Dental News
Spring 2024
Welcome to our Spring 2024 Dental News
In this issue
Spring Budget 2024
Delayed Covid-19 Business interruption insurance payout
Introduction of new CQC provider portal
Business rates reimbursement for NHS practices
Simplified tax reporting rules for doctors and dentists
Electric company cars
Spring Budget 2024
With the Spring Budget just recently announced by Chancellor Jeremy Hunt, we have put together a summary to highlight the key points that may affect you and your business.
In his statement to Parliament, the Chancellor set out a plan with measures to ease the tax burden and stimulate economic growth.
Our summary will cover the following areas:
- Reduction in NI contributions
- Corporate Tax
- Residential Property Capital Gains Tax
- Non-Dom Tax Status
- VAT thresholds
- Furnished Holiday Lettings
If you have any questions on the Budget, or would like to know how we can help then please contact us
Delayed Covid-19 Business interruption insurance payout
A recent case referred to the Supreme Court for judgement has paved the way for businesses to legitimately claim interest on delayed Covid-19 Business Interruption insurance payouts.
The protracted case, lasting over two years, was successful following lengthy negotiations with QBE insurance who were found to have delayed settling business interruption claims due to the pandemic.
The negotiations, led by Salmon Assessors, resulted in interest awarded of £386,000 split between 84 dental practices represented by the firm which equates to an average of £4,500 per surgery.
Interest was calculated at the standard judgement debt rate of 8%.
The period that interest was determined on was from when the claim should have been settled (two months after trading losses commenced as a result of COVID) up until the insurer actually made payment.
Introduction of new CQC provider portal
A new provider portal has been launched by the CQC to facilitate the submission of registration forms such as when registering as a new provider or cancelling your provider registration, along with receiving statutory notifications. This will replace the existing portal which closed on 28 March 2024.
Providers (nominated individuals and registered managers) can now register and create an account using the new portal.
Since the new portal has been made available, there have been some issues experienced which CQC are trying to resolve. You can continue to submit notifications to the CQC via email.
Business rates reimbursement for NHS practices
Providers can now apply for reimbursement of 2024/25 business rates from NHS Business services. To do so, qualifying conditions must be met including :-
- The provider pays the business rates (or if a partnership, one of the partners) and
- The NHS Dental services contract value is more than £25,000
Applications and any supporting evidence must be received within 3 months of the first business rates payment being due. Supporting evidence will include a copy of your business rates demand and evidence showing the NHS proportion claimed in the previous year. For any 2024/25 claims, you will submit evidence for the claim made in 2023/24 such as accounts for the 2022/23 tax year and a letter from your accountant (which we will happily provide for our clients for you to forward on!)
Please note that if the provider is entitled to claim small business rates relief, this should be claimed prior to applying for business rates reimbursement.
Simplified tax reporting rules for Doctors – alignment of income tax and basis periods changes come into effect
Self-employed Doctors and dentists who prepare accounts using a different accounting date rather than a 31 March or 5 April accounting year end are set to benefit from simpler tax reporting rules.
From the 2023/24 tax year and in readiness for Making Tax Digital (MTD) for Income Tax which is due to be introduced in April 2026, businesses will be taxed on profits arising in a tax year (tax year basis) rather than profits of accounts ending in the tax year (current year basis). This is with the aim of aligning self-employed profits with any other sources of income, such as property and investment income, in order to simplify matters.
Doctors and dentists who have a 30 April year end will be particularly affected as they will need to report profits for the year ended 30 April 2023 at the same time as profits generated between 1 May 2023 and 31 March 2024. This could potentially lead to higher tax bills.
If the business also has overlap relief (overlap profits arise in the first years of a business or a change of accounting date), these will be relievable against profits in the 2023/24 transition year.
Example
A sole trader draws up their accounts to 30 April. Their profits for the year ended 30 April 2023 are £55,000, and for the year ended 30 April 2024 £66,000. They have overlap profits brought forward of £20,000.
The profits for the tax year 2023 to 2024 are as follows:
- Current year basis element – year ended 30 April 2023 – £55,000
- Plus, transitional element – 1 May 2023 to 5 April 2024 – £66,000 x 11/12 = £60,500
- Less overlap profits (£20,000)
- Total profits for tax year 2023 to 2024 = £95,500
These profits exceed the profits under the current year basis by £40,500 (i.e. the transitional element less overlap profits). The sole trader can therefore elect to spread the excess over up to 5 years.
