August 14, 2025 • 61 mins
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Collect unlimited free verifiable CPD for UK Dentists here >>> https://www.dentistswhoinvest.com/videos/how-to-efficiently-extract-wealth-from-your-limited-company-with-david-hossein
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Unlocking the financial potential of your dental limited company requires strategic thinking beyond basic salary and dividend planning. In this comprehensive exploration of wealth extraction strategies, specialist dental accountant David Hossein and I delve into the challenge many dentists face: substantial cash reserves effectively "stranded" in their companies due to tax considerations.
The podcast begins by examining the fundamental tax benefits of operating through a limited company – the ability to control income extraction and thereby manage personal tax exposure. This advantage, available to dentists since 2006, creates the common situation where cash accumulates within the company structure. Rather than seeing this as a problem, we reframe it as an opportunity for strategic financial planning.
For associates, we discuss the critical threshold of £100,000 personal income that preserves your tax-free personal allowance, alongside comprehensive business expense planning. Many dentists miss legitimate claims for items like protective clothing, business travel, mobile phones, and CPD courses (even those in exotic locations, with important caveats!). We examine how family involvement through employment or shareholding can distribute income more efficiently, and explore the tax benefits of company-provided assets like electric vehicles and bicycles.
Property investment emerges as a major wealth-building strategy, with corporate structures offering significant advantages over personal ownership – particularly regarding mortgage interest relief. David explains the ideal setup using separate special purpose vehicles, inter-company loans, and even introduces the powerful concept of "growth shares" that can pass future value appreciation to children without inheritance tax implications.
For practice owners contemplating sale, we outline the vital tax considerations around Business Asset Disposal Relief (with rates increasing from 14% to 18% in April 2024) and the zero-rate Substantial Shareholding Exemption for reinvestment scenarios. The discussion includes practical advice on holding company structures and timing considerations for maximum tax efficiency.
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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Dr James (00:00):
Lots of dentists have money in their limited company
which is effectively strandedthere because of tax, and when I
say stranded, what I mean is wecan get it, but it's just going
to cost us a lot to be able toextract it into our own personal
name, and that's why today'spodcast is hosted by myself and
also Mr David Hossein,specialist accountant to
(00:22):
dentists.
We're going to be discussingall of the methods that are out
there that can be used toextract wealth from your limited
company, both the commonknowledge methods and also the
lesser known ones that exist outthere that are well worth
hearing.
This stuff is what we need toknow to be able to make the most
of that money that is trappedin there.
(00:43):
I'm also happy to share thatthere is free verifiable CPD
associated with this podcastepisode.
Whenever you finish the episode, all you have to do is click
the link in the podcastdescription.
It'll take you right throughthe Dentistry Invest website.
You'll be able to complete ashort questionnaire and, once
passed, you fill in yourreflections and we'll go ahead
and email over to you yourverifiable CPD certificate,
(01:07):
which is entirely free.
What that means is this podcastepisode will be able to
contribute towards yourverifiable CPD hours during this
learning cycle.
Everybody, welcome to thiswebinar.
This evening we're talking taxefficiency and how to
efficiently extract your moneyfrom your limited company,
(01:27):
because, well, it's quite oftenthe case that we know that it's
almost like held hostage inthere in a way because of tax.
So anything that's going to beable to help us be able to
extract more of that into ourown name is going to be a good
thing, and that's why I'm joinedtoday by Mr David Hossein,
expert accountant to dentists.
(01:49):
David, I'm looking forward tothis one.
Where should we start?
David (01:54):
hi, James, yep, uh, so I'm excited to be here.
Um, so we can, we can jump in.
I suppose I've got the slidesready let's do that.
Dr James (02:02):
Let's do that bit of housekeeping just before we do
that.
Tonight is going to be about anhour ish in length, about 60
minutes.
If anybody has any questions,please feel free to pop them in
the chat and we will get to themat the end whenever we come to
the q a section, which is goingto be about 35 40 minutes in.
So then, what that means isit's a first come, first serve
(02:25):
basis.
Basically, the first questionswe see in the chat, we're going
to answer as many as we can upuntil that hour mark that we
talked about just a second ago.
So, yeah, if everyone's happy,as you said, David, now is the
time we can get we can jumpstraight in, right.
David (02:38):
Yeah, let's get started so do you want me to share the
screen?
Dr James (02:45):
yeah, let's do it.
Let's do it.
You should have permissions, Ibelieve.
David (02:48):
Okay, so a bit of uh it knowledge.
Now let's see if I can figurethis out it's all right.
Dr James (02:55):
Uh, zoom right at the bottom.
See the button that says shareyeah, I've got three.
David (03:01):
I've got three screens.
It's just figuring out theright one, gotcha.
So let's try again.
How's that?
Can you see how to extractwealth from your limited company
?
Dr James (03:15):
we certainly can.
David (03:16):
We're looking good so if you're here, you obviously have
a limited company.
The question then becomes howare we extracting things in a
tax efficient way?
Now second slide there.
Can I just check and see thatit's moved for you.
Dr James (03:34):
It hasn't quite yet, David.
Actually I've got the wrongscreen.
David (03:38):
That's all right, let me study it.
Dr James (03:38):
No, it's all right, it's all right.
David (03:41):
So I'll start again.
Stop share, sure, right, let'sstart again.
Uh, stop share, sure?
That's the problem withmultiple screens?
Okay, so let's try again.
Um, how about that?
Does it say overview?
Yeah, no, we're cooking.
Yeah, in the right place, good,all right.
So, um, it's not that long ago,so it's only 2006, since
(04:03):
dentists were actually allowedto have a limited company.
There were concerns aboutlimited liability and so on and
whether it's appropriate forhealthcare professionals to have
it and how that opens the doorsto corporate ownership.
But we are able to trade asdentists as a limited company.
Obvious tax benefit is that itallows you to control the level
(04:24):
of income tax you pay on yourearnings.
So your earnings can be at acertain level, but you control
what income tax you pay based onwhat you draw out of the
company.
That that's a starting point.
A bit of a quirk with this isthat if you are a dental
associate in the nhs, you canhave a company but you can't
superannuate, which is differentfor principals, who can, and
they can have a company but youcan't superannuate, which is
(04:44):
different for principals, whocan, and they can have a company
and still superannuate insofaras they have a salary and
dividends, whereas associatesare unfortunately not allowed.
So I don't make that rule, butit is important to say so if
anybody listening to thinkingabout going with a company.
You have to know if you're annhs dentist, you can't have the
superannuation going forward.
(05:04):
You have to know if you're anNHS dentist, you can't have the
superannuation going forward.
So hopefully that's clear toeverybody.
Next slide, so wealth extraction.
So a big part of extractingwealth will be minimizing the
tax that you pay, because theless that goes to HMRC, the more
is available for yourself.
So using a limited company,whether as an associate or
(05:26):
principal, will ultimatelyaccrue a significant amount of
cash inside the company, right,because that's the whole purpose
of the company.
You're going to control whatyou take out.
Therefore, the company will beleft with cash.
So that's certainly somethingthat should be talked through
before having a company and havea strategy about well, I'm
going to have this cash, I knowwhat I want to do with it, and
(05:49):
we'll talk about some of thosekind of options here, not as
financial advice, but just moreon the tax side of it.
So that's my agreement.
If you like, we'll also discussassociates and principals,
because they both have different, unique problems, I suppose, if
you can call it that.
(06:12):
So, starting with associates, sohiring associates, use a
limited company, as mentioned,to control the large tax bills
that come with that.
We often get um associatessaying look, I've had this tax
bill of 90 000 pound.
What on earth is going on?
Should I be paying that much?
What can I do about it?
And conversation is usuallywell, you know, you earn money,
you pay income tax on it.
But if you can, if you're notspending all of it and you've
(06:34):
got a plan for that money, thenyes, the company can help.
You Tends to be that we likefor people to have less than
100,000 pound in terms of theirincome from the company, because
at that point you still keepyour personal allowance.
If you draw over £100,000 fromthe company, you will lose the
£12,570 tax-free allowance andon that chunk of your income
(06:59):
above 100, you are effectivelypaying 60% tax, which is not
good for you to be doing,basically, and just controlling
that.
So keep yourself at 100, butcertainly the lower you go, the
more you save.
So you've got your company weneed to think about well, have
(07:19):
you claimed all for yourexpenses that you're allowed to
and any allowances and any basicthings that can be done to
minimize that because, again,minimize the tax, that's more in
your pocket.
Um, investment side, you've gotpayments into pensions.
So this is a big thing againabout getting your income below
100 000 and this also applies toassociates who are not having
(07:42):
companies that you can put moneyinto a pension to bring your
income down Again, avoiding that100,000 plus trap.
Paying into a pension, you cando that into a private pension
for your company.
It is fully tax deductible, sothat portion of your income that
you put into a pension iseffectively subject to zero tax,
which is really good and it'san expense.
(08:05):
So I want to make that clearthat payments into a pension,
whilst they are investments,they are also an expense for
your tax purposes.
Other investment options kind oftend to be around putting into
a property or stock shares andcrypto.
The difference with those typesof investments is that they are
(08:25):
not an expense and that can besometimes confusing and we get
clients saying, well, look, Iput a hundred thousand, it's a
crypto, so I've got no profitthis year, but it's not an
expense, it's an investment.
It's only pensions thatqualifies a deduction against
your income for corporation tax.
So just to make that clear.
Um, holding of the investments.
