Dentists - Are you giving it all away to the tax man?

April 2, 2012 - PRLog -- Dentists - Are you giving it all away – to the Taxman?

The long awaited changes to the Dentist Act came into force as long ago as July 2006 and this enabled dentists to operate their Practices as a Limited Company but, says tax expert (http://www.khan-thornton.co.uk/) Dino Khan, nearly two years later many practitioners have still failed to consider turning the new legislation to their advantage by doing just that!

To convert their businesses into a Limited Company will require that they comply with certain regulatory conditions which most UK qualified dentists, with a little professional assistance, should not find difficult to achieve

Tax planning opportunities:

"Benefits are there to be gained and this is especially true for dentists who have been in business for a number of years. There are tax planning opportunities available to the Limited Company, but sound professional advice must be sought if they wish to achieve real savings - we are talking here about very substantial amounts of money" says Dino Khan.

The incorporation of a Dental Practice, whether large or small, will bring benefits in different ways. Limited Companies are especially suitable for Practices with entrepreneurial aspirations and which are looking to expand. It is true that a Limited Company will attract additional administration costs but these will easily be outweighed by the benefits accrued. Dino Khan stresses that "An informed professional advisor will maximise savings in both the administration costs and the tax liability.

Keeping abreast of changes in the system

It must be remembered however, that legislation is continually changing and the Government is constantly reviewing the tax and national insurance system. Your adviser will need to keep abreast of all such changes if the maximum benefit is to be achieved."

The procedures for setting up a Limited Company will vary dependent upon whether we are dealing with an existing business or a newly qualified dentist about to set up their own practice.

For an existing business the goodwill of the business will be transferred to the Limited Company and will be shown as an asset in that Company. This asset can either be financed with a loan from a director or alternatively from an outside source, which would create the opportunity of unlocking the capital tied up in the business.   The vendor will be liable for capital gains tax but this was reduced to 18%  from the 5 April 2008 and is therefore far less a liability than hitherto.

Factors for consideration

If a business was sold prior to the 5 April, Dino Khan points out that 75% of the gain may be exempt from capital gains tax if it qualifies for taper relief. The business profits can be withdrawn by its owners or partners in the form of dividends, which results in further savings on National Insurance payments. There are also tax implications if the Practice owns the freehold of their premises but these would need to be considered quite separately.

Another factor, which requires consideration, is the provision of pensions within a Limited Company, however the NHS superannuation rules for Limited Companies are now clearer than they have been in the past.

There are also special registration requirements for the Limited Company's directors and shareholders and these are monitored by the GDC and the employment rights of existing staff must always be taken into consideration.

Statistics show that being a Limited Company assists in enabling a Dental Practice to last longer, there being better provisions for the continuation of a Practice as a Limited Company than as sole trader.

"It pays to get specialist advice, for whilst the above guidelines are a good basis for considering tax advantages, each practice has individual circumstances and requirements," says Dino Khan.  For more information, please visit www.dentist-tax.co.uk.

Dino Khan heads up one of the most progressive accountancy practices in the UK - http://www.khan-thornton.co.uk and firmly believes that his company's success is directly related to specialisation. Dentistry is the latest area to attract his attention and he believes that the largest majority of dentists are being unduly kind to the taxman!