Ignoring Cash Flow Issues Amidst Rising Costs 

Dentists and The Peril of Financial Avoidance

In the realm of dentistry, where precision, care, and attention to detail reign supreme, a parallel demand for financial diligence is often overlooked or evaded. Dentists, while dedicated to their craft, can sometimes find themselves navigating turbulent financial waters, especially when faced with challenges like escalating interest rates and mounting operational costs. However, the tendency to overlook or disregard cash flow issues could be likened to the age-old idiom of ‘burying one’s head in the sand,’ ultimately exacerbating problems rather than resolving them. 

In recent times, the dental industry, like many others, has encountered the impact of higher interest rates. The ramifications of increased borrowing costs can significantly impede the financial stability of dental practices. Whether financing new equipment, expanding the clinic, or managing existing debts, the dentistry profession, like any small business, is vulnerable to the ebb and flow of interest rates. With each uptick, the strain on cash flow intensifies, making it crucial for dentists to proactively address these challenges. 

Check out our article Have the interest rate peaked at 4?

Furthermore, operational expenses for dental practices continue to surge. From the cost of state-of-the-art equipment to escalating overheads and staffing expenses, dentists are facing an uphill battle to maintain profitability. The convergence of these factors requires a pragmatic and strategic approach to financial management, yet it’s not uncommon for some practitioners to avoid addressing these issues head-on. 

The analogy of ‘burying one’s head in the sand’ encapsulates the perilous consequence of ignoring financial challenges. Instead of confronting the root causes of cash flow constraints, some dentists might adopt a passive stance, hoping the issues will resolve themselves. This approach, however, often leads to a snowball effect, exacerbating financial distress and limiting the ability to invest in the practice’s growth and development. 

Check out our article on how should a dental practice organize its finances.

To mitigate these challenges, dentists must prioritize financial literacy and prudent fiscal planning. Implementing a comprehensive cash flow management strategy becomes imperative. This may involve reevaluating expenditures, renegotiating terms with suppliers, exploring alternative financing options, or seeking professional financial guidance tailored to the unique needs of a dental practice. 

Moreover, embracing technological advancements and leveraging digital solutions can streamline administrative tasks, optimize operations, and potentially reduce costs. Embracing innovation not only enhances efficiency but also positions the practice for long-term sustainability in an evolving landscape. 

Collaboration within the dental community can also be a valuable resource. Engaging in forums, networking events, or professional associations can provide insights, shared experiences, and innovative solutions to navigate financial challenges collectively. 

Ultimately, acknowledging and actively addressing cash flow issues, particularly amidst rising interest rates and mounting costs, is pivotal for the financial health and longevity of dental practices. Evading or neglecting these challenges can lead to a deeper financial quagmire, hindering the ability to provide quality care and stifling the potential for growth and innovation within the profession. 

In conclusion, dentists must resist the temptation to ignore cash flow issues and higher costs resulting from increased interest rates. By confronting these challenges head-on through prudent financial management, proactive strategies, and a willingness to adapt, dental practitioners can fortify their practices, ensuring sustained success amidst a dynamic and challenging economic environment.

Check out our article on 5 quick tips when buying a dental practice

If you have concerns contact us at Samera and let us review your position and examine what can be done to assist. 

Unlocking Success: The Samera Boot Camps for Start-Up Dental Practices

Establishing a successful dental practice involves more than just clinical expertise; it requires a comprehensive understanding of business management, financial strategies, and effective marketing. Recognizing this need, Samera, a leading firm specializing in healthcare business consulting, has been organizing highly successful boot camps tailored specifically for start-up dental practices. These boot camps have garnered a reputation for being transformative, equipping budding dental entrepreneurs with the tools and knowledge needed to thrive in the competitive healthcare industry. 

A Holistic Approach to Dental Practice Management: 

Samera’s boot camps stand out due to their holistic approach. They cover a wide spectrum of crucial aspects essential for the success of a dental practice. From navigating complex financial landscapes to implementing effective marketing strategies and ensuring compliance with regulations, participants gain a comprehensive understanding of the multifaceted nature of dental practice management.

Expert-Led Sessions: 

One of the key features of the Samera Boot Camps is the involvement of industry experts who bring their wealth of knowledge and experience to the table. These sessions are led by professionals well-versed in dentistry, finance, marketing, legalities, and technology. Participants have the invaluable opportunity to learn from these experts, gaining insights and practical advice that can be directly applied to their practices. 

Practical Insights and Case Studies:

The boot camps not only offer theoretical knowledge but also delve into real-world scenarios through case studies. Practical insights shared during these sessions empower attendees to understand challenges, strategize solutions, and implement best practices effectively.

