Sell by autumn to pay a lot less tax
Sell by autumn to pay a lot less tax
Time is precious. Don't waste it.

Despite Covid the trade in dental practices is in good health. That’s judging from our experience and anecdotal evidence from the corporates and brokers. We’re working on some sales at the moment and volumes are steady as far as we can see. The gentle drop in prices of around 5% — less serious than anticipated — means that those who wanted to exit in 2020 have no reason to change their plans. Actually they may want to hurry so they don’t incur significantly higher Capital Gains Tax (CGT).

The Treasury is reviewing CGT, so it’s almost certain there will be unfavourable changes for taxpayers given the pressure on the government to pay the enormous bill for Covid. For one of the main types of tax CGT doesn’t currently pull in much cash, just £9.2bn in 2018/19. The government wants to change that, and tax on profits from selling businesses will almost certainly be in the firing line.

Capital gains on assets ranging from businesses to second homes and buy-to-lets are traditionally taxed at lower levels than income because people are taking a risk, but a web of allowances, exemptions and reliefs complicate the system, while many capital gains remain exempt, such as winnings from gambling wine investments and the sale of your own home.

We already saw a cut to Entrepreneurs’ Relief which was previously available on profits of up to £10m from business sales until it was cut in March (with no notice period) to £1m. I wouldn’t be surprised if it’s cut further, neither would I be surprised if the main rate of CGT is raised from 20% to closer to 28%, where it was until around five years ago.

The consultation on CGT runs until 12 October, which should give the Treasury time to produce a response for the Chancellor ahead of the autumn Budget (also expected in October). This means that if you had sold your dental practice in January and made a profit of £1m you’d pay £100k tax on it (with Entrepreneurs’ Relief), whereas if you sell in December you might pay closer to £300k. Any changes to CGT, like those we saw for Entrepreneurs’ Relief, may be effective immediately, including any rate rises.

So if you are selling, time is precious. Don’t waste it. Don’t wait for the market to recover because it never really dropped. And don’t waste time haggling on price because you stand to make a far greater saving on your tax bill than you could hope to haggle from a buyer. We know about selling dental practices this side of Covid and we can support you through the process. You might want to take a look at our Dental Practice Seller’s Guide to get a feel for our approach. Get in touch if you’d like to beat HMRC to the mark on CGT.

Simon Vincent
By Simon Vincent Senior Tax Accountant
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