(08:47):
So it's quite common forproperties to be held in a
separate company and that istend well, that tends to be
driven by the lenders.
Who wants to have a charge overa new, clean company that is not
mixed in with any otheractivities, whereas, um, it's
quite okay for an associate whowants to put money into crypto
(09:07):
or stocks or shares to hold thatin their associate companies.
There's no, there's norequirement to move it out.
If it's just stock shares andother investments, it can become
a problem if you then have anassociate dental company that
becomes a practice owningcompany, which does happen.
So, again, talk that throughwith your accountant about well,
(09:28):
should I have my investments ina separate company?
If you've got aspirations towant to practice?
How would that work in terms ofsplitting those two things out?
Because it is important andwe'll get to that when we look
at practice owners in a minute,okay, nice one, by the way,
David.
Dr James (09:44):
I don't know if there's any way to just make the
slides just a little teeny bitbigger on the screen, because,
if possible, if it's, if it'snot, it's not no, it is.
David (09:54):
I must have done the wrong.
I've done the wrong screenagain.
Let me, let me start again it'sall right if it's.
Dr James (09:59):
If it's not, if it's going to be a big problem, we're
, we're fine.
The main uh value is comingfrom what you're telling us let
me see, I'll tell you a thirdtime.
David (10:07):
Lucky let me.
Let me start again it's allright.
Dr James (10:10):
It's all right, no biggie, uh so one, two, so is
that big?
Oh, that is so much better.
I'm glad that I asked excellentexcellent.
David (10:23):
Thanks and apologies to.
I've got three screens and just, yeah, it's not always obvious,
no problem.
Okay, so this kind of slidejust is a list of common
expenses that we see.
It's a PDF that is availableand I will send this.
James, you can pass this onafterwards.
Just look, these are things thatyou could be incurring, that
(10:49):
you might not be telling youraccountant and therefore you
could be missing out on some taxrelief.
And again, this applies tolimited companies as well as
sole traders.
So if you're an associate witha sole trader, this would still
apply to you.
Um, I'll talk through itbecause sometimes that, you know
, can be interesting.
Um, so, starting at the top,protective clothing so if you've
bought scrubs and things thatare 100% clothing for work, that
is a tax deductible expense, soyou can claim for that.
(11:12):
The cleaning of that is also.
So if you've got a bag ofscrubs and you're sending it to
the cleaner once a month, that'salso a business expense and
it's tax deductible.
The cleaner once a month,that's also a business expense
and it's tax deductible.
(11:32):
Printing, postage and stationeryIf you buy pens, stamps, pads,
diaries we tend to say, you know, you claim about £50 a year
just for that sort of PSP.
We call it printing, postageand stationery, travel expenses.
So, as a dentist, you will betraveling for courses, you'll be
traveling to see you knowbusiness mentors, potentially
suppliers.
You need to keep a record ofthat.
If you've driven, then it's acase of claiming 45p per mile
(11:55):
and just telling your accountantthis year I've done a thousand
miles or two thousand miles ofbusiness travel.
Um, the requirement at yourside is to keep a diary.
You might, you might, spendyour phone.
You might have just saidsomething in your diary that
says today I would travel tolondon or to scotland or
wherever, but you can claim forthat.
That is a business expense.
So is your phone.
We all use our phone, for Ithink I use my phone.
(12:18):
Majority of my phone is forbusiness work.
So I think that would be thesame for a lot of, a lot of
dentists.
And and we do ask you to tellus how much of your phone do you
use Is it 50%?
Certainly somewhere between 50to 80.
A lot of people will say it'sused for business, so that can
be claimed as an expense as well.
You will be paying forsubscriptions, so your GDC
(12:39):
subscriptions, bda subscriptions, those are things.
That should be obvious.
Course fees is where it gets alittle bit colourful, and we
have a lot of colourfulconversations with the clients
about course fees and especiallyif they're overseas.
Now is it an expense?
That's the first thing.
So if you're going for CPD togo on a course that relates to
(13:05):
the work you're currently doing,that is fully tax deductible.
So what about its location?
Does it matter that it's indubai or does it matter that
it's in london?
No, if it, if you go in on acourse in dubai and it's for the
work that you're currentlydoing, that is still an expense,
as is the travel, as are thehotel costs.
Um, where it gets colorful isthe timings involved, because
(13:27):
hmrc will want to say well, lookyou, you travel the day before
you land, sleep, start thecourse, sleep, come back, and if
there's an element of personalenjoyment, um, they won't give
you the uh, the travel in thosedays hotels.
So we do tend to get asked thatquite a bit about what if I
stay an extra week or a few dayshere and um, yeah, that that's
(13:49):
the official line with it.
So we sometimes get asked well,look, the course is finished on
a thursday and on a friday.
I'm, you know, I want thefriday to myself and what?
What can I do?
And if you've got an extra day,why don't you just go and talk
to a lab out there or some kindof supplier and you can tell me
that that was, that was abusiness day as well.
So just be reasonable.
(14:10):
But courses tends to be,especially as overseas travel, a
bit colorful in terms of whatis what is possible, because
everybody likes holiday, don'tthey?
Um legal and professional, so itshould be pretty
straightforward.
Unfortunately, you know, thereare lawyers out there who do
make dentist lives difficult andpatients are advertised and if
(14:34):
you've got a legal fee you'vehad to pay to defend yourself.
That is fully tax deductible.
Um legal fees.
That might not be so obviousand and it's worth saying for
education purposes, is if you'rebuying a practice or you've put
an offer on a practice andyou've had to pay legal fees and
you've incurred costs but itdoesn't go through, it falls
(14:55):
through for whatever reason, youknow, your lending pulled out
at the last minute or change ofcircumstances, legal fees for an
aborted purchase areunfortunately not tax deductible
.
So that's, that's the bad newson legal fees, your accountant's
fees, your accountant's fees toprepare your tax return and all
the phone calls and so on is anexpense, so make sure that's
(15:16):
included, as is your indemnityinsurance.
Any books and journals famousfor charities, computer expenses
you might put a laptop that youdo work on.
That's, that's a businessexpense, as is an ipad.
You can be using that forlooking at scans and x-rays and
so on.
Um, use of home you can claim302 pound a year, no questions
(15:38):
asked.
So make sure that's done.
And any other expense that is100 business related.
So if you paid for it and itwas purely to do with dentistry,
you can claim that as anexpense.
So those are your commonexpenses.
Thinking beyond that, we thenget into, I suppose, a bit more
(15:59):
thinking on planning.
So you have a limited companycompany you're drawing salary
and dividends, um, you're taxedon that.
Now, yeah, it's, it's.
I mean it's a good question toask what?
What have we got availablewithin the family?
Is maybe a spouse at home withthe kids?
Or do they have maybe a lowerrate of tax they're paying?
(16:21):
If they've not got, you know, avery high paying job, they can
be involved in the business,either as an employee or as a
shareholder, potentially both.
What's right for you depends ona lot of circumstances, but
certainly one of those twooptions would be, you know,
advisable.
If they're paying a lower rateof tax, why not involve them?
(16:44):
It has to be done correctly.
But obviously talk that throughto the accountant.
I've put on there other familymembers as well, just because
it's something we get asked alot about.
Grandparents, if you have alimited company, we get asked
can I employ my grandparents?
The answer is is you can give ajob to whoever you like.
(17:07):
Um is the answer.
Now, should you is the question.
So I think where it becomes agood idea is if you are
supporting your grandparentsanyway.
So you know you, they've raisedyou and you want to support
them in their old age and theycan do work for you.
Now, whether that's good workor bad work is between you and
them.
Hmrc can't do a performancereview on your parents, but if
(17:29):
they can generally be justifiedto be doing some work, you can
employ your grandparents.
And and that money that you'regiving um to your parents and is
an expense for the company.
So again, it's bringingbringing the tax liabilities
lower.
Director's loans is anothermethod of taking money out.
(17:50):
So getting money out of acompany.
To you personally is one ofthree ways salary dividends or
loan.
Director's loans have to bepaid back and if they aren't,
then they are just converted toa dividend.
So not so tax-sufficient.
And that section of 455 taxesis essentially a dividend tax.
But where director's loan canbe tax-sufficient is actually if
(18:11):
you are planning to loan moneyto your company.
We often see this where, again,going to the practice
acquisition so dentist has alimited company, has put an
offer on a practice he's goingto buy.
So dentist has a limitedcompany, has put an offer on a
practice, is going to buy, butneeds to, you know, get the
deposit from his savings accountinto the company because it's
(18:31):
the company buying it.
That money that is lent to thecompany is a loan to the company
and that can be used to offsetagainst any dividends that are
taken.
So to bring to convert that,convert dividends taken into
actually a repayment of the loanand, you know, bring the income
tax down that way.
So loans to the company can bea good idea and bring tax down.
(18:53):
So we like that one.
Um trivial benefits, you knownot everybody is aware, so it's
worth adding on there.
You can, uh, pay 50 poundnon-cash expenses per employee,
up to 300 pound per year.
So if yourself you have alimited company, you are a
(19:13):
director, you're an awesomeemployee and perhaps your spouse
is also an employee, so betweenthe two of you can have 600
pound of christmas presents orwhatever you want to choose, so
that's good to know.
You can also on top of that sonot included in that you can
also host an annual party.
So you know, go out for a nicemeal at a cost of £150 per head.
(19:38):
That's an annual allowancethere, so that's also good to
know.
Dr James (19:45):
David on the £50, the £300 per year employee that's
divvied up into the £50 non-cashexpenses.