Networking and Collaboration:

Apart from the structured sessions, the boot camps facilitate networking opportunities among participants. This environment fosters collaboration, allowing attendees to learn from each other’s experiences, share insights, and build a network of like-minded professionals. The collaborative spirit nurtured during these events often extends beyond the boot camp, creating ongoing support systems among attendees.

Success Stories:

Over the years, the Samera Boot Camps have witnessed numerous success stories. Many participants have implemented the strategies learned during the boot camps, resulting in thriving dental practices. These success stories are a testament to the effectiveness and impact of the knowledge imparted during the sessions.

Conclusion:

Samera’s commitment to empowering start-up dental practices through these highly successful boot camps has significantly contributed to the success of numerous dental entrepreneurs. By offering a comprehensive understanding of business management, financial strategies, and effective marketing within the dental industry, these boot camps have become an invaluable resource for those embarking on their entrepreneurial journey in dentistry. 

For aspiring dental professionals seeking to establish their practices on a strong foundation of business acumen and industry expertise, the Samera Boot Camps stand as a beacon of guidance and success, fostering the growth and prosperity of start-up dental practices across the industry. 

Running a Dental Practice in an Inflationary Environment

Is the current model of running a dental practice flawed in an inflationary environment?

Running a dental practice is a costly business. 

High capital costs, high staffing costs, high premises costs, high marketing costs….the list goes on, so how can you build a profitable dental practice or group?

Firstly, if there is scope to reduce some element of cost in a dental practice, it’s so important to try and do this.

However, if this is executed poorly it impacts delivery and service standards, which ultimately has a detrimental impact on the business.

But high costs means high private prices just to make a decent return, hence why we see the huge queues of people lining up for an NHS dentist in certain parts of the country.

Despite this, more and more UK dentists are opening private practices from Land’s End to John O’Groats.

Some will succeed and some will fly, but I am sure others will falter too.

This begs the question, is the current financial model for operating a dental practice fundamentally flawed?

Last week I had an interesting conversation with a rather fine dentist in Europe. Despite the impression that everyone in his country can afford anything, he made a really valid point – that not everyone can afford to pay for private care. In fact, around 1/3 of the population cannot afford to pay for private care (the market is mainly private in this country).

This means they adapted their business model for delivering dentistry using technology, dental hygienists and only utilising the dentist’s time for key dental aspects. 

They have built a dental network that is specialised and capital investment is focused on prevention/maintenance and conservative treatment to cover the most significant part of the demand of their target segment (price sensitive patients, who appreciate regular prophylaxis and checkups).

At all their branches, X-rays and intra-oral scans are carried out by hygienists in local primary prevention and screening centres. This information is then relayed back to a central diagnosis hub, where the information is reviewed by a dental team.

All diagnosis is legally required to be done by a dentist only. All x-rays and intra-oral scans are taken under the recommendation of a dentist.

Now after the diagnosis, the diagnosis hub is able to deliver high-quality, personalised teleconsultations, from hygiene coaching to immediate triage and management of dental emergencies (immediate instructions and medical prescriptions are provided as needed and appointments for the specific issue are scheduled in the first available spot), thus improving accessibility, timeliness and appropriateness of treatment in a very much cost-effective way.

So if a dentist is required in a certain location, they can move the dentists between sites, ensuring that there is minimised idle capacity, which allows them to keep their prices lower as they have optimised their whole workflow.

A very interesting business model, and one that could work as the costs get higher, and patients’ ability to pay higher prices reduces.

One to watch, and adapt to other markets including the UK.

Are EBITDA multiples in the UK Dental Market going to grow over the next few years?

I was recently asked this question by a group practice owner, so I thought I would throw my thoughts into the ring.

Over the last few years a lot of the growth in Dental practice values and hence EBITDA multiples has been as a result of increasing amounts of Private Equity (PE) money entering the market.

They have investors cash and want to deploy this to buy and build a dental group, as they have seen some successful exits previously. 

But surely there has to come a point when this will stop or pause at least?

Many of the large UK dental corporates are PE backed and as far as I can remember many of the larger groups have always been discussing a flotation, but none have successfully pulled this off. Failing that, PE investors restructure their holdings and then sell their shareholdings to other PE houses usually making a profit on their original investment. The new owners, then hope they can grow it further and then get this to flotation, but realising this is not going to happen with a suitably sized financial sponsor to get it listed, so they either end up holding their investment or try to -rejig to make it attractive to another PE investor.

Click here to read our article on Dentist and Dental Associate Expenses Guide

In my opinion, if a successful float can happen, then perhaps the value multiples will rise as more PE will enter the market and then believe that dentistry is the holy grail to growing their investments.

Here in the UK, most of the groups have a large NHS bias, but the question has to be will the NHS change the contract and if it does how will it impact such large groups? With Covid, if I were a betting man, I think the contract will change, but I think many dentists are praying this won’t happen – but who knows?

