Preservation

Thought, knowledge and planning

Preservation

Thought, knowledge and planning

In today’s tax environment before you start making money any decision about where it should go must be proactive. The best structure for you is the one that leaves the most money in your pocket, and that depends on how much you’re going to be earning, whether you have cash in reserve, and what else you might want to do.

We invest heavily in research to create tax solutions that help dental practice owners. We will review how your business is set up and if we see any opportunities to make efficiencies we will recommend them and, if you approve, implement them.

No other advisers in the dental industry can give you this overview. A concept we use to start this conversation and get you thinking is the iron triangle: there is always a trade off between your tax rate, access to cash and your relationship with HMRC. Would you like to prioritise one over the other two? Here is what one of our clients had to say about how it helped him.


INCORPORATING YOUR BUSINESS

Despite changes to Capital Gains Tax, practices with a cash reserve can still yield a return of up to 87.5% when they incorporate.
Even though the pros and cons of creating a limited company can seem confusing, we’ve found that 91% of dentists could benefit from incorporation.
Even though the pros and cons of creating a limited company can seem confusing, we’ve found that 91% of dentists could benefit from incorporation.
In fact, incorporation is pretty much essential for both practice owners and associates earning over £100k. With your best structure in place, we can look at ways to save tax on your money downstream, depending on what your needs are. That might be investments in lieu of a tax bill. Below are just a few examples.
In fact, incorporation is pretty much essential for both practice owners and associates earning over £100k. With your best structure in place, we can look at ways to save tax on your money downstream, depending on what your needs are. That might be investments in lieu of a tax bill. Below are just a few examples.

CASE STUDY: TAX EFFICIENT SPECULATION

When our interim report identified £50k surplus profits at Dr N’s practice, we wanted to know more about his plans.

He didn’t need more personal funds so we looked at some speculative options which were tax efficient, so the risk was mitigated by corporate tax savings.

Since the dividend tax rate rose to 32.5% or more for higher rate taxpayers, anyone wanting to access all of their profits faces a combined tax exposure of up to 50.5%. It’s pretty clear that you are doing yourself a disservice not to explore every option to delay, defer or mitigate this money sink.

CASE STUDY: TAX EFFICIENT SPENDING

If you need to access your wealth, there are ways we can help you do it efficiently, so don’t let lazy tax advisors tell you that living off the “tax sweet spot” of £100k a year is your only choice. Here’s an example.
After incorporating her practice two years ago, Dr M’s beneficial directors loan account was due to run out and the incumbent NASDAL advisor had suggested restricting withdrawals to £100k to mitigate the additional personal tax burden.
This seemed to ignore Dr M’s circumstances, as her profits were well in excess of £300k a year. After discussions with us, she chose a tax efficient reward that allowed access to the full breadth of those profits.

CASE STUDY: PRACTICE SALE

Mr M was negotiating with a corporate that was buying him out. It had a team of expert lawyers, who made their offer, and said that’s the way they do things.

It was the first time Mr M had sold a practice, so he felt unfavourably pitched in terms of expertise, and was carried along by the wave of activity and expectation.

His accountant, doing nothing wrong, told him the precise tax bill based upon the method instructed, but he came to us and we suggested an alternative sale structure, with no downside for either party.

This saved Mr M more than £200k in tax.

CASE STUDY: PRACTICE ACQUISITION

Mr D was looking to purchase his first practice.
The seller had a traditional accountant who wished to structure the sale in the manner most favourable to his client, however, we highlighted an opportunity to the accountant where we would pay £50k extra but obtain £100k tax relief for our client, a saving which would have been inaccessible otherwise.
The seller had a traditional accountant who wished to structure the sale in the manner most favourable to his client, however, we highlighted an opportunity to the accountant where we would pay £50k extra but obtain £100k tax relief for our client, a saving which would have been inaccessible otherwise.
Crucially, Mr D then reinvested his savings into a sustained marketing program with Hive and has doubled his turnover in 18 months.
Crucially, Mr D then reinvested his savings into a sustained marketing program with Hive and has doubled his turnover in 18 months.

Our INSIGHT

"...you can make a pension contribution which has a low tax burden, and which HMRC are OK with, but your cash will be locked away. Or you can take all the cash out of your company, which HMRC will like because you’ll have a high tax exposure. Then there are many innovative techniques that may pique HMRC’s interest in you, for example sale of goodwill and incorporation (that is until they closed that down a year ago) — but can you withstand the gaze of HMRC? It may not bother you in the slightest, or it may keep you up at night, in which case maybe not."
Ross Martin, Director at Hive Business

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