Martin Aitken & Co Ltd News & Developments

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Dental Acuity Winter 2018-19

Dentist

Commercial, finance and tax briefing for dentists

Click on the links below to read the full articles. If you have any queries or would like to discuss any of the issues raised in this edition, please do get in touch with Jayne Clifford, Director by email This email address is being protected from spambots. You need JavaScript enabled to view it. or by calling 0141-272-0000.

Scottish Budget 2019-20

Derek Mackay MSP, Cabinet Secretary for Finance and the Constitution delivered his Scottish draft budget for 2019-20 in the Scottish Parliament on 12 December 2018. >Read more

Budget 2018: the key impacts on dentists

The 2018 Budget delivered opportunities for dental practices and health sector businesses which are intended to support and encourage them to invest. However, Mr Hammond’s generosity was not all it appeared as the personal allowance and higher rate threshold will both be frozen in 2020/21 and he also kept many tax thresholds and allowances unchanged >Read more

MTD for VAT: Are you ready for 1 April 2019?

If you will be using the MTD system next year, you must use approved accounting software which will enable you to send regular updates to HMRC. You should check with your existing software supplier if they will be MTD ready, or get in touch with us to discuss your options. >Read more

MACO at FGDP (UK) Scotland Study DayDental Guide 2017 18

Director Jayne Clifford and the Martin Aitken & Co Dental accounting, tax and finance team hosted an interactive session with the BDS5’s on Life as an associate, preparing for self-employment, practice ownership and how to get the most out of your accountant, tax and financial adviser at the FGDP (UK) Scotland Study Day at Glasgow Science Centre on Friday 7 December 2018.

If you were unable to attend the FGDP (UK) Study Day and would like to find out more information on topics covered please download our finance, tax and business insights guide.

 

Thinking about buying a practice in 2019? MACO buying selling

Buying a dental practice is exciting and potentially stressful. However, with careful planning your advisers can help you to appraise the economics and keep you on the right track. >read more

Don’t miss out this tax year

To ensure you don’t miss out on valuable allowances and exemptions that you are entitled to, you should plan and take advice now rather than leaving it until the end of the tax year, or the end of your financial year. Tricia Halliday, Tax Director, provides some tips and suggestions for you to consider. >Read more

Tax planning for life 

Budget 2018: the key impacts on dentists.

The 2018 Budget delivered opportunities for dental practices and health sector businesses which are intended to support and encourage them to invest. However, Mr Hammond’s generosity was not all it appeared as the personal allowance and higher rate threshold will both be frozen in 2020/21 and he also kept many tax thresholds and MACO businessallowances unchanged.

Corporation tax will fall next year

One of the key developments confirmed by the Chancellor – but originally announced in previous Budgets – is that corporation tax will fall to 17% from 2020. This new low rate will make incorporation more attractive for smaller businesses and reduce the tax burden for companies of all sizes.

Increased allowances for business investment

The annual investment allowance (AIA) will increase from £200,000 to £1,000,000 for qualifying investment. The increased allowance only applies to investment between 1 January 2019 and 31 December 2020.

Quite simply, capital allowances can reduce your annual tax bill. They can be claimed for some types of capital expenditure but, generally speaking, anything that is used for a business purpose that has a useful life of two or more years may qualify. They are treated like any other expense and can be deducted from your profits when calculating your taxable profits at the end of the financial year. The deductions recognise that assets and equipment can lose value as a result of general use, wear and tear. In other words, capital allowances are the tax equivalent of depreciation.

Alongside this, a new structures and buildings allowance has been introduced which has been set at 2% on construction or conversion costs over 50 years, where all the contracts for physical construction works were entered into from 29 October 2018.

Personal allowances and thresholdsMaco Icons2

A £650 increase in the personal allowance to £12,500 will come in next year, one year ahead of schedule. There will also be an increase in the higher rate threshold (and self-employment National Insurance on profits) to £50,000; however, we will have to wait until 12 December to find out if the latter will be implemented in Scotland. The pension lifetime allowance, widely tipped to be cut pre-Budget, was increased to £1.055m from April 2019.