There is no doubt a shortage of quality dental practices to buy in the main cities across the UK, hence values remain strong, as many younger dentists have entered the profession with a view to owning their own dental practice, but not being able to buy one (either through lack of availability or insufficient funds). So now we are seeing unprecedented demand for people to start their own private dental squat.

It’s an interesting time in UK dentistry currently, and whilst a group could yield more than 10x EBITDA if selling, sometimes the individual parts could be worth more than the whole – so you could sell individual sites to single operators at a stronger premium as they have money saved to get on the ladder (perhaps with the help of their mum and dad).

As long as we don’t have any further major global pandemics, I do think values will remain resilient as demand does currently outstrip supply for quality practices in urban locations.

As for the EBITDA multiple rising higher over the next years than it is currently, I wouldn’t bet against it, but I think we need to see a successful flotation to see multiples move to a much higher level.

Watch this space!

Click here to read our articles on Samera Learning Centre.

Dental Accounts & Tax Specialists

As dental practice owners ourselves, we know what makes a clinic tick. We have been working with dentists for over 20 years to help manage their accounts and tax.

Whether you’re a dental associate, run your own practice or own a dental group and are looking to save time, money and effort on your accounts and tax then we want to hear from you. Our digital platform takes the hassle and the paperwork out of accounts.

To find out more about how you can save time, money and effort on your accounts and tax when you automate your finances with Samera, book a free consultation with one of our accounting team today.

Dental Accounts & Tax: Further Information

For more articles, webinars and blogs on dental accounts check out the dental accountancy section of our Learning Centre and follow us on YouTube, Facebook, LinkedIn and Instagram.

The Game Changer in your Practice Accounts

Make one payment to all your 30+ suppliers each month and save hours!

Ok, I maybe sounding like a nerdy accountant, and think this is exciting for accounting, but to be honest it will save you a lot of time and money, if you commit and get your affairs streamlined onto Xero.

For the last 12 months, we have been testing using Xero WITH Wise (formerly known as Transferwise), in order to make payments to suppliers.

Click here to watch our webinar on Navigating Your Dental Practice Finance Future.

Now, I only need to make one payment per month to all our 30+ suppliers, this takes a few minutes, rather than having to make individual payments to each supplier which can take hours.

The key is to be using Hubdoc for scanning all your invoices, then this is processed by our book-keeping team into Xero, with all accounts reconciled and then payments are made via WISE who manage the whole payment process.

Click here to read our blog on How to finance a dental practice.

And yes, I just make one payment each month to all our 30+ suppliers.

This saves me many hours each month, streamlines the whole process and allows us to focus our efforts on aspects of the business that require greater focus and time.

Click here to read our articles Samera.

Further Information

For further information this watch the video on the following page:

Dental Accounts & Tax Specialists

As dental practice owners ourselves, we know what makes a clinic tick. We have been working with dentists for over 20 years to help manage their accounts and tax.

Whether you’re a dental associate, run your own practice or own a dental group and are looking to save time, money and effort on your accounts and tax then we want to hear from you. Our digital platform takes the hassle and the paperwork out of accounts.

To find out more about how you can save time, money and effort on your accounts and tax when you automate your finances with Samera, book a free consultation with one of our accounting team today.

Dental Accounts & Tax: Further Information

For more articles, webinars and blogs on dental accounts check out the dental accountancy section of our Learning Centre and follow us on YouTube, Facebook, LinkedIn and Instagram.

5 Tax Tips for Dentists and Doctors in May 2021

As we are moving further into the 2021-22 tax year we are starting to see the light at the end of the pandemic tunnel, which means now is the best time for you to review and refresh your financial affairs. Now is the time for business owners like yourself to maximise the tax benefits available to you for further capital investment and innovation, and right here is the perfect place for you to start. Here are Samera’s Tax Top Tips for Dentists and Doctors. Our tips offer valuable insight and inspiration for you and your business to grow. 

1. Stamp Duty Holiday 

The stamp duty holiday extension has been confirmed and will apply to all residential property buyers. This means that you will not have to pay stamp duty on the first £500,000 of your property if you complete the transfer legally before 30 June 2021. From 1 July 2021 to 30 September 2021 the nil band will be £250,000. The nil rate band will then return on 1 October 2021 to the standard amount of £125,000.

If you are in the midst of transferring or acquiring a residential property, or even considering it, due to this stamp duty holiday you may want to accelerate matters before the stamp duty returns and your potential savings wither away. Accelerating your purchases or transfers will enable you to achieve the most stamp duty savings. Get in touch with our advisors for further information.

2. Super deduction and the SR Allowance

The super deductions and special rate first year allowance (SR allowance) temporarily increases reliefs for companies within any sector on qualifying expenditure on plant or machinery from 1 April 2021 to 31 March 2023. The super deduction introduced in 2021 was the biggest business tax cut in modern British history. This recent capital allowance and the SR allowance gives companies up to 130% tax relief on the qualifying cost of the capital investment.  These allowances are only available for companies, not for any self-employed businesses or partnerships.

