The Government has failed to collect up to £200 million in tax from Britain’s dentists after the botched introduction of a change to their contracts with the NHS last year, The Times has learnt.

Andrew Murrison, a Conservative health spokesman, called the new dental contracts a “catastrophe” yesterday. He has written to Dawn Primarolo, the Paymaster-General, demanding answers about what he said was a simple failure by Britain’s tax authorities to enforce the law.

The confusion over dentists’ tax status began in April last year, when the Government made changes intended to simplify the way in which they were paid by the NHS. Individual dentists effectively had been self-employed and were paid by the centrally run Dental Practice Board for their work. Under the new system, associate dentists became employees of their practice, which, in turn, was contracted to supply an agreed amount of work to an individual NHS primary care trust.

The changes, introduced by the Department of Health, shifted associate dentists from self-employed to salaried status. The move was made on the basis that they would not suffer in terms of their gross earnings.

Yet under the new system, associate dentists have to pay employee National Insurance (NI) contributions, while their practices must pay employer NI contributions.

Last year, confusion over these changes apparently prompted a decision by the Treasury not to collect this money. Experts believe that the total is approaching £200 million and growing weekly.

“This has arisen because the Treasury and the Department of Health, which drew up the new contracts, were not talking to each other and have overlooked what appears to be an anomaly,” Dr Murrison said.

In correspondence seen by The Times, Ms Primarolo argues that there has been no change in dentists’ tax status.

Similar revisions to contracts of doctors who are not partners put them under PAYE status and liable to employee NI contributions.

A spokesman for HM Revenue & Customs said: “We are working closely with the Department of Health to ensure everyone pays the right amount of tax.”

Dentists are worried that the Treasury may seek to claw back the money. Bankers in the City say that they cannot value dental businesses because of the uncertainty, which affects their projected profitability.

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