Does that also apply todirectors?
David (19:56):
Directors are employees.
Dr James (19:57):
yes, oh, there you go.
Okay, good, just carrying thatone up, wasn't sure.
David (20:08):
No problem, good question , um, you also have business
meetings and um again, let's sayyou are going to a meeting
where you are discussingbusiness, the business of
dentistry.
Let's say you meet yourprincipal for a coffee or for a
meal to talk about things thatcan be paid to the company.
It's not an expense in that itwon't reduce your corporation
(20:32):
tax, but it's better to be paidfrom company money that's not
been subject to dividend taxes,because money in your pocket
you've paid you know, 33, 39,whatever the rate is that you're
paying dividend taxes on.
So it's better to do thingslike that through the company.
So that's good.
We've talked about mobilephones and laptops.
I won't say that again.
(20:53):
Cars is a big expense forpeople and your company can
provide that to you as anexpense and your company can
provide that to you as anexpense.
That is much better than buyinga car through money that has
been subject to corporation tax25% and then dividend tax of
potentially 33%.
(21:14):
So if you are not adverse to anelectric car and some people
obviously prefer petrol, but alot of our clients do have
electric cars and the answer isalways put it to the company
it's going to be an expense foryou, as is a bicycle.
So if, like me, you've recentlytaken up road biking because
(21:37):
you like to get out and about,your company can buy you a bike,
and these things are expensive,sometimes up to tens of
thousands of pounds.
So if you do like the twowheels, you can also buy
yourself it through the company,again saving the corporation
tax and dividend taxes on it.
So don't uh, don't, miss thatone if you, if you do ride a
(21:57):
bike, um, okay, so next slide ison properties.
I want to talk a bit aboutproperties because it is very
common.
We have a lot of dentists whoare limited companies and
everybody loves bricks andmortar.
So into property.
So just an overview here.
So I mean, what's the benefit?
(22:19):
So, as a higher rate taxpayer,there's no tax relief for
mortgage interest.
That was abolished years ago,which is really horrible because
you can.
If you buy a propertypersonally, you're a higher rate
taxpayer you rent it out for agrand, you pay in the bank 800,
you know 900 a month in interest, but you're taxed on the grand.
So once you've paid the tax,often we have, you know,
(22:42):
situations where people areputting money into the property
just to cover its expenses.
So that's cash flow negative,not not good at all.
That's not the case forcompanies, because companies get
the interest as an expense thatbrings the tax down, um.
So it says there um, lenderswill want a special purpose
vehicle, ie a separate companyfor that.
(23:03):
They want it clearly separatewith a charge that only they
have against the company.
So how do we do that?
We lend the money from thedental co to the property
company and as long as you havethe same direct to shareholders
in both companies, that's fine.
There's no tax issues there andit can be written off in future
.
If that's a decision that'smade in future without tax
(23:26):
consequences.
I have put under consider exittaxes because it is something
that people often forget thatyou might buy a buy to let in
the property.
So you might buy a buy to letproperty in the company.
But if I want to buy that fromyou, I don't want to buy a
company, so I'm buying theproperty from your company and
the money is trapped in thecompany again, which is fine.
If I want to buy that from you,I don't want to buy a company,
(23:46):
so I'm buying the property fromyour company and the money is
trapped in the company again,which is fine if you want to
invest it, but not fine if youyou need to take it out as a
dividend.
So when you're doing your sums,just make sure you've thought
that bit through, that you mighthave to pay dividend taxes when
it comes out.
However, as I say so, propertyis very popular and it can soon.
You know some associates whoare quite adamant.
(24:08):
They do not want to be practiceowners and they're doing very
well in property and it growsand grows and grows.
Over time it becomes a good,good problem, but a problem for
inheritance tax.
Uh, which is what I want totalk about.
Uh, so this slide just showsthe setup of you know, the two
companies.
Um, yeah, so inheritance tax.
(24:28):
I want to talk a bit aboutinheritance tax because it's
becoming a bigger problem forpeople, since, in the budget now
we have, pensions also formpart of um of people's taxable
estate, so inheritance, that's amuch bigger problem for people.
Now there is um work in thebackground, people trying to get
that um pushed back on.
But as things stand, pensionsare now part of your estate, so
(24:51):
people are going to pay moreinheritance tax.
Um, there is some planning thatcan be done, um with property
companies in fact in any companybut I'm going to pay more
inheritance tax.
There is some planning that canbe done with property companies
In fact, any company.
But I'm going to talk aboutproperty companies because you
tend not to pass on a dentalcompany to children.
You tend to sell it and thenmove on in life.
But this also applies to anycompany, and that's growth
(25:13):
shares.
So's a growth share.
So growth share is a fixed linein the sand on the value of a
company.
So the scenario is is this James, you have a property company
that, at today, is worth 1million pound and it's in a
fantastic area, and we sit down.
You tell me, David, it's worth amillion today, but in 10 years
(25:35):
it's going to be 2 million.
And I've got a problem becausethe doctor's told me I'm not
doing so well and I might nothave so long to live right.
But even not in that extremescenario, we've got to think
about inheritance tax becauseyour plan is to hold this long
term.
So what growth shows do is wehave a corporate lawyer who
drafts articles and ashareholders agreement to
(25:56):
convert that one million poundand to crystallize it into the
existing shares, and then weissue a separate class of shares
called growth shares, and anyincrease in value is allocated
to those growth shares and thosegrowth shares are issued to the
kids today.
So any future value is passeddown tax-free, because it's not
(26:17):
a passing down of value, it's anissuing of shares that
subsequently grow in value.
So I'll say that again themillion pound is put into the
existing shares that you keep,but we issue new shares and any
growth is automaticallyallocated to those which are
given to the children andthey're worth a pound today, but
(26:39):
in 10 years they're worth amillion.
That we know.
So there's a million poundpassed down tax-free and that's
a special kind of tax claimthere and it's that's.
Dr James (26:48):
That's a hack right there you can, that you can
allocate all of the growth tothose shares that have been
distributed.
I and that's.
David (26:56):
Yeah, that's fascinating that you can do that works
really well for investmentsbecause investments, by
definition, over time go up invalue.
Yeah, um, and it's more so forinvestments because practices,
as I say, most people sell it onthe open market and don't.
It's quite rare you pass apractice down like that, so just
wanted to uh mention that's agood tax planning opportunity
(27:18):
there.
Dr James (27:19):
Presumably that works outside of property with other
assets as well, just maybe notdone as frequently.
David (27:24):
Correct.
Yeah, it's shares, so it'scompanies.
But if you have assets within acompany, same principle applies
.
Dr James (27:32):
Yeah, interesting.
David (27:35):
Yeah, righto, so that's associates.
Um, I've done a slide onincorporation for sole traders
and I think it's important toflag that.
You know, often people thinkthat you know, if I draw all the
money from my business, it'snot right for me to have a
company, and in general that'sright.
(27:55):
But there is an exception tothat and that is if you're a
practice owner with a bank loan,and probably shouldn't say this
, but of all my clients, theones who are most stressed and
under financial pressure areprincipals who bought a practice
that's not inside limitedcompany, because they get
hammered on paying the bank backand paying tax on the bank
(28:17):
repayments.
So whenever I talk to anassociate who's buying a
practice, I will always try andsteer them toward well, can you
buy it through a company?
If it's NHS, you can't.
If it's not alreadyincorporated, you can't, because
you buy an NHS contract througha partnership mechanism where
you join as a partner and theold principal retires or comes
(28:38):
off the contract and a companycannot be a party to an NHS
contract.
It can be an owner but not aparty.
So on a sale, you can't do it.
But if you've bought, you know,or if you own a practice and it
is a sole trader and you dohave a bank loan, you can
incorporate it.
So you know.
Going back to the title, howcan you extract effectively
(29:00):
extract wealth from a limitedcompany or have one in the first
place?
An example here on screen.
I'm not sure if I can see this,but this um practice is making
profits of 283 and, on the basisthat all, all profits are used
personally because we've got theloan repayments of 56,000 that
are still subject to let me getthe mouse on it that's subject
(29:21):
to income tax, this client isstill going to save 8.8 thousand
pounds per year in tax.
Incorporation of your soletrader practice is something to
think about as a good planningopportunity.
It does involve a refinance, soyou'd need to get a new loan in
the company name.
Perhaps that as a good planningopportunity?
Um, it does involve a refinance, so you'd need to get a new
loan in the company name.
Perhaps that's a good thing,because interest rates are
(29:41):
coming down now, so you mighthave a high rate that you could
actually benefit from a lowerone.
Um, but it stops you payingincome tax on the part of the
profits that you pay to the bankand it could well save you tax.
So, um, also, it's worth saying, the NHS local teams are a lot
more happier to not give you aheadache now, so they understand
the pressure NHS practices areunder because you need to get
(30:03):
their approval, and theyunderstand the pressures that
are on the NHS practices so theygive you less headache these
days.
It's not guaranteed, but it'sworth mentioning.
Okay, yes, worth worthmentioning.
Okay, just, uh, radio.
(30:27):
So the sale of next is for.
So, for principles, the sale ofyour practice will be probably
the most significant financialmilestone of your career.
A dental practice is a veryvaluable asset.
Um, the market wasn't greatlast year, so we had a good year
2022, for sales.
Forputs were very active,interest rates were low 23, 24,
not great.
Not great in terms of theoffers that we had for clients
(30:49):
and deals that actuallycompleted.