Both these enhanced capital allowances are in addition to the existing ongoing Annual Investment Allowance which already gives relief for costs of qualifying plant and machinery up to £1M in the tax year of purchase. 

It is important to note that certain assets do not qualify for relief such as cars or second-hand equipment but the majority of brand-new plant machinery and equipment for use in your trade is likely to qualify. These are reliefs where the date of expenditure is important for the assets to qualify so businesses will need to maintain records of dates of acquisition especially for larger projects that span between the allotted dates (1 April 2021-1 April 2023).

Click here to find out more about the superdeduction.

3. Capital Taxes Planning

Although many rumours have been floating around leading up to the March Budget, no changes have been made. However, it is the view amongst many of our tax professionals that the increase of tax with Capital Gains Tax (CGT) is hanging in the balance and is only a matter of time before it will be increased. 

If you are currently considering whether to transfer or sell any assets, it may be a good idea for you to get ahead and start to accelerate such sales and transfers in light of potential CGT changes that are imminently forthcoming.

4. Use of a Family Trust

This tip is particularly useful if you are looking to undertake asset protection or Inheritance Tax Planning (IHT) – otherwise, at the event of your death, HMRC could be entitled to IHT at the rate of 40% of your assets. Inheritance tax alone raised a record of £4.9bn in the last financial year.

You can control a family trust by yourself and it can hold assets for any of your family members including your children with distributions purely made at your discretion. Doing this can remove the value out of your IHT estate therefore, reducing your estate to a more manageable value. Your estate includes everything you own and the trust can help you keep a lump sum outside of your survivor’s estate to ensure it is not subject to IHT. The use of a trust could also protect your family legacy in various ways. 

Certain assets are able to qualify for 100% relief from IHT upon transfer into trust. If you have a very large and complicated estate, the sooner you start planning, the better. An efficient IHT plan involves gifting assets during your lifetime instead of one large trust at the end. Each person can generally transfer upto £325,000 into trust without incurring any tax charges upon entry. 

5. Research and Development 

The Research and Development tax credit scheme is one that countless companies are still not making use of. This scheme is the main source of government support in the UK for innovative companies. If you can demonstrate that your expenditures went towards research and development costs (by definition by HMRC of what expenditure you can claim), then you will be able to claim on it. Many eligible businesses can claim benefit from additional tax relief of up to £24.70 for every £100 of qualifying expenditure. There is now no minimum expenditure on qualifying for R&D required to make a claim for tax credit. 

If you have used any sort of science or technology or used a particular service for a project or a problem in your business that needed specialist help to fix, you may have a potential claim. If you are unsure whether your project might qualify for this valuable relief, get in touch with one of our professional advisors. 

Click here to read our article on Dentist and Dental Associate Expenses Guide

Book a Consultation

To find out more about your tax options and what Samera can do to help you, book a virtual consultation with one of the Samera Finance team.

Dental Accounts & Tax Specialists

As dental practice owners ourselves, we know what makes a clinic tick. We have been working with dentists for over 20 years to help manage their accounts and tax.

Whether you’re a dental associate, run your own practice or own a dental group and are looking to save time, money and effort on your accounts and tax then we want to hear from you. Our digital platform takes the hassle and the paperwork out of accounts.

To find out more about how you can save time, money and effort on your accounts and tax when you automate your finances with Samera, book a free consultation with one of our accounting team today.

Dental Accounts & Tax: Further Information

For more articles, webinars and blogs on dental accounts check out the dental accountancy section of our Learning Centre and follow us on YouTube, Facebook, LinkedIn and Instagram.

What Does the Super-Deduction Mean for Dentists?

From 1 April 2021 until 31 March 2023, any businesses investing in qualifying new plant and machinery assets will be able to claim:

  • a 130% super-deduction capital allowance on qualifying assets and machinery investments
  • a 50% first-year allowance for qualifying special rate assets

The biggest business tax cut in modern British History

This super-deduction allows companies to cut their tax bill by up to 25p for every £1 they invest. With this scheme in place, companies are expected to benefit to the tune of £25 billion over the next two years. As the pandemic has released many economic shocks throughout the UK accompanied by much uncertainty, this super-deduction tax relief will encourage many businesses to spur investments that will help them grow and get back on track. However, the deduction will only apply to “companies investing in qualifying new plant and machinery assets” rather than intangible assets.

The super-deduction allows any limited business to deduct the full value of qualifying assets from profits before tax. Rather than over several years, the full tax relief is received the same year the assets are purchased, therefore reducing your tax liability. This scheme will provide significantly faster tax relief for investments up to £1 million, further helping businesses expand, invest and grow. 

