Tax Planning for Dentists

High earning sole traders and partnerships will be hit particularly hard by the increases in the top rate of income tax.

However, dentists are in a very good position to do something about it. 

From 31 July 2006 dentists can now trade through a limited company as a Dental Body Corporate (‘DBC’).  This has opened the door for dentists to obtain the same tax advantages that many other businesses have enjoyed. Where there is significant self-generated goodwill in the practice the generous provisions of Capital Gains Tax Entrepreneurs Relief can used to capture very valuable tax reductions, effectively bringing down the rate of tax on your profits to 10%.  Compared with a top rate of 50% (60% in some cases) this represents potentially massive savings.

Another big advantage is that the tax planning involved is non-controversial and does not rely on any tax avoidance schemes.  Therefore you are unlikely to become involved in a challenge from HMRC or a protracted investigation, as will certainly result from using a tax avoidance scheme.

However, the process does need to be very carefully and meticulously handled as there are a number of issues which must be got right to achieve the savings.  There are regulatory and legal issues involving the transfer of the business to the new company.

The PCT will be need to be involved if the practice has an NHS contract and staff contracts will need to be transferred. A specialist valuation of goodwill will also be required.

None of these problems are insuperable, but they do need careful handling. But, if done correctly, the process will unlock large savings for the average dental Principal.  The larger your income, the larger the savings will be.

You do not have to change your accountant.  We will work with you and your regular accountant to take you through the whole process to unlock the savings.  Call Tony Borman on 0845 643 5450 for a no-obligation discussion on how much you could save.