There were a lot of clients whogot offers that were messed
about and then they fell throughfor whatever reason, and
multiples were prettyconsistently low.
It's getting more active now.
Multiples are better.
So last year it would have said6.5 was about the average for
profits.
(31:09):
In terms of valuations, 7.25 ismore consistent now.
So people are paying more fordental practices, corporates are
and, as I say that's fueled bywhat interest rates are coming
down, so corporates can buycheaper, and that has an impact
as well.
Um, and there are corporates outthere who are getting ready for
their exit and that puts a lotof pressure for people to buy
(31:29):
and, you know, be part of theexit of that corporate, which is
good.
So we are seeing more offersfor clients to sell.
So when you're in thatsituation, whether it's this
year, next year or for thefuture, you've got, I suppose,
two options for you in terms ofcapital taxes when you sell.
You have BADR, business assetdisposal relief, which is 14% at
(31:53):
the moment, going to 18% inApril, or substantial
shareholding exemption if yousell via a holding company,
which is zero, which soundsreally good and that can be
certainly better than 18%, butit's only for a certain scenario
, if you're going to reinvestthe money and I'll explain in
the following slides which iswhat it says there.
(32:15):
So consider SSA if reinvestingthe funds.
Dr James (32:19):
If you're a UK dentist and you wish to add to your
verifiable CPD portfolio forthis learning cycle, it's worth
knowing that Dentists Who Investhas over a thousand minutes of
free verifiable CPD on ourwebsite.
Verifiable CPD on our websiteJust simply head over to
(32:41):
wwwdentistwhoinvestcom and hitthe video slash CPD tab and you
can go right ahead and helpyourself to as much CPD as you
need.
You'll also find a link thattakes you straight to the CPD
section of the Dentists WhoInvest website in the podcast
description off the Dentists WhoInvest website in the podcast
description.
David (32:57):
How is this relevant?
So if you own your dentalpractice fire-limited company,
you can sell the shares to thebuyer and you will potentially
pay 14% if that completes beforeApril, or 18% thereafter.
There are conditions for that.
So for the prior two years upto your sell, you have to have
(33:18):
been an employee or director andowned more than 5% of a trading
company.
And that's relevant becausewhen we talk about investing
through your company, we havesome clients with over a million
pound in crypto it's just donereally well and over a million
(33:39):
in property.
And if that's all within thedental practice company, is it a
trading company anymore or isit an investment company?
And if it is an investmentcompany, so 51% more of assets
and trading activity you won'tget the 14%, it will be 24.
So for dental practice owners,most likely you'll have your
(34:00):
investments outside.
That's one strong reason to doit to not jeopardize your
business asset disposal relief,to pay the lower rate of tax on
sale, but also, if you thinkabout it, if you're selling your
practice and your practicecompany has all this investment,
you want to retain that becauseyou've invested for long term.
So how do you take it out?
It's complicated.
It's better just to have it ina separate company through loans
(34:22):
, and then those those loans aredealt with on the sale.
It's much easier to deal withit that way.
So, um planning uhopportunities around that?
Certainly um shares can begifted to your, so you get a
million pound of lifetime gains.
If the practice is going tomake a gain of 2 million, why
not have that split 50-50 withyour partner?
(34:42):
We'll save a lot of tax.
Children it's possible to makeyour adult children so 18 plus
shareholders if we have somepractices that go for 4 or 5
million and you need to spreadit out a bit further.
However, kids are differentthan your spouse because your
(35:03):
spouse, you live with everythingshared um hmrc.
Well, if you're giving sharesto your children, if you're
gifting shares, you've gifted it.
A gift is a gift is a gift,that's what.
So once that money's with thekids, it's.
You can't ask them to pay itback.
They might you know,quote-unquote buy you things,
but that's out of their goodheart and not immediately,
(35:23):
certainly.
So that's how that all worksand that's how it's structured.
Dental practice One company,investments, the other nice and
easy on the sale, the dentalpractice goes, the investment
company stays.
Next is if you have a veryclear plan that I'm going to
(35:43):
sell my practice and I'm goingto get £2 million and I'm going
to reinvest all of it in thisnew business that I've got.
I'm very clear on property andit's going to be reinvested.
There is something called asubstantial shareholding
exemption where you put in aholding company like this, so
the holding company now owns thedental practice company.
(36:04):
You may or may not have aproperty company in there when I
put it in for illustrationpurposes.
And it's the holding companythat sells the shares and gets
the two million.
And if it's owned the shares inthe dental practice for more
than 12 months, um, with a fewother conditions, it will pay
zero percent because there's anexemption for that, which is
great, because why pay tax ifyou don't have to?
(36:26):
If you're absolutely clear,you're going to roll it over
into new things.
And we often get asked onholding companies um, should I
have one?
I'm not sure what I'm going todo.
So I've got a dental practiceand I've heard, you know,
somebody's told me to put aproperty company, a holding
company, in place, and I alwayssay, well, if you are not clear
(36:47):
right now, then don't do itbecause, don't forget, you've
got 12 months pre-sale um.
A sales process will take yousix months minimum by the times
heads of terms are signed andyou'll be talking to buyers for
two, three months before that.
So you've easily got ninemonths anyway um for you know,
to get through and pretty closeto sale you'll you'll know what
your plans are so you can put ina holding company towards the
(37:11):
end.
But if you start with the oneand you need to take it out,
that's complicated and timeconsuming and expensive.
So my kind of default positionis don't have one if you don't,
if you're not 100 clear why youneed it, because it can always
be added in later and David.
Dr James (37:28):
Just to clarify one thing on that, because I was
having this conversationrecently, uh, with my accountant
and he was saying that there's,if you do a share transfer to a
holding company, there's notnormally a tax liability for
that, is there?
David (37:45):
No, there's a process to go through to make sure there's
no issues with it, calledclearance.
So there are tax laws ontransferring the shares and we
write to HMRC to say we areseeking advanced clearance that
this proposed transfer of sharesis outside of related
(38:05):
employment related securitiesand there is no charge to tax by
doing it.
There is one department at hmrcthat works really well and it's
this department reconstructions.
They reply within two weeks andyou can talk to them on email.
Every other department is phonecall, but the reconstructions
department, because it servicesbig multinationals, is actually
very well run and you willusually get a reply within two
(38:27):
weeks to say, yep, go ahead, noproblems.
Dr James (38:29):
So it's very quick to put in place as well interesting
, because that's just somethingI mean we're taxed for
everything, aren't we?
You know it feels like, butthat's something I mean we're
taxed for everything, aren't we?
You know it feels like, butthat's something that we're not
taxed for, which I findinteresting yes, and I think
rightly so, because you're notreceiving any money.
David (38:46):
It's different, and we had this with a client recently
where they were actuallytransferring shares.
So, um, dentist a wanted togive his shares in his company
to another dentist for shares intheir company.
So swapping shares between duedental practices, and there was
no cash being transferred butthere was a tax charge because
(39:08):
there's an exchange of valuesand there's no exemption for
that.
So it was a bit difficultbecause there was swapping
shares without any cash movingbut they had a 14% tax charge
and, unfortunately, nothing wecould do on that one.
There's not an exemption forthat.
But where it's a company thatyou own, as you say, there's no
cash moving hands.
So why should you pay tax?
Okay, so next slide Extractingcash.
(39:43):
Okay, yep, uh, so next slideextracting, uh, cash.
So it is that we.
You know it is quite good.
We do see clients who have notinvested money, they've not put
it into stocks or pensions or orproperty, or they have done,
they've got cash left over andthey don't want to take it as a
dividend, because why would youif you don't need it?
Um, it's more relevant toprincipals who are selling the
business and you know there is away that says that you convert.
(40:03):
You can convert cash to capital.
So by default, cash is usuallytaxed as income.
But if you include it on thesale of your practice and the
share purchase contract isworded correctly, that cash can
be bought from you by the buyerat capital tax rates of 14 or
(40:24):
18%, which is quite handy.
So you don't need to freak out.
If you've got hundreds ofthousands in cash and you're
selling your practice, you don'tneed to take it as a dividend.
You can just add it to the gainand be paid at 14, 18%.
Dr James (40:34):
So that's another way way to to deal with excess cash
interesting one on umentrepreneurs really for badr,
and maybe we're getting a littlebit beyond the scope of this
presentation, but they seem to.
I mean, once upon a time it was10 million right tax-free, and
(40:56):
then 10, and then it was capitalgains above that, and now it's
like, uh, 1 million, isn't it 1million?
David (41:04):
but you still?
Dr James (41:05):
get taxed you still.
You know I get taxed 14 on that1 million or, and it will be 18
soon yep, and it was 10 millionat one point.
David (41:13):
I remember those days and I don't want to sound pompous,
but 1 million today's money isquite different than 10 million
10 years ago.
So there's no adjustment forinflation at all.
There is there.
Dr James (41:23):
I'm going to get my brilliant exit in like 10 years,
15 years, Do you think?
I know it's hard to comment,but do you think they're going
to keep it in some form or justkeep watering it down just out
of interest?
David (41:43):
I think we've lost a lot of people through that.
I think people have goneoverseas who don't want to be
tax resident because of capitalgains tax.
Now I think we have seen thatit's been quite in the news a
lot Very prominent wealthypeople who have moved overseas
because they don't want to paythat right.
So and that's bad for business,that's bad for that's bad for
(42:04):
the business of raising taxes.
We want people to stay in thiscountry and pay taxes.