Corporation tax is a tax on profits only, not turnover. Therefore, it is only a tax on businesses that are thriving. Although many businesses have struggled during the rise of COVID-19, many businesses have also had a lot of support from the government over the last year, as the government’s relief measures have meant that companies haven’t had to draw from their own reserves. and there will be more businesses statistically thriving than a lot of people may realise. 

The super-deduction will end in 2023, which means companies have two years to take advantage of this scheme before the super-deduction window of opportunity slams shut. After march 2023, corporation tax will rise to 25%, so the government can begin to earn back some of the money that was spent during the height of the pandemic. Rishi Sunak explained how the increase of corporation tax is “fair and necessary” in order for businesses to contribute to the UK’s recovery due to how much support they received throughout the pandemic. 

Click here to read our articles on Samera Learning centre.

Example Super-Deduction

Below you can find an example of how this super-deduction can benefit your dental practice. In this example, we take a look at the difference in tax savings when a sample dental practice invest in inventory on or before 31st March 2021 compared to on or after 1st April 2021.

Date of Purchase31st March 20211st April 2021
Cost£2.5mil£2.5mil
Inventory allowances:
£1mil at 100%£1mil
£1.5mil at 18%£270K
£2.5mil at 130%£3.25mil
Total allowances available£1.27mil£3.25mil
Corporation tax benefit at 19%£241.3K£617.5K
Tax saving£376.2K

Contact Our Asset Finance Team

Before this amazing tax opportunity ends, we urge businesses, especially dental practices to increase your investments while you get the 130% tax relief. Two years will fly by quicker than you know. By then the tax relief door will be slammed shut and corporation tax will increase. The benefits to your business will be endless. If you are interested in investing in assets for your business with the 130% tax relief, get in touch with our in house experts that can help you with the asset finance you may need. The team here will happily guide you through the process and offer advice and tips that will be integral for your business to thrive during this opportune moment. 

Click here to find out more about our Asset Finance services.

Commercial Loans for Healthcare Businesses

We’ve been helping to fund the future of British healthcare businesses for over 20 years and our team are made up of former bankers with decades of experience in the UK’s healthcare lending sector.

You can find out more about working with Samera and the financial services we offer by booking a free consultation with one of the Samera team at a time that suits you (including evenings) or by reading more about our financial services at the links below.

For more information on raising finance for your healthcare business, including more articles, videos and webinars check out our Learning Centre here, full of articles and webinars like our How to Guide on Financing a Dental Practice.

For all our previous webinars and video updates, subscribe to our YouTube channel and follow us on Facebook, LinkedIn and Instagram.

2021 Year End Tax Planning – Can you become an ISA Millionaire?

It’s that time of year again when one needs to consider all their tax saving options.

In truth, there are maybe two major things you need to be considering, ISA and pension contributions.

If you have not contributed to either of these, then it’s definitely worth considering. My personal favourites are ISA’s as you can still have an instant access to the cash, yet income and capital growth is tax free.

If you invest wisely, it’s possible to build a very large ISA holding which you have not paid any tax on at all – on the income or the capital growth. Your goal should be to build a large ISA holding and if you start early in your career, it’s pretty likely you can become an ISA millionaire!

Don’t forget about Junior ISA’s too

In addition, if you have children, make sure you are using their junior ISA allowances too. Currently, you can invest up to £9000 tax free into a junior ISA – again a no-brainer if you are thinking of saving for their futures.

Of course, pensions have the benefit of providing tax relief but you cannot access the funds until 55.

Both offer excellent options to be tax efficient, so if you have not used your allowances this year and have cash to invest, start with either (or both) of these two options!

Summary of details below:

ISA v pensions-
Benefits at a glance
ISAPension
Can I have instance access?

Yes
No access before age 55 unless due to severe ill health or protected retirement age
How much can I pay in?

£20,000 each tax year£3,600 gross or 100% of net relevant earnings (whichever is higher) subject to annual allowance limits
(currently £40,000 but can be lower for high earners)
What is the tax treatment in the fund?

Tax-efficient growth Tax-efficient growth
What tax relief is available on your contributions?

NoneImmediate 20% available

Higher/additional rate taxpayers can claim further relief via self-assessment
What happens on death?Full value is included in your estate for Inheritance Tax (IHT) purposesPension funds not currently included included in estate for IHT purposes

Death benefits are tax free if paid before deceased’s 75th birthday, but subject to beneficiary’s marginal rate of tax if deceased was over 75 at date of death

Further Information on Accounts & Tax

Our team of specialist accountants and tax experts can help manage, process and structure your business’s finances. From management accounts and payroll & pensions to tax planning and cash flow management, we can take care of the full back-office function of your business.

Book a free, no-obligation consultation with one of the team to find out how we can make your accounts & tax easier, quicker and cheaper.

For all our previous articles, webinars and video updates, subscribe to our YouTube channel and follow us on Facebook and Instagram.

