Dental Earnings and Expenses, Great Britain, 2005/06

Dental Earnings and Expenses, Great Britain, 2005/06

September 2007

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Dental Earnings and Expenses, GB, 2005/06 Contents Summary ........................................................................................................2 Table 1: Summary of the various dental business arrangements which are studied in this report. ..........................................................................3 Table 2: Summary of population and sample changes between 2004/05 and 2005/06, GB1. ....................................................................................5 Figure 1: Change in composition of the GDS/ PDS dental population between 2004/05 and 2005/06, GB. .........................................................6 Summary of net income estimates for all GDS dentists.............................7 Table 3: Comparison of GDS dentist net income by contract type, 2005/06, GB..............................................................................................7 GDS Non-associate dentists .........................................................................8 Table 4: 2005/06 main results: GDS non-associates, GB.........................9 Table 5: Comparison of expenses to earnings ratios (%) for GDS nonassociates between 1999/00 and 2005/06 by sex, age, partnership status and location, GB. ....................................................................................10 Table 6: Gross earnings, expenses and net income for non-associates, GB, 1999/2000 to 2005/06......................................................................10 Table 7: NHS earnings as a % of total earnings1, GB.............................11 NHS Commitment Analysis for GDS non-associates .................................13 Figure 2: Distribution GDS of non-associate dentists by level of NHS commitment, 2005/06 and 2004/05, GB. ................................................14 Table 8: NHS commitment summary, 2005/06, GB ................................14 Figure 3: GDS non-associate average gross earnings by level of NHS commitment 2004/05 and 2005/06, GB ..................................................15 Detailed Expenses Breakdown for GDS non associates............................16 Table 9: Average expenses breakdown, GDS non-associates, 2005/06, GB ..........................................................................................................16 Table 10: Average expenses breakdown, GDS non-associates, GB, 2001/02, 2003/04, 2004/05 and 2005/06 ................................................17 Table 11: Average expenses breakdown, GDS non-associates, 2005/06, by NHS commitment ...............................................................................18 GDS Associate dentists ..............................................................................19 Table 12: 2005/06 main results: GDS first party associates, GB ............19 Table 13: 2005/06 main results: GDS second party associates, GB ......20 Detailed Expenses Breakdown for GDS associates...................................21 Table 14: Average expenses breakdown, GDS first party associates, 2005/06, GB............................................................................................21 Table 15: Average expenses breakdown, second party associates, 2005/06, GB............................................................................................22 PDS Whole-Year dentists ............................................................................23 Figure 4: Distribution of EER among the PDS Whole-Year population...24 Table 16: Main results for PDS Whole-year Providers, GB.....................24 Table 17: Main results for PDS Whole-year Performers, GB. .................24 PDS Switched dentists ................................................................................25 Table 18: Main results for PDS Switched dentists, GB. ..........................25 Appendix: Methodology ..............................................................................26 Copyright © 2007, The Information Centre, Primary Care Statistics. All rights reserved.

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Summary This report provides a detailed study of the earnings and expenses of General Dental Service (GDS) and Personal Dental Services (PDS) dentists in Great Britain and is based on tax data for dentists with an accounting year ending in 2005/06. All averages in the report relate to both full- and part-time dentists with varying levels of earnings from the NHS. The earnings and expenses relate to NHS and private work. This report has been produced by the Information Centre for health and social care (IC). A joint working group with representation from the IC, the Department of Health (DH), the British Dental Association (BDA), the Doctors’ and Dentists’ Review Body (DDRB) secretariat and the NHS Business Services Authority Dental Services Division (DSD) was consulted on the content of the report. Changes from year to year are affected by estimates from samples of dentists and by changes in the composition of the workforce, including the shift to PDS 1 , in 2005/06. This is the first time that earnings results for PDS dentists have been published. It is not meaningful to discuss the average earnings of an average dentist as there is great variation in the different financial arrangements. However, the key findings among GB dentists in 2005/06 are: •

Average net income among all GDS dentists was highest for first party associates (practice owners who work with other dentists who are not partners) at £114,068, with non-associates (dentists working in a standalone business) earning £94,639 and second party associates (dentists who rent the facilities of a first party associate) earning £61,125.

•

For GDS non-associates, the average Expenses to Earnings Ratio 2 (EER) was 57.8%; for GDS first party associates the EER was 67.8%; and for GDS second party associates the EER was 33.4%.

•

For GDS non-associates, earnings from the NHS accounted for, on average, 41.9% of total earnings from all sources. For those GDS nonassociates with a high NHS commitment (ratio of NHS earnings to total earnings between 67% and 100%), the average EER was 49.6% whereas those GDS non-associates with a low NHS commitment (ratio of NHS earnings to total earnings up to 33%) had an average EER of 62.8%.