The more people that pay alower rate is better than
because the people that willmove will move overseas are the
people with the most assets, ifyou think about it.
So I don't think it's good forbusiness.
Dr James (42:21):
Yeah, remains to be seen that one is here.
For the moment, when you getinto these things like running a
business, and you're like youknow, most of the time it's
quite a while before you getyour exit.
You know what I mean and youkind of you get into it with
this in mind and then there's noguarantee that it's going to be
here or it's going to bewatered down further still.
But yeah, no, I was justinterested on your thoughts on
(42:42):
that one.
We can't know what.
We can't predict the future.
David (42:45):
No, and it's politics, isn't it?
So what's right?
And what's politically sexy istwo different things, isn't it
so cool?
Just interested to know whatyou thought we'll see.
Okay, so yeah, that's it.
That's the last slide, so Ihope that all right sorry, I
spoke quite fast there.
Dr James (43:06):
I think I got a bit excited on my no no, I think
that was the perfect tempopersonally, and I think we
actually all owe David a clap up, so I'm going to start to clap
up on everyone else's behalf.
I'm sure there's peopleclapping behind the cameras this
evening as well.
David, thank you for, uh,sharing that enlightening as
always.
And you know what I said that,David, before we did this
webinar tonight.
I was like, right, tell usabout all the stuff that we know
(43:28):
about, just so that we can havea recap and ensure that we're
covering all bases and that thattax deductible that little
slide that you had of all taxdeductible expenses that was a
really good one to screenshot,which people might like to do in
the recording of this webinar,which we're going to be
releasing to the mailing listvery soon.
So, yeah, recovering the stuffthat we know, but we want to
(43:52):
ensure we've covered all basesand also the things that people
don't know about as much, whichis really interesting because,
actually, whenever we weretalking about badr just a second
ago, I think there's lots ofpeople who still don't know
about that and lots ofprinciples as well that I talk
to whenever we bring it up andit's all.
It's all just about that's.
Yes, we were talking about itgetting watered down.
It's still one of the lowesttaxes that there is and it's one
(44:13):
of the incentives that there isfor people to go out there and
still be entrepreneurs and beprincipals in this day and age.
So yeah, some interesting stuff, guys.
We said that we would do somequestions.
We've got about 15 minutes forquestions, so what we are now
going to do is rattle through asmany of them as you can, and I
(44:34):
can see that there's been quitethe influx in the chat box,
which is cool, which is good tosee.
So, David, if you're happy,should we just go ahead and get
cracking?
David (44:44):
See how far we get.
Yeah, that's a really goodquestion, sir.
Yeah, so I think the first one.
Dr James (44:52):
Yeah, I'll read them out if you want and you can do
the thinking.
How about that?
Yeah, I'll read them out if youwant and you can do the
thinking.
How about that?
Cool, yeah, all right, cool.
First one from Ryan Stewart.
Shout out, ryan Stewart, hopeyou're doing good.
Is the buying of lunch coffeeRyan's thinking of a stomach
respect?
Is the buying of lunch slashcoffee during a normal working
day a business expense?
David (45:13):
The answer's in the question.
During a normal working day, no.
But if you, um, let's say youwanted to have a catch-up with,
uh, one of the nurses or thepractice manager and you took
her out for a cost of coffee, umthat would be put on a daily
basis?
No, it's only if it's becauseit's.
What's the purpose of it?
The purpose of that coffee isto fill your stomach.
Dr James (45:34):
But if you've had that coffee to have a meeting with
somebody, then you can't do itGood, and that's a good example
of something that you, in thesecond situation you were
talking about just a second ago.
When you're taking somebody outfor lunch, you can put it
through the limited company, butit's not tax deductible, right?
But it'll still be cheaper todo it that way.
Cool, Good stuff.
(46:07):
Next question from AA pseudonymthere, I believe.
David (46:08):
Can you involve children over 17 years of age and are
there any limits on theirinvolvement?
Aren't be shareholders andpotentially that's, you know,
not a good thing either at thatage.
But they can be employees sothey can do work.
Um, obviously, you've gotnational minimum wage to think
about, so you know they're anemployee.
You have to not pay thempennies.
Um, in terms of limitations, Ithink that hmrc would look at
(46:31):
that and say, well, what workhave you given them?
Um, you wouldn't give them apractice manager's job, you
wouldn't give them cqc duties,but they could be doing social
media work for you.
Um, admin work.
And you would tend to say, well, yep, I've employed my child.
Giving them work to do, whetherthey do it well or not, is, as
I say, hmrc can't performancemanage your staff.
(46:53):
Some staff are good, some staffare not great, but it should be
relevant in terms of theirmarket hourly rate.
So if it wasn't your child,would another child be paid that
?
And what hours are available tothat child outside of school?
But going back to involving afamily member, your child is
your family member.
You're giving them pocket money.
Let them earn it.
So, yeah, definitely.
Dr James (47:14):
Good stuff.
Next question from amandaamanda nailer is an electric car
as an expense only relevant ifbuying new um, no, but, and it's
only for limited companies.
David (47:28):
But if it's new or second hand, it's still a tax expense.
The only difference is asecond-hand electric car um,
isn't 100.
Expense in the first year is 18per year.
So it's different, right?
You still get the tax reportsover a longer period of time, um
, that's if you're buying it.
If you're leasing, then it'sjust whatever you're paying
(47:51):
monthly for it, but you canstill get it as an expense for
the company cool.
Dr James (47:57):
John gaddis, can you get the cycle to work scheme,
the bike purchase and stillclaim some motor expenses for
between practices, courses andmeetings?
Yes, you can.
Yeah, yeah you're not.
David (48:11):
You're not forced to.
You know, hmt can't force youto cycle.
Every day it rains quite a lotin this country, so one day you
might cycle, one day you mightgo in the car seems reasonable.
Dr James (48:22):
Jeremy williams.
Question from jeremy williamsused cars can be claimed, but
are claimed at 18 a year forfive years, correct?
Yeah?
Yeah, I think it was astatement more than a question,
that one, but yeah, it'saccurate, okay.
Question from Arps Do you stillneed to pay IHT on tax?
(48:43):
Sorry, sorry, big pardon.
Do you still need to pay IHT ortax when you sell the practice
and you're resident, forinstance, in Dubai?
David (48:53):
Yeah, yeah, um, I think that one needs a proper look at
before yes or no.
Um, can't give you a yes or noor not.
I would have to look at it andsee how long you're there.
For when did you move?
What's the um?
What's your involvement in thecompany at the point?
There's a lot in there, um.
(49:15):
So get it looked at properly.
I couldn't give a yes or no ornot seems reasonable and you
know what?
Dr James (49:19):
it's probably a good point to mention that after this
webinar, we are going to besending out an email which has
an opportunity within it toconnect with David.
There's going to be a link inthere that you can use if you
want to speak to David aboutanything that we talked about
tonight, because none of this isreally substitute for good tax
advice.
David is also available on thefacebook group as well, Mr David
(49:45):
Hossein, so feel free to lookhim up if you want to ask
anything more specific about wewere talking about this evening
specific and relevant to yourown personal circumstances.
Next question from simab.
Two questions from simab.
What is the maximum amount youcan pay grandparents for child
care?
Would that would be classed asan expense?
David (49:57):
um.
Child care is not an expense,but you might pay them for doing
other work.
So this, this is where you'vegot to think it through.
So you, you want to pay thegrandparents because they're
helping you out with the kids.
You can't say that becausethat's not a business expense.
But you might be paying themfor help with admin and they
(50:19):
mind the kids for free, if thatmakes sense.
It's how it's packaged up andsold to the taxman, and often
it's a conversation around itlooking presentable and
reasonable, and there's usuallya way.
There is usually a way.
We do have people who go downthat route, but you are
employing them and giving themduties that you can kind of show
, but they're minding the kidsfor free as a a result of it and
(50:41):
it's it's, it's kind of anunderstanding.
Uh, if that makes sense, butfrom hmrc's perspective, you're
not paying them to mind yourkids.
They would not give you that atall.
You can't.
You can't do that fair enough.
Dr James (50:54):
And second question is for the 150 pounds annual party
allowance, does your companybank account or receipt need to
show the practice, the preciseamount of 150 pounds exactly?
David (51:10):
I would take a photo of the receipt and just keep it in
your phone.
It's uh, it's better to have it.
It's better to have it and notneed it.
And you know, be asked and havean inquiry and be like, look,
my bank statement says whateversan carlos office I'm doing.
But it's also like they mightwant to see the receipt and look
, we haven't had this.
But I always do it for myselfand I talk like just take a
photo, because if they everwanted to see how many stars if
(51:33):
you go, how many meals, becauseper person and that detail would
be on the invoice.
Dr James (51:37):
So yeah, is that £150 per head?
Yes, per employee Per annum.
Okay, that's quite the partythen, right, you can really look
after them.
And is it just the one?
Just one off.
David (51:50):
No, no, you could have two events, each £75.
So it's just, that's the annualallowance.
Dr James (51:57):
It doesn't have to be one of them, right, I see, fair
enough.
Annual allowance doesn't haveto be one of them, right?
I see?
Fair enough, all right, noproblem.
Another question uh, as adental associate, can I employ
children aged over 18 pounds formy limited company?
David (52:14):
if they're doing what you can give a job to anybody, it's
.
You know hmrc can't tell youwho to employ and who not to
employ, but with it being afamily member, they would again
look for what are you payingthem versus what you would pay
joe blogs off the street?