2021’s Budget Impact on UK Dentists

We have reviewed yesterday’s budget and have provides some further detail, along with our own viewpoints on the announcement and its impact on the UK’s dentists.

There are some significant changes which will play out over the coming months and years. In addition, it does look like things have been made more complex by the new introduction of both some old and new concepts into the tax system.

We’re here to help, so get in touch!

Corporate Tax Announcements from the Budget

Increase in Corporation Tax rates

  • The Chancellor in his Budget recognised that business has benefited from unprecedented support during the Coronavirus. In the spirit of fairness, it therefore recognises the role that business have in repaying the historical borrowing costs, by raising the level of corporation tax from 19% to 25% from 1 April 2023.
  • This higher rate will apply where company profits are in excess of £250,000, with the low rate of 19% being retained for those with profits under £50,000. For those companies with profits between £50,000 and £250,000, there will be marginal relief applying to bridge the gap between the lower and upper limits.
  • These limits will be divided by the number of associated companies; in other words, where one company controls another or both are under the same control. This associated company definition is also going to replace the 51% group company test previously used to identify which companies are required to pay tax by quarterly instalment. This may well increase the number of companies being required to pay tax by instalment and the cash flow impact of this will need to be considered.

Samera’s Viewpoint

This is a return to the days of pre-2014, when multiple rates of corporation tax was last in use. However, the level at which the higher rates apply is much lower (£250,000) compared with £1,500,000 back in 2014. 

This means that more companies will be drawn into paying the higher rate of corporation tax, than in 2014. This will make it increasingly difficult to predict future corporation taxes.

Temporary extension to carry back of trading losses for Corporation Tax

  • This is a welcomed cash-flow benefit for all companies and unincorporated businesses that may now be able carry back losses, that have arisen recently due to reduced demand for their goods and services, to earlier years. The current rules are restricted to only offsetting losses to the previous 12 months profits.
  • The measure applies to companies with accounting periods ending in the period 1 April 2020 to 31 March 2022, and for tax years 2020/21 and 2021/22 for unincorporated businesses. 
  • The effect of the measure will to be extend the period for which the trading loss can be carried back against earlier profits and will be extended from the current one year element to a period of three years, with losses being carried back against later years first.
  • Although there are no restrictions on the amount of the loss to be carried back to the previous year, there will be restrictions on the amount of losses to be carried back to the earlier two years, where a £2m cap will apply for each of the two year periods to 31 March 2022. The £2m cap will apply to groups, where the limit will be shared, and this will need to considered in detail and the submission of a formal allocation statement. There are also measures introduced to allow certain loss carry backs to be claimed outside the company tax return.

Samera’s Viewpoint

This is a welcome cash boost to taxpayers whose profits may have been fundamentally impacted by the COVID-19, which could provide an immediate cash-flow injection. 

However, the measure also introduced more complexity to SME’s in managing their tax affairs with the interaction of the cash-flow boost, impact on R&D claims they may have made and the fact that there is now a small company corporation tax rate.

Super-deduction for companies investing in new plant and machinery

  • The Chancellor has announced a new tax deduction aimed to stimulate investment by UK companies.
  • Between 1 April 2021 and 31 March 2023, companies will be able to claim a corporation tax deduction at 130% of qualifying expenditure. This has not been extended to unincorporated businesses, or other structures such as LLPs.
  • This measure only applies to main rate pool assets, but 50% deduction also announced for expenditure on most new assets that would ordinarily qualify for 6% special rate pool.
  • Although this is a welcome announcement, , the complexity is in the small print. This measure, in particular, is a super-complex super-deduction. 
  • Further complexities arise where assets are sold having previously benefitted from the super-deduction.
  • Timing for expenditure is going to be key. Whilst we would encourage companies to delay expenditure until April, contracts entered into before 3 March will not benefit from the super deduction even if the date of the expenditure is delayed.
  • Whilst the rate of super deduction does not appear to be affected if expenditure is incurred in accounting periods which straddle 1 April 2021, the rate of deduction is reduced for periods straddling 1 April 2023. It may be worth considering changes to accounting periods to mitigate a loss in the deduction if expenditure is planned to be significant in late 2022 or early 2023.
  • Additional conditions will be imposed on expenditure on assets acquired under hire purchase or similar contracts.

Samera’s Viewpoint

From a cash flow perspective the benefit of the enhanced deduction, whilst welcome, will not be felt until the company is due to pay its corporation tax liability. This again introduces increased complexity to the tax system which will make it harder for SME’s to plan.

Temporary increase in Annual Investment Allowance

  • There was confirmation that the Annual Investment Allowance will increase from £200,000 to £1m from 1 January 2021, for expenditure on plant and machinery incurred during the year ended 31 December 2021.
  • This is another boost for businesses who will be able to obtain a 100% tax deduct when they invest in plant and machinery. 

