John Clarke, Head of Business Development at Wesleyan Bank explains…
High-earning dentists expect to pay a lot in taxes every year. However, many are failing to take advantage of legitimate tax relief benefits which could save them thousands of pounds and help to improve their practice’s cash flow and fund future investments.
According to research conducted by Catax, 39 per cent of SMEs are unaware they can claim a valuable form of tax relief known as ‘Capital Allowances’ and many businesses, including dental and GP practices, could be sitting on a potentially significant tax windfall which may never have been brought to their attention previously.
Capital Allowances entitle commercial businesses to claim a valuable source of tax relief for certain capital expenditure. Qualifying items include specialist equipment, IT and technology related investments as well as heating, air conditioning and lighting. Costs associated with building refurbishments and extensions may also qualify for capital allowances, but it is recommended that dentists consult the advice of specialist dental accountants who can alleviate any confusion around the ever-changing minefield of tax legislation.
“Annual Investment Allowance (AIA) allows dentists to more easily plan for future investments by offering tax relief at 100 per cent for qualifying capital equipment expenditure.”
In addition, the Annual Investment Allowance (AIA) allows dentists to more easily plan for future investments by offering tax relief at 100 per cent for qualifying capital equipment expenditure. The AIA enables businesses to write off the combined cost of certain assets against profits in the year of purchase, up to a value of £200,000, providing a valuable tax saving concession. Examples include investment in dental equipment such as dental chairs, x-ray machines, IT software and hardware and dental cabinetry and furniture.
Furthermore, some dentists are failing to take advantage of a relatively unknown gem of tax credits in the form of the Research & Development (R&D). Introduced by the Government in 2000, the R&D scheme encourages businesses, including dental practices, to develop new products and services to improve their competitive advantage and strengthen the UK’s economic power. Since its launch, UK businesses have claimed approximately £14 billion in tax relief but it is estimated that £1 billion in tax credits is currently going unclaimed every year which innovative dental practices could be entitled to claim.
“Dentists who are spending time and money to develop new treatments can obtain R&D tax relief”
Dentists who are spending time and money to develop new treatments can obtain R&D tax relief, which for some businesses can amount to 230 per cent of the qualifying spend. This means that for each £100 of qualifying costs, the corporation tax paid by dental practices on income could be cut by a further £23.
Managing a business’s finances can seem a daunting task, particularly for dentists who work long hours in stressful environments, but making the most of your tax allowances could make a huge difference to your business. Specialist alternative finance providers, such as Wesleyan Bank, can also offer further relief to under-pressure dentists by enabling them to spread the cost of their self-assessment tax liabilities over a period of six or 12 months. With the 31 July tax payment deadline rapidly approaching, now might be a good time to consider seeking guidance from trusted accounting and financial experts who are experienced in supporting dentists at every stage in their careers.