And if your kids are doing youknow your social media and
marketing, which you know theydo kids are very good at that
(52:36):
you might give them some moneyand you can do that through
payroll.
Is is the right way to do it.
Dr James (52:41):
So absolutely interesting.
Next questions come in how canI access the recording?
Recording is going to beavailable on the podcast, the
dennison invest podcast, if youlike to listen to it in an audio
format.
We're also going to bereleasing the full presentation,
the full video.
We're also going to bereleasing the full presentation,
(53:03):
the full video, on the mailinglist and the website, so that
should be out this Saturday.
If not, it'll be very soon nextweek.
So definitely two best placesto keep your eye on is the
podcast and also the mailinglist.
And also another thing that Imeant to mention earlier you do
actually get some free CPD forattending this webinar tonight.
You just have to fill in ashort questionnaire that's going
to be included as part of thatvideo that we just talked about
(53:24):
a second ago.
It's going to be the full whack.
It's going to be the whole 60minutes.
So you might as well claim itif it's there and it's free.
So good thing you know.
Thank you for that question.
Next question from pratik whatare the ways to be tax efficient
with the company when you'resalaried and already earning in
a higher tax bracket?
David (53:43):
I've been exploring this and there seems to be minimal
ways, mainly set contributionsso I think, if you're saying
that you're salaried and youdon't have a company, is that,
is that what I think maybe, if Iread it out again, what are the
ways to be tax efficient with acompany when you're salaried
(54:03):
and already earning a higher taxbracket?
Dr James (54:06):
yeah, there's kind of a, I think.
So from what I gather, you'resaying that you're employed oh,
he's put a comment I'm.
David (54:15):
I am salaried, but also have a company for other
purposes, so oh right, thatmakes sense, then okay it's the
same principle.
Have the money that you can gointo the company and, um, don't
draw it, that won't.
That'll mean you won't payincome tax on it, and then all
the things we talked about applyto that company, though fair
enough.
Dr James (54:34):
Hopefully that clears things up.
Fatigue let us know if we'vegot that situation right just
there.
And that, that, that, that,yeah, I don't think there is too
many exotic ways beyond what wesaid this evening.
Is there David?
David (54:45):
No, and anything exotic, have double checked, because
exotic things have a way ofcausing future exotic problems
for you.
Dr James (54:52):
Seems reasonable.
John Gallis, what is thebenefit to a practice buyer?
Hang on, let me just see thisquestion right here.
A practice buyer to buy cash inthe business?
Is there a limit to this?
David (55:06):
there's no benefit because you pay it out to the
seller.
Um, and there the question isthere a limit?
It's a great question becauseit's potentially a problem for
the seller, not for the buyer,because if um, you know all the
deals that I've done, you knowthat cash is paid out to the
seller, so you don't get it.
And why would you?
Because you have to thenfinance that acquisition with
(55:26):
interest and so on, so you don'twant to inherit a lot of cash.
Um, is there a limit to it,potentially for the seller, if
they've got three million incash again going back to is it a
trading company or aninvestment companies?
But it's an issue for theseller, not the buyer.
Dr James (55:39):
So you'd be okay with it.
Thank you for that.
One question from davik patelcan your dental company loan
money to your propertyinvestment company if the
directors and shareholders arenot the same dental equal
husband and wife, property equalhusband with third party person
(56:00):
?
If not, is there a way to do itand what are the implications
and things to consider?
David (56:05):
it is possible.
So the question is can you loanit?
Yes, you can.
You can loan money to anycompany, um, the kind of where I
say there's no tax problems,where it's common control and
ownership is where you are goingto write that loan off, but
where you were doing it with athird party.
I will assume that you wantthat loan repaid in future,
which is fine.
(56:25):
It's only if you're going towrite the loan off, um, for you
know if one business is beingsold or you just don't want to
repay it for whatever reason.
But when there's a third partyinvolved, a loan is a loan,
that's a loan.
It's absolutely fine to do that.
Any considerations have it allin writing, a proper written
agreement, preferably drafted bya lawyer, because you know
(56:47):
that's good business practicethe writing off thing that you
mentioned just a second ago.
Dr James (56:52):
I mean, surely it can't be as simple as you have a
dental company, you lend awhole load of money over
invested in properties, and thenyou don't have to pay a penny
back.
Is there some sort of penaltythere?
David (57:04):
no, there's no penalty, but there does have to be a
director's board meeting, aresolution to approve the
write-off amounts signed, dated.
The buyers of the practicewould.
Their lawyers would want to seea copy of that documentation
and we prepare those.
So it's um, it's possible to do, it's not.
It's not much work, but you dohave to have the paperwork has
(57:25):
to be properly minuted, boardmeeting dates and so on,
signatures because that seemslike a little bit of a hack
right there.
Dr James (57:31):
That seems like a way that it's possible to get money
very tax-efficiently acrossanother company and then invest
it.
David (57:39):
Yeah, it is and hmrc say that you can't set out with that
intention.
So you can, because a loan is aloan.
So you make a loan with theintention of it being repaid.
But it's very common thatcircumstances transpire that the
company receiving the loansinvested it.
It can't repay it withoutliquidating the assets and the
(58:02):
directors have agreed not torecover it.
But it's.
Dr James (58:05):
You can't set out with that intention formally, but
it's, it's very common and it'senough to be by way of, by way
of an explainer as to why you'redoing that.
It's enough to be able to sayI've bought all these properties
and I can't convenientlyliquidate them absolutely, and
that's fine, even though, eveneven though, on the balance,
(58:26):
there is enough money there,right, yes, but it's not liquid,
is it?
Even though in the really, why?
Wow, okay, interesting, therewe go, interesting there we go.
Glad you asked that question,debbie.
(58:47):
Yeah, that's a reallyinteresting point there, anyway,
um, okay, coming up to thefinal whistle, now I think we've
got time for one more, andthat's from ryan stewart.
Again, trivial benefits.
Can I buy six 50 point amazonvouchers?
You can, right, you can, aslong as it's not cash, isn't it?
Vouchers are cash, oh, are they?
Oh, never mind, uh see them daywithout these being redeemed?
single 300 pound transaction.
(59:08):
Ryan, why do I get theimpression you're going to rush
off after this webinar and doexactly this?
You've thought this through.
Uh, deemed a single 300 poundtransaction 600 pound, if I go
mad for the wife and and who ismy secretary too, okay, uh, or
do they need to be spread outthroughout the course of the
(59:28):
year?
Basically, is what ryan'sasking ryan sounds really fun.
David (59:31):
Um, yeah, it is.
It's limited to 50 pound pertransaction and it can't be
vouchers.
Vouchers are cash, basically,so right.
Dr James (59:41):
But then the second part of that I guess what ryan
is getting at is if you do themall in one evening like a little
flurry, three, uh, six, fiftypound vouchers that's okay or
not?
Sorry, not vouchers.
David (59:51):
Six fifty pound expenses yes 300 pound of wine, that's 50
pound each in one transaction.
Yeah, as long as it's, you know, I think the key is the
transaction.
I would have it as one bankpayment, two bank payments,
three bank payments.
Like, just do them separately.
Don't just buy six bottles ofwine for 50 pound each because
that could be seen as onepurchase.
Just have it as separatepayments.
(01:00:12):
Nice, all in the same day.
Dr James (01:00:15):
Yep, go mad, as you say and then am I right in
saying, okay, no, no, that'sfine.
Yeah, that makes sense becauseyou could.
Yeah, you could have it's.
It's basically purchases, right, you can have multiple items in
each purchase, but the purchasecan't exceed 50 points.
Yeah, there's another way ofsaying that.
Lots of dentists have money in their limited company
which is effectively strandedthere because of tax, and when I
say stranded, what I mean is wecan get it, but it's just going
to cost us a lot to be able toextract it into our own personal
name, and that's why today'spodcast is hosted by myself and
also Mr David Hossein,specialist accountant to
(00:22):
dentists.
We're going to be discussingall of the methods that are out
there that can be used toextract wealth from your limited
company, both the commonknowledge methods and also the
lesser known ones that exist outthere that are well worth
hearing.
This stuff is what we need toknow to be able to make the most
of that money that is trappedin there.
(00:43):
I'm also happy to share thatthere is free verifiable CPD
associated with this podcastepisode.
Whenever you finish the episode, all you have to do is click
the link in the podcastdescription.
It'll take you right throughthe Dentistry Invest website.
You'll be able to complete ashort questionnaire and, once
passed, you fill in yourreflections and we'll go ahead
and email over to you yourverifiable CPD certificate,
(01:07):
which is entirely free.
What that means is this podcastepisode will be able to
contribute towards yourverifiable CPD hours during this
learning cycle.
Everybody, welcome to thiswebinar.
This evening we're talking taxefficiency and how to
efficiently extract your moneyfrom your limited company,
(01:27):
because, well, it's quite oftenthe case that we know that it's
almost like held hostage inthere in a way because of tax.
So anything that's going to beable to help us be able to
extract more of that into ourown name is going to be a good
thing, and that's why I'm joinedtoday by Mr David Hossein,
expert accountant to dentists.
(01:49):
David, I'm looking forward tothis one.
Where should we start?
David (01:54):
hi, James, yep, uh, so I'm excited to be here.
Um, so we can, we can jump in.
I suppose I've got the slidesready let's do that.
Dr James (02:02):
Let's do that bit of housekeeping just before we do
that.