This temporary increase together with the announcement of the super deduction, could play an important factor to help kick-start business investment, and may also attract foreign companies to invest in the UK.

Personal Tax and Private Client Announcements from the Budget

Self-employed grants for the newly self-employed in 2019/20

  • This group of individuals missed grant funding when COVID-19 hit, as they had no proof with HMRC that they were self-employed.
  • Provided their self-assessment returns for 2019/20 have now been filed, these individuals can now claim the 4th and 5th grants. 
  • 4th grant covers period from February until April, available from late April and 5th grant covers May until September, to be claimed from late July.
  • 4th grant available will be 80% of three months’ average profits, capped at £7,500 paid out in a single payment. 
  • Final grant will be based on a turnover test, so more targeted. Those whose turnover has dropped by at least 30% will be eligible to claim up to 80% of a three month average trading profit, but those whose turnover has not dropped as much will only be eligible to claim 30%, capped at £2,850.   
  • It has been confirmed that grants are taxable in the year in which they are received.
  • As this is taxable income, possible knock-on effects are that it should be pensionable income, but could also impact on things like the clawback of child benefit.
  • Finally some support for a group of people who fell into no man’s land from March last year. 

Temporary extension to carry back of trading losses for Income Tax

  • Trading losses made by unincorporated business in tax years 2020/21 and 2021/22 will be eligible for loss carry back relief.
  • The losses can be carried back against the profits of the same trade for a period of three years instead of the usual one year period.
  • A £2m cap will apply to the extended carry back of losses for each tax year.
  • With temporary closure of businesses during the national lockdowns, this measure could prove to be an additional lifeline for some unincorporated businesses to obtain tax repayments from prior years to ease cash flow.

Capital Gains Tax (CGT) – Annual Exempt Amount will remain at current level to April 2026

  • There will be no increase or reduction in the tax-free amount for Capital Gains Tax from the current level until April 2026. There was considerable speculation this may change but this has not occurred as yet.
  • This annual tax-free amount will therefore remain at £12,300 for individuals, personal representatives and some Trusts and £6,150 for all other Trusts.
  • Private clients are now in a position to carefully consider their assets in the round to make decisions when selling their assets or passing their wealth on to the wider family.

Stamp Duty Land Tax (SDLT) – extension to the temporary SDLT holiday

  • Up to the end of June 2021 there will be no SDLT on the first £500,000 for purchases of homes in England and Northern Ireland, where this is the purchaser’s sole residence. The 3% surcharge will remain in place if this will not be the purchaser’s only residential property or if the purchaser is a company.
  • From 1 July to the end of September 2021 the holiday amount reduces to £250,000.
  • Importantly both the new dates of the end of June and September are ‘cliff edges’ so a purchase must be completed to take advantage of the SDLT holiday.
  • This is not only a great boost for those people seeking to get onto the property ladder, especially in conjunction with the news that 95% LTV mortgages will soon be available again, but also good news for those looking to move.
  • In addition to this, for those people with a personally held rental property portfolio it extends the timeframe to consider whether incorporating their property business is worthwhile whilst there is not a punitive upfront SDLT charge to doing so.      

Inheritance tax – nil rate band frozen

  • The Chancellor did not announce any changes for IHT other than to freeze the nil rate band of £325,000 and residence nil rate band of £175,000 until April 2026. The nil rate band has now been frozen at the same level since 6 April 2009, resulting in increasing numbers of estates being brought within IHT, particularly in London and the South East. This measure is expected to raise £985m and highlights the need to take timely advice.
  • We may see further announcements as part of “Tax Day” on 23 March 2021, particularly regarding simplification of lifetime gifts and the interaction of IHT with Capital Gains Tax.

Employment Tax announcements from the Budget

Extension of furlough arrangements

  • Scheme extended to 30 September 2021.
  • Currently employer claims 80% of reference pay.
  • Employer will be required to contribute 10% from 1 July 2021, and 20% for August 2021 and September 2021 (with the employees still receiving 80%).

Samera’s Viewpoint

This measure will ensure employees are no worse off than currently but will increase the cost burden for the business as the scheme winds down to 30 September 2021. 

National Living Wage changes

  • From April 2021, NLW will increase by 2.2% to £8.91 per hour.
  • This was previously for workers aged 25 and over, but now it will apply to workers aged 23 and over.
  • This will add to employer costs which may inadvertently impact jobs.

Samera’s Viewpoint

Again this is an extension to bring further employees within scope in the 23-25 age range.

Further Information on Accounts & Tax

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Book a free, no-obligation consultation with one of the team to find out how we can make your accounts & tax easier, quicker and cheaper.