The minimum amount per year to be added is £40,500 / 5 = £8,100. Under this election, assuming the sole trader chooses to add the minimum amount, the profits for the tax year 2023 to 2024 are reduced to £55,000 + £8,100 = £63,100. A minimum adjustment of £8,100 per year will be required to the profits of each of the tax years from 2023 to 2024 onwards (until 2027 to 2028 at the latest) until the £40,500 is extinguished.
The above illustrates that those affected will need to consider their position ahead of time to determine how the changes will impact their January 2025 tax payments.
For our clients who are impacted, it is advisable to provide accounting records early to enable us to advise you on your personal tax liability well in advance to assist in you making the necessary provisions. If you do require advice or wish to discuss, please contact us.
Electric company cars
Switching to an electric vehicle continues to be tax beneficial. However the favourable 100% first year allowance tax relief is due to come to an end on 31 March 2025.
For the 2024/25 tax year, a fully electric vehicle will fall in the 2% Benefit in Kind tax rate, which does sit favourably when comparing the tax due on either a petrol or diesel vehicle, although an incremental increase will apply of 1% per annum to 5% in 2027/28 tax year.
These low Benefit in Kinds (BIK) on fully electric cars (or good hybrids with emissions of less than 50g/km) means that anyone operating via a limited company may consider leasing or purchasing a relevant vehicle. Based on current legislation, it is generally tax-efficient to purchase fully electric cars as company cars via a limited company. This is because the company car tax (2% for 2024/25) will be less than the Income Tax payable on the dividend should a company director/shareholder wish to extract funds to fund the car purchase personally.
If you purchase a plug-in hybrid car then it will be dependent on how many miles a vehicle can cover under battery power and the emissions figure as to whether it is more tax-efficient to purchase as company cars through a limited company or individual ownership.
Please see below the things to consider regarding purchasing a car from the company.
Benefit in Kind (BIK)
It is important to know that the provision of a company car gives rise to a benefit in kind, which has tax implications for both you and the company. You will be liable to pay Income Tax on the benefit and the company would also suffer Class 1A National Insurance (NICs).
The benefit in kind (BIK) rate is also dependent on the level of CO2 emissions of the car, but as you are aware from 6 April 2024 the BIK % for cars which are fully electric will be 2%.
The BIK % is applied to the list price to get the BIK figure - this will then be the figure that you will pay Tax on. The BIK will be declared on your personal Tax Return as employment income.
For example, a Tesla car with a list price of £90,000 would generate a BIK figure of £1,800. For a higher-rate tax payer, income tax liability of £720 (£1,800 x 40%) will arise on the company car for the 2024/25 tax year.
The company will also be liable to Class 1A National Insurance Contributions at a rate of 13.8% of the BIK figure. In the above example this would be £248.40 (£1,800 x 13.8%). Please note however, that the company will receive Corporation Tax relief on the Class 1A National Insurance Contributions paid.
Capital Allowances
The company will be able to claim tax relief on the purchase, the amount of the relief is dependent on the level of CO2 emissions of the car. From 6 April 2021, the following capital allowances can be received on the cost of the car:-
|
CO2 Emissions |
Capital Allowances |
|
0 g/km |
100% first year allowance – (can only be claimed on new and unused cars) |
|
Between 1 g/km and 50 g/km (or second hand EVs) |
18% reducing balance |
|
Above 50 g/km |
6% reducing balance |
Electric charge-points are also eligible for 100% first year allowances until 5 April 2025.
Please note that currently 100% first year allowances are available on new and unused electric and zero emissions cars which are due to end on 31 March 2025. If you are considering buying a vehicle, you may wish to acquire before this date in order for the company to benefit from full tax relief on the cost of the vehicle.
In order to obtain tax relief in the form of capital allowances, the company will need to either:
- purchase the car outright
- purchase the car using a straight-forward loan with interest in the company’s name or
- by hire purchase in the company’s name.
It is also worth noting that if Capital Allowances are claimed, when you come to sell the car in the future, if the car is worth more than the ‘tax value’ of the car then the company may have to repay back some of the tax relief. This is known as a ‘balancing charge’.
Tax relief on financing and associated car expenses
The company will also receive tax relief on car running expenses and if the vehicle is purchased using a loan, the company will receive tax relief on the interest element of the monthly repayment.
The company would not receive capital allowances however if it were to lease the car. Instead the company would receive Corporation Tax relief on the lease/rental payments (relief subject to 15% disallowance if >50g/km).
If you would like assistance in calculating tax savings and any tax and National Insurance implications on any specific cars, you should speak with your usual contact at Humphrey & Co for more details.