Tonight is going to be about anhour ish in length, about 60
minutes.
If anybody has any questions,please feel free to pop them in
the chat and we will get to themat the end whenever we come to
the q a section, which is goingto be about 35 40 minutes in.
So then, what that means isit's a first come, first serve
(02:25):
basis.
Basically, the first questionswe see in the chat, we're going
to answer as many as we can upuntil that hour mark that we
talked about just a second ago.
So, yeah, if everyone's happy,as you said, David, now is the
time we can get we can jumpstraight in, right.
David (02:38):
Yeah, let's get started so do you want me to share the
screen?
Dr James (02:45):
yeah, let's do it.
Let's do it.
You should have permissions, Ibelieve.
David (02:48):
Okay, so a bit of uh it knowledge.
Now let's see if I can figurethis out it's all right.
Dr James (02:55):
Uh, zoom right at the bottom.
See the button that says shareyeah, I've got three.
David (03:01):
I've got three screens.
It's just figuring out theright one, gotcha.
So let's try again.
How's that?
Can you see how to extractwealth from your limited company
?
Dr James (03:15):
we certainly can.
David (03:16):
We're looking good so if you're here, you obviously have
a limited company.
The question then becomes howare we extracting things in a
tax efficient way?
Now second slide there.
Can I just check and see thatit's moved for you.
Dr James (03:34):
It hasn't quite yet, David.
Actually I've got the wrongscreen.
David (03:38):
That's all right, let me study it.
Dr James (03:38):
No, it's all right, it's all right.
David (03:41):
So I'll start again.
Stop share, sure, right, let'sstart again.
Uh, stop share, sure?
That's the problem withmultiple screens?
Okay, so let's try again.
Um, how about that?
Does it say overview?
Yeah, no, we're cooking.
Yeah, in the right place, good,all right.
So, um, it's not that long ago,so it's only 2006, since
(04:03):
dentists were actually allowedto have a limited company.
There were concerns aboutlimited liability and so on and
whether it's appropriate forhealthcare professionals to have
it and how that opens the doorsto corporate ownership.
But we are able to trade asdentists as a limited company.
Obvious tax benefit is that itallows you to control the level
(04:24):
of income tax you pay on yourearnings.
So your earnings can be at acertain level, but you control
what income tax you pay based onwhat you draw out of the
company.
That that's a starting point.
A bit of a quirk with this isthat if you are a dental
associate in the nhs, you canhave a company but you can't
superannuate, which is differentfor principals, who can, and
they can have a company but youcan't superannuate, which is
(04:44):
different for principals, whocan, and they can have a company
and still superannuate insofaras they have a salary and
dividends, whereas associatesare unfortunately not allowed.
So I don't make that rule, butit is important to say so if
anybody listening to thinkingabout going with a company.
You have to know if you're annhs dentist, you can't have the
superannuation going forward.
(05:04):
You have to know if you're anNHS dentist, you can't have the
superannuation going forward.
So hopefully that's clear toeverybody.
Next slide, so wealth extraction.
So a big part of extractingwealth will be minimizing the
tax that you pay, because theless that goes to HMRC, the more
is available for yourself.
So using a limited company,whether as an associate or
(05:26):
principal, will ultimatelyaccrue a significant amount of
cash inside the company, right,because that's the whole purpose
of the company.
You're going to control whatyou take out.
Therefore, the company will beleft with cash.
So that's certainly somethingthat should be talked through
before having a company and havea strategy about well, I'm
going to have this cash, I knowwhat I want to do with it, and
(05:49):
we'll talk about some of thosekind of options here, not as
financial advice, but just moreon the tax side of it.
So that's my agreement.
If you like, we'll also discussassociates and principals,
because they both have different, unique problems, I suppose, if
you can call it that.
(06:12):
So, starting with associates, sohiring associates, use a
limited company, as mentioned,to control the large tax bills
that come with that.
We often get um associatessaying look, I've had this tax
bill of 90 000 pound.
What on earth is going on?
Should I be paying that much?
What can I do about it?
And conversation is usuallywell, you know, you earn money,
you pay income tax on it.
But if you can, if you're notspending all of it and you've
(06:34):
got a plan for that money, thenyes, the company can help.
You Tends to be that we likefor people to have less than
100,000 pound in terms of theirincome from the company, because
at that point you still keepyour personal allowance.
If you draw over £100,000 fromthe company, you will lose the
£12,570 tax-free allowance andon that chunk of your income
(06:59):
above 100, you are effectivelypaying 60% tax, which is not
good for you to be doing,basically, and just controlling
that.
So keep yourself at 100, butcertainly the lower you go, the
more you save.
So you've got your company weneed to think about well, have
(07:19):
you claimed all for yourexpenses that you're allowed to
and any allowances and any basicthings that can be done to
minimize that because, again,minimize the tax, that's more in
your pocket.
Um, investment side, you've gotpayments into pensions.
So this is a big thing againabout getting your income below
100 000 and this also applies toassociates who are not having
(07:42):
companies that you can put moneyinto a pension to bring your
income down Again, avoiding that100,000 plus trap.
Paying into a pension, you cando that into a private pension
for your company.
It is fully tax deductible, sothat portion of your income that
you put into a pension iseffectively subject to zero tax,
which is really good and it'san expense.
(08:05):
So I want to make that clearthat payments into a pension,
whilst they are investments,they are also an expense for
your tax purposes.
Other investment options kind oftend to be around putting into
a property or stock shares andcrypto.
The difference with those typesof investments is that they are
(08:25):
not an expense and that can besometimes confusing and we get
clients saying, well, look, Iput a hundred thousand, it's a
crypto, so I've got no profitthis year, but it's not an
expense, it's an investment.
It's only pensions thatqualifies a deduction against
your income for corporation tax.
So just to make that clear.
Um, holding of the investments.
(08:47):
So it's quite common forproperties to be held in a
separate company and that istend well, that tends to be
driven by the lenders.
Who wants to have a charge overa new, clean company that is not
mixed in with any otheractivities, whereas, um, it's
quite okay for an associate whowants to put money into crypto
(09:07):
or stocks or shares to hold thatin their associate companies.
There's no, there's norequirement to move it out.
If it's just stock shares andother investments, it can become
a problem if you then have anassociate dental company that
becomes a practice owningcompany, which does happen.
So, again, talk that throughwith your accountant about well,
(09:28):
should I have my investments ina separate company?
If you've got aspirations towant to practice?
How would that work in terms ofsplitting those two things out?
Because it is important andwe'll get to that when we look
at practice owners in a minute,okay, nice one, by the way,
David.
Dr James (09:44):
I don't know if there's any way to just make the
slides just a little teeny bitbigger on the screen, because,
if possible, if it's, if it'snot, it's not no, it is.
David (09:54):
I must have done the wrong.
I've done the wrong screenagain.
Let me, let me start again it'sall right if it's.
Dr James (09:59):
If it's not, if it's going to be a big problem, we're
, we're fine.
The main uh value is comingfrom what you're telling us let
me see, I'll tell you a thirdtime.
David (10:07):
Lucky let me.
Let me start again it's allright.
Dr James (10:10):
It's all right, no biggie, uh so one, two, so is
that big?
Oh, that is so much better.
I'm glad that I asked excellentexcellent.
David (10:23):
Thanks and apologies to.
I've got three screens and just, yeah, it's not always obvious,
no problem.
Okay, so this kind of slidejust is a list of common
expenses that we see.
It's a PDF that is availableand I will send this.
James, you can pass this onafterwards.
Just look, these are things thatyou could be incurring, that
(10:49):
you might not be telling youraccountant and therefore you
could be missing out on some taxrelief.
And again, this applies tolimited companies as well as
sole traders.
So if you're an associate witha sole trader, this would still
apply to you.
Um, I'll talk through itbecause sometimes that, you know
, can be interesting.
Um, so, starting at the top,protective clothing so if you've
bought scrubs and things thatare 100% clothing for work, that
is a tax deductible expense, soyou can claim for that.
(11:12):
The cleaning of that is also.
So if you've got a bag ofscrubs and you're sending it to
the cleaner once a month, that'salso a business expense and
it's tax deductible.
The cleaner once a month,that's also a business expense
and it's tax deductible.
(11:32):
Printing, postage and stationeryIf you buy pens, stamps, pads,
diaries we tend to say, you know, you claim about £50 a year
just for that sort of PSP.
We call it printing, postageand stationery, travel expenses.
So, as a dentist, you will betraveling for courses, you'll be
traveling to see you knowbusiness mentors, potentially
suppliers.
You need to keep a record ofthat.
If you've driven, then it's acase of claiming 45p per mile
(11:55):
and just telling your accountantthis year I've done a thousand
miles or two thousand miles ofbusiness travel.
Um, the requirement at yourside is to keep a diary.
You might, you might, spendyour phone.
You might have just saidsomething in your diary that
says today I would travel tolondon or to scotland or
wherever, but you can claim forthat.
That is a business expense.
So is your phone.
We all use our phone, for Ithink I use my phone.
(12:18):
Majority of my phone is forbusiness work.
So I think that would be thesame for a lot of, a lot of
dentists.
And and we do ask you to tellus how much of your phone do you
use Is it 50%?
Certainly somewhere between 50to 80.
A lot of people will say it'sused for business, so that can
be claimed as an expense as well.
You will be paying forsubscriptions, so your GDC
(12:39):
subscriptions, bda subscriptions, those are things.
That should be obvious.
