to allow dentists to benefit from Corporate Tax rates rather than Income Tax rates, the latter tending to be higher.  It is therefore key in that regard that all income of a DBC (including income deriving directly from the NHS) is treated as that of the DBC rather than of the individual dentist(s) behind the DBC.  

Our experience to date is that the majority of Health Boards do not necessarily differentiate between the DBC and the principal dentist(s), despite being told that the practice has incorporated. They therefore often leave the individual list numbers of the principal dentist(s) in place but pay the various entitlements in terms of the SDR to a new company bank account.  However, this structure does bring the potential for tax issues to arise.

There are steps which can be taken to minimise this potential risk, and in our regular work with dentists, we endeavour to create a practice structure which minimises this tax risk so far as we can. 


At present, in order to pay into the NHS superannuation scheme, a dentist has to be on a Health Board’s dental list as an individual and DBCs cannot pay into the scheme. This is despite the fact that DBCs have been recognised for some time now in terms of the Regulations. In practice therefore, the principal(s) has no choice but to keep the patients registered on their individual list number so as not to be prejudiced under the current NHS superannuation scheme.  A salary can be withdrawn from the DBC by the principal and we understand that this is capable of qualifying for superannuation purposes however it is likely to be desirable to withdraw sums of money from a DBC by way of dividends and at present dividends do not qualify in terms of the NHS superannuation scheme.  This is different to the position in England and Wales (which recognises the popularity of DBCs to a greater extent in terms of the superannuation scheme).  By structuring the NHS pension scheme in such a way, those principals who wish to operate using a DBC are in reality encouraged to leave their list numbers in their own name (which leads them back to our tax issues above).

Entitlements under the SDR

Without going into detail on an area which is very detailed and fairly complex, there are various entitlement under the SDR which are either not payable to DBCs, or alternatively are only payable if certain conditions are met. That seems to be at odds with the whole concept of allowing dentists to practice through a DBC. Surely a DBC structure shouldn’t carry with it a further disadvantage in terms of the payments which can be made to the practice compared to those which can be made to an individual dentist. 


There are therefore a number of factors for any dentist to consider before deciding whether to operate as a DBC and it is clear that it is not as straightforward as being a “tax effective” way to run a business.  We encounter all of the above issues regularly and it is becoming clear that the terms of the Regulations, the SDR and the NHS superannuation rules do not sit well together and require to be harmonised/updated to reflect the ability of dentists to incorporate and operate as a dental body corporate without the risk of being penalised further down the line as a result of inconsistencies between the various NHS requirements.