• For PDS Providers3 (dentists who hold a PDS contract with a PCT), average net income was £127,910 with an average EER of 59.5%. For PDS Performers (dentists who are not Providers but who work to deliver the requirements of a PDS contract), average net income was £65,852, with an average EER of 13.0%.

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The proportion of dentists working in PDS was 23% at the end of 2004/05 and 37% at the end of 2005/06 The EER is a measure of how much of an individual’s gross earnings were consumed by business expenses. 3 An attempt to distinguish groupings has been carried out by the IC and the methodology is detailed in the Appendix. 2

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Introduction 1.1. This paper presents evidence on the self-employed earnings and expenses of General Dental Services (GDS) and Personal Dental Services (PDS) dentists in tax year 2005/06. The source for the data is the self assessment (SA) return held on HM Revenue and Customs (HMRC) SA system, which covers earnings from all self-employed sources including the GDS/PDS contract, private practice, and any other sources. Analyses were carried out on an anonymised dataset by HMRC statisticians; only aggregated data were supplied to the IC. 1.2. Dentists for the GDS analyses in this report were chosen from the Dental Rates Study Group (DRSG) in 2005/06 (as at 28 February 2006) whereas the whole population of PDS dentists (including dentists working for corporate bodies) were included for the PDS analyses (see appendix for further details). 1.3. Table 1 below shows the various business arrangements in which selfemployed dentists can work in Great Britain, all of which are discussed further in the rest of this report.

Table 1: Summary of the various dental business arrangements which are studied in this report. GDS/PDS Type

Description

GDS: Non-associate

Works in a stand-alone business and includes dentists working in business partnerships.

GDS: First party associate

Practice owners working with other dentists who are not partners.

GDS: Second party associate

Rents the facilities of a first party associate.

GDS: Partners of associates

In a business partnership with an associate dentist.

PDS: Whole-year

Known to have worked under a PDS contract for the whole year of the study

PDS: Switcher

Known to have moved from working in the GDS to working under a PDS contract at some point during the financial year.

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4 1.4. Prior to 2004/05, this report has provided analyses on GDS nonassociate dentists only. During this period, when all dentists were GDS, the expenses to earnings ratio for all GDS dentists was inferred from the non-associate results. This was based on the fact that, historically, the results for non-associates were broadly similar to the overall results covering all GDS dentists. 1.5. For GDS non-associate dentists, time series results are presented up to and including the financial year 2005/06. GDS non-associates are dentists who do not have formal business links with other dentists. PDS ‘Whole Year’ dentists were in the PDS for the entire 2005/06 tax year while PDS ‘Switchers’ moved from GDS to PDS at some point during that tax year. Given the changing populations of GDS and PDS dentists, all the time series presented should be treated with caution. 1.6. The IC is publishing information on PDS earnings for the first time by expanding the population to cover PDS dentists and those GDS dentists that switched to PDS in 2005/06. Last year, the Information Centre (IC) decided not to publish PDS results pertaining to the 2004/05 tax year due to concerns that the final sample of PDS dentists was too small. The main reasons were as follows: •

Only a small number of dentists were working in PDS before the start of 2004/05, making estimates vulnerable to extreme values;

•

Information on PDS dentists’ contract status (whether working as a provider or a performer 3 ) or type of PDS scheme was unavailable; and

•

Where dentists switched to a PDS contract in 2004/05, their NHS earnings were from a mixture of GDS and PDS sources. Such dentists that had an accounting year that ended prior to quarter 4 will have worked in GDS for the whole year. Analysis of this cohort of dentists was therefore not considered to be meaningful.

1.7. Table 2 below shows the relative populations of each type of dentist, along with the size of the sample that was actually studied for the dental earnings reports of 2004/05 and 2005/06 produced by the IC. The population data is also shown graphically in Figure 1.

3

“PDS Providers” are providers of premises and facilities to Performers. In most cases, in 2004/05, Providers received direct payments from the PCT and, in turn, pay the Performers. Providers can have a number of arrangements with Performers. The IC identified “Providers” by assuming they are dentists with an EER greater than 0.3 and less than 0.9 “PDS Performers” work at the practice of the Provider in return for a share of the PCT payment received by the Provider. The IC identifies “Performers” as dentists having EER less than 0.3

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Table 2: Summary of population and sample changes between 2004/05 and 2005/06, GB1. 2004/05 Population

1

2005/06

Final HMRC Sample

Population

Final HMRC Sample

GDS Non-Associates GDS First Party Associates GDS Second Party Associates GDS Partners of Associates

4,610 3,590 5,109 548

2,322 1,747 2,400 273

3,725 3,318 4,751 377

1,739 1,553 2,176 184

PDS Switchers

2,847

1,799

3,299

1,543

PDS Whole Year

1,030

341

3,746

2,198

All Dentists: 17,734 Note that this does not fully cover all dentists in Great Britain.