However, the personal allowance and higher rate threshold will both be frozen by the UK Government in 2020/21. A good example of the impact of frozen thresholds is the personal allowance that will continue to be tapered from an income level of £100,000. This threshold has applied since April 2010 and it creates high marginal rates for some dentists.

Combined with the increase in the personal allowance, for income between the taper threshold of £100,000 and the starting point for additional rate tax of £150,000: the first £25,000 will be taxed at up to 60% (61.5% in Scotland); and the next £25,000 will be taxed at 40% (41% in Scotland).

NHS spending up

By far the largest element of spending announced in the Budget was for the NHS with the Chancellor finding a further £20bn a year for the NHS, which when followed through will mean that the NHS will account for 38% of all public spending by 2023. 

MACO TREES

Buying a Practice? What to consider

Buying a dental practice is exciting and potentially stressful. However, with careful MACO performanceplanning your advisers can help you to appraise the economics and keep you on the right track.

Marketing the practice
The first stage of the process concerns the marketing of the practice by the vendor or the selling agents. If you do contemplate a purchase, it is important to register with the agents that operate in the sector. Their knowledge of your requirements (locality, size, price, etc.) will help prioritise opportunities for you.

Appoint the right team
Having your advisers ready to assist is crucial, as they can assess the proposition and advise on the key information that is needed for the “viewing” process. By discussing the proposal early and carrying out initial due diligence, you will be better placed to make the right decision at your own pace rather than, perhaps, in haste.

How much can you afford to pay?
Knowledge of your own resources from your Accounts and what might be available from a lender will be key to purchase negotiations and paying the right price for the practice. If a property is included in the assets being acquired, then the early use of a surveyor is vital.

What’s it worth?dental tools
You will need to examine the thoroughness of the vendor’s valuation model and the credentials of the preparer. Dental practice valuation calculations could consider various methodologies along with turnover and profits, but much can depend on the reason for the sale - retirement/illness, relocation and, of course, financial distress.

Agree “Heads of Terms”
If negotiations continue, the next stage is agreeing “Heads of Terms” (HoTs). This is a summary of the terms that the buyer and seller have agreed in principle and you need to have them checked by your solicitor.

Get clarity on exactly what you are buying
The next stages are financial and legal due diligence, following which the Sale & Purchase Agreement (SPA) will be available. A lot of this depends on whether the practice-owning company and its share capital is for sale or whether an asset sale is taking place. It is vital that this is clarified as early as possible by both sides and their advisers.

The Sale & Purchase Agreement (SPA)
The SPA should address a range of issues, including;

  • It will ensure that information about the business, including its Accounts, is reliable. It is essential to view up-to-date Management Accounts for the practice you wish to buy as the financial health of a practice may have deteriorated since the Annual Accounts were produced.
  • Confirmation of the number of active patients, insurance patients & hygienist patients.
  • Damaged/old stock should be excluded from the valuation which should be carried out by an external valuer.
  • On purchasing a company, you inherit its liabilities and therefore care needs to be taken to negotiate the necessary warranties and indemnities from the seller to protect your interests.
  • Restrict the seller from directly competing with you after completion.
  • Property issues such as transfer of ownership, lease provisions, planning consents and repairs.
  • Equipment specifications, age, insurance and any software contracts.
  • All employee information (pay rates, benefits, pensions, holidays, etc.) must be disclosed so that the buyer knows what the responsibilities are going forward under the Transfer of Undertakings (Protection of Employment) regulations (TUPE).

Raising finance to fund the purchase
If you are involving a lender in the practice acquisition, make sure that you deal with representatives that specialise in Healthcare. Your solicitor should advise you on the loan agreement obligations such as security over assets. You should also ask your accountant to prepare financial projections for three years both for the bank’s requirements and to see how the new practice will fit into your existing financial modelling.

If you would like to discuss any of the issues raised in this edition, please get in touch with Jayne Clifford, Director, Martin Aitken & Co.

 

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