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Rishi Sunak’s Budget Update

The Dental Business Guide Podcast Episode | 3rd March 2021
Arun Mehra

Good afternoon. It’s Arun Mehra here on the 3rd March from the Dental Business Guide and I’ll be talking to you about the budget that was announced earlier today by Rishi Sunak. Now, there was a lot of expectation around this budget, with various bits of information being leaked before the budget. But now more details have emerged today and I’m just going to give you a quick summary of the key points that I think affect the dental sector in particular.

As more information comes out, I will be sharing more information on our websites and maybe on this podcast as well. 

So firstly, in respect to the Coronavirus support that’s available from the government – certainly furlough has been extended until the end of September and the government will continue paying 80% of employees salaries for the hours they cannot work.

Employers will have to then also contribute 10% in July and 20% in August and September. So, as we expected, this is something that will help businesses generally for people who’ve got people on furlough, which will pay for them. In addition, support for self employed will also be extended until September.

Now interestingly, I think we are coming out of this pandemic, by the end of June, hopefully, when all the restrictions will be lifted. But this is going to go to the end of September as businesses will reopen. So that, I guess, is a positive sign. 

Now in terms of the state of the economy, and generally about the finances, we saw the economy shrink by about 10% in 2020. There is an expectation of it to rebound. And the Treasury’s hoping in 2021, the annual growth rate will be around 4%, which will hopefully then grow even beyond that after 2021. 

Current borrowing at the moment just out of interest is around £234 billion for the period 2021-22.

Now, the all important area of taxation. I know a lot of our clients are always interested to understand what’s the impact on them, on their personal taxes, on their personal take home pay. There’s been no changes to the rates of income tax, National Insurance, or even VAT. The personal income tax allowance has been frozen at the current rate at 12,570 from 2022 all the way to 2026.

However, that’s likely to change I guess, as we go along – that’s a long time away to happen. In addition, high-rate income tax threshold has also been frozen at 50,270 until 2026 as well.

The area that has changed (and this is a significant) area is that corporation tax will be changing. So by 2023, the highest rate of corporation tax will be 25%. Now, what does that really mean? I suppose there’s a kind of a taper here. So that the companies that are earning a lower rate of tax will still be taxed at 19%. And that’s the vast majority of companies and those companies who are earning under 50,000 pounds a year. But companies who have a high profitability, they’re tapered up to the rate of 25%. So anyone earning in excess of profits of 250,000 pounds, I believe, will be taxed at 25%.

In addition on the tax side of things, the stamp duty holiday on house purchases in England and Northern Ireland had been extended to June, which was kind of what we expected as well. And there will be no changes on inheritance tax or lifetime pension allowances, or even capital gains tax – because I know there was a lot of concern about capital gains tax changing. And an entrepreneur’s relief perhaps being removed – that has not happened thus far in this budget.

And then I suppose finally some other aspects on the business side of things is government really wants to encourage business. That’s what kind of the message I got from this, whether it will have the impact of what it desires – that’s another story. But one of the things he’s trying to do is encourage people to invest in equipment, invest in infrastructure, invest in new items.

They’re saying if for instance, you’ve invested 10,000 pounds in equipment, you’ll be able to get 130% of that, 13,000 pounds worth of that, as a deduction in your tax bill. So that’s a huge incentive. If you’ve got to kit out a dental clinic or business, you’re doing a new surgery, there’s a huge investment opportunity or a tax opportunity to reduce your tax bill as well.

In addition, there’s the other area to look at – business rates. The holiday for that continues in England until June with, 75% discount after that. 

So, I suppose in summary, we are in a pandemic, still, I think they’ve tried to minimise the impact of tax rises on income tax personal, especially individual.

Inevitably, there will have to be some tax rises, that’s going to impact the larger corporates in a couple of years time.

I guess we will see and hopefully we will grow back. One last thing I haven’t mentioned is they want to encourage and train people in more business knowledge, business acumen to help businesses grow on the digital front and also in just general management side of things as well. 

So some new incentives and new schemes that are being launched there today, which are worth looking for. And you can find out about those on gov.uk/helptogrow

So in summary, an interesting budget. I suppose there will be some deductions and benefits for businesses out there. It’s good that income tax hasn’t risen. Corporate tax will be impacting on the larger businesses in a few years time.

Hopefully, this will encourage the economy to grow and to get back on its feet post pandemic. Now if you have any questions on this or want further detail, get in touch with me via the samera.co.uk website and I look forward to hearing from you soon. Okay, and check out our next podcast soon.

Further Information on Accounts & Tax

Our team of specialist accountants and tax experts can help manage, process and structure your business’s finances. From management accounts and payroll & pensions to tax planning and cash flow management, we can take care of the full back-office function of your business.

Book a free, no-obligation consultation with one of the team to find out how we can make your accounts & tax easier, quicker and cheaper.

For all our previous articles, webinars and video updates, subscribe to our YouTube channel and follow us on Facebook and Instagram.