8,882

19,216

9,393

1.8. Table 2 shows that changes in the population in 2005/06 may affect the comparisons that are made between results for 2004/05 and 2005/06. 1.9. Furthermore, the General Dental Services Payment Report 2005/06, published by the Information Centre in September 2006, showed that in 2004/05, dentists who moved from GDS to PDS were more “committed” to the NHS, meaning that they “left behind” a GDS nonassociate population with a lower commitment to NHS work. It is possible that such migration may have occurred again, affecting the validity of any comparison between the level of NHS earnings done in 2004/05 and 2005/06. 1.10. Further to this, Figure 1 below shows graphically the data in Table 2, highlighting the migration to PDS contracts that has occurred between 2004/05 and 2005/06, as well as the reduction in the GDS nonassociate population – on whom NHS earnings analysis is based.

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Figure 1: Change in composition of the GDS/ PDS dental population between 2004/05 and 2005/06, GB. 100% PDS w hole year, 1,030 PDS w hole year, 3,746

90% PDS sw itchers, 2,847

80% GDS Partners of assoc* PDS sw itchers, 3,299

% of total dentists (GB)

70%

60%

GDS 2nd party associates, 5,109

GDS 2nd party associates, 4,751

50%

40%

GDS Partners of assoc*

GDS 1st party associates, 3,590

30%

GDS 1st party associates, 3,318

20% GDS non-associates , 4,610

10%

GDS non-associates , 3,725

0%

2004/05

2005/06

* GDS Partners of Associates 548 in 2004/05 and 377 in 22005/06.

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Summary of net income estimates for all GDS dentists 2.1. A national gross earnings and expenses estimate for all GDS dentists together cannot be calculated due to the payment flows that occur between first and second party associates. This is likely to lead to double counting of some payments meaning that combined expenses ratios cannot be derived. It is possible, however, to calculate combined average net income results. 2.2. Table 3 provides a summary of the net income for all associate types. When comparing the earnings of the different associate types it is important to note that variation in the age and sex profiles of each group will affect results. This is particularly the case for the second party associate population which has a much higher proportion of females and a younger age profile than the other associate types. 2.3. Table 3 shows that, for GDS dentists, average net income was highest for first party associates and partners of associates (£114,068 and £104,908 respectively), with non-associates earning the next highest (£94,639) and second party associates earning the least (£61,125).

Table 3: Comparison of GDS dentist net income by contract type, 2005/06, GB.

GDS first party GDS second GDS partners of All GDS associates party associates associates associates

GDS Nonassociates

All GDS Dentists

Population size Sample size

3,318 1,553

4,751 2,176

377 184

8,446 3,913

3,725 1,739

12,171 5,652

All dentists (GB)

£114,068

£61,125

£104,908

£83,877

£94,639

£87,172

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GDS Non-associate dentists 3.1. This section updates the earnings and expenses analyses carried out annually on non-associate dentists. Non-associates are dentists who do not have formal business links with other dentists; that is, involving transfers of gross fee payments between two or more dentists with formal associate arrangements for meeting expenses costs. These dentists are mostly single-handed practitioners; although a small proportion (around 5%) are in partnership arrangements. 3.2. Time series results for GDS non-associates are influenced by the changing population and the migration from GDS to PDS. In 2004/05, the final HMRC sample of GDS non-associates made up only 13% of all known dentists. In 2005/06, the corresponding cohort had shrunk to represent only 9% of all dentists. This means that it is not correct to assume that the results for non-associates in 2005/06 are indicative of the dentist population as a whole. In particular, the General Dental Services Payments Report 2004/05 (published by the IC in September 2006) showed that in 2004/05, dentists who moved from GDS to PDS were more “committed” to the NHS, meaning that they “left behind” a GDS non-associate population with a lower commitment to NHS work. It is possible that such migration may have occurred again; therefore a comparison of the proportion of NHS earnings over time should be viewed with this in mind. 3.3. The following tables show the headline findings for GDS nonassociates:

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Men

1 2

Single-handed

Table 4: 2005/06 main results: GDS non-associates, GB.

London

Rest of GB In partnership All men

Women

4

Single-handed

3

Age