Course fees is where it gets alittle bit colourful, and we
have a lot of colourfulconversations with the clients
about course fees and especiallyif they're overseas.
Now is it an expense?
That's the first thing.
So if you're going for CPD togo on a course that relates to
(13:05):
the work you're currently doing,that is fully tax deductible.
So what about its location?
Does it matter that it's indubai or does it matter that
it's in london?
No, if it, if you go in on acourse in dubai and it's for the
work that you're currentlydoing, that is still an expense,
as is the travel, as are thehotel costs.
Um, where it gets colorful isthe timings involved, because
(13:27):
hmrc will want to say well, lookyou, you travel the day before
you land, sleep, start thecourse, sleep, come back, and if
there's an element of personalenjoyment, um, they won't give
you the uh, the travel in thosedays hotels.
So we do tend to get asked thatquite a bit about what if I
stay an extra week or a few dayshere and um, yeah, that that's
(13:49):
the official line with it.
So we sometimes get asked well,look, the course is finished on
a thursday and on a friday.
I'm, you know, I want thefriday to myself and what?
What can I do?
And if you've got an extra day,why don't you just go and talk
to a lab out there or some kindof supplier and you can tell me
that that was, that was abusiness day as well.
So just be reasonable.
(14:10):
But courses tends to be,especially as overseas travel, a
bit colorful in terms of whatis what is possible, because
everybody likes holiday, don'tthey?
Um legal and professional, so itshould be pretty
straightforward.
Unfortunately, you know, thereare lawyers out there who do
make dentist lives difficult andpatients are advertised and if
(14:34):
you've got a legal fee you'vehad to pay to defend yourself.
That is fully tax deductible.
Um legal fees.
That might not be so obviousand and it's worth saying for
education purposes, is if you'rebuying a practice or you've put
an offer on a practice andyou've had to pay legal fees and
you've incurred costs but itdoesn't go through, it falls
(14:55):
through for whatever reason, youknow, your lending pulled out
at the last minute or change ofcircumstances, legal fees for an
aborted purchase areunfortunately not tax deductible
.
So that's, that's the bad newson legal fees, your accountant's
fees, your accountant's fees toprepare your tax return and all
the phone calls and so on is anexpense, so make sure that's
(15:16):
included, as is your indemnityinsurance.
Any books and journals famousfor charities, computer expenses
you might put a laptop that youdo work on.
That's, that's a businessexpense, as is an ipad.
You can be using that forlooking at scans and x-rays and
so on.
Um, use of home you can claim302 pound a year, no questions
(15:38):
asked.
So make sure that's done.
And any other expense that is100 business related.
So if you paid for it and itwas purely to do with dentistry,
you can claim that as anexpense.
So those are your commonexpenses.
Thinking beyond that, we thenget into, I suppose, a bit more
(15:59):
thinking on planning.
So you have a limited companycompany you're drawing salary
and dividends, um, you're taxedon that.
Now, yeah, it's, it's.
I mean it's a good question toask what?
What have we got availablewithin the family?
Is maybe a spouse at home withthe kids?
Or do they have maybe a lowerrate of tax they're paying?
(16:21):
If they've not got, you know, avery high paying job, they can
be involved in the business,either as an employee or as a
shareholder, potentially both.
What's right for you depends ona lot of circumstances, but
certainly one of those twooptions would be, you know,
advisable.
If they're paying a lower rateof tax, why not involve them?
(16:44):
It has to be done correctly.
But obviously talk that throughto the accountant.
I've put on there other familymembers as well, just because
it's something we get asked alot about.
Grandparents, if you have alimited company, we get asked
can I employ my grandparents?
The answer is is you can give ajob to whoever you like.
(17:07):
Um is the answer.
Now, should you is the question.
So I think where it becomes agood idea is if you are
supporting your grandparentsanyway.
So you know you, they've raisedyou and you want to support
them in their old age and theycan do work for you.
Now, whether that's good workor bad work is between you and
them.
Hmrc can't do a performancereview on your parents, but if
(17:29):
they can generally be justifiedto be doing some work, you can
employ your grandparents.
And and that money that you'regiving um to your parents and is
an expense for the company.
So again, it's bringingbringing the tax liabilities
lower.
Director's loans is anothermethod of taking money out.
(17:50):
So getting money out of acompany.
To you personally is one ofthree ways salary dividends or
loan.
Director's loans have to bepaid back and if they aren't,
then they are just converted toa dividend.
So not so tax-sufficient.
And that section of 455 taxesis essentially a dividend tax.
But where director's loan canbe tax-sufficient is actually if
(18:11):
you are planning to loan moneyto your company.
We often see this where, again,going to the practice
acquisition so dentist has alimited company, has put an
offer on a practice he's goingto buy.
So dentist has a limitedcompany, has put an offer on a
practice, is going to buy, butneeds to, you know, get the
deposit from his savings accountinto the company because it's
(18:31):
the company buying it.
That money that is lent to thecompany is a loan to the company
and that can be used to offsetagainst any dividends that are
taken.
So to bring to convert that,convert dividends taken into
actually a repayment of the loanand, you know, bring the income
tax down that way.
So loans to the company can bea good idea and bring tax down.
(18:53):
So we like that one.
Um trivial benefits, you knownot everybody is aware, so it's
worth adding on there.
You can, uh, pay 50 poundnon-cash expenses per employee,
up to 300 pound per year.
So if yourself you have alimited company, you are a
(19:13):
director, you're an awesomeemployee and perhaps your spouse
is also an employee, so betweenthe two of you can have 600
pound of christmas presents orwhatever you want to choose, so
that's good to know.
You can also on top of that sonot included in that you can
also host an annual party.
So you know, go out for a nicemeal at a cost of £150 per head.
(19:38):
That's an annual allowancethere, so that's also good to
know.
Dr James (19:45):
David on the £50, the £300 per year employee that's
divvied up into the £50 non-cashexpenses.
Does that also apply todirectors?
David (19:56):
Directors are employees.
Dr James (19:57):
yes, oh, there you go.
Okay, good, just carrying thatone up, wasn't sure.
David (20:08):
No problem, good question , um, you also have business
meetings and um again, let's sayyou are going to a meeting
where you are discussingbusiness, the business of
dentistry.
Let's say you meet yourprincipal for a coffee or for a
meal to talk about things thatcan be paid to the company.
It's not an expense in that itwon't reduce your corporation
(20:32):
tax, but it's better to be paidfrom company money that's not
been subject to dividend taxes,because money in your pocket
you've paid you know, 33, 39,whatever the rate is that you're
paying dividend taxes on.
So it's better to do thingslike that through the company.
So that's good.
We've talked about mobilephones and laptops.
I won't say that again.
(20:53):
Cars is a big expense forpeople and your company can
provide that to you as anexpense and your company can
provide that to you as anexpense.
That is much better than buyinga car through money that has
been subject to corporation tax25% and then dividend tax of
potentially 33%.
(21:14):
So if you are not adverse to anelectric car and some people
obviously prefer petrol, but alot of our clients do have
electric cars and the answer isalways put it to the company
it's going to be an expense foryou, as is a bicycle.
So if, like me, you've recentlytaken up road biking because
(21:37):
you like to get out and about,your company can buy you a bike,
and these things are expensive,sometimes up to tens of
thousands of pounds.
So if you do like the twowheels, you can also buy
yourself it through the company,again saving the corporation
tax and dividend taxes on it.
So don't uh, don't, miss thatone if you, if you do ride a
(21:57):
bike, um, okay, so next slide ison properties.
I want to talk a bit aboutproperties because it is very
common.
We have a lot of dentists whoare limited companies and
everybody loves bricks andmortar.
So into property.
So just an overview here.
So I mean, what's the benefit?
(22:19):
So, as a higher rate taxpayer,there's no tax relief for
mortgage interest.
That was abolished years ago,which is really horrible because
you can.
If you buy a propertypersonally, you're a higher rate
taxpayer you rent it out for agrand, you pay in the bank 800,
you know 900 a month in interest, but you're taxed on the grand.
So once you've paid the tax,often we have, you know,
(22:42):
situations where people areputting money into the property
just to cover its expenses.
So that's cash flow negative,not not good at all.
That's not the case forcompanies, because companies get
the interest as an expense thatbrings the tax down, um.
So it says there um, lenderswill want a special purpose
vehicle, ie a separate companyfor that.
(23:03):
They want it clearly separatewith a charge that only they
have against the company.
So how do we do that?
We lend the money from thedental co to the property
company and as long as you havethe same direct to shareholders
in both companies, that's fine.
There's no tax issues there andit can be written off in future
.
If that's a decision that'smade in future without tax
(23:26):
consequences.
I have put under consider exittaxes because it is something
that people often forget thatyou might buy a buy to let in
the property.
So you might buy a buy to letproperty in the company.
But if I want to buy that fromyou, I don't want to buy a
company, so I'm buying theproperty from your company and
the money is trapped in thecompany again, which is fine.
If I want to buy that from you,I don't want to buy a company,
(23:46):
so I'm buying the property fromyour company and the money is
trapped in the company again,which is fine if you want to
invest it, but not fine if youyou need to take it out as a
dividend.
So when you're doing your sums,just make sure you've thought
that bit through, that you mighthave to pay dividend taxes when
it comes out.
However, as I say so, propertyis very popular and it can soon.
You know some associates whoare quite adamant.
(24:08):
They do not want to be practiceowners and they're doing very
well in property and it growsand grows and grows.
Over time it becomes a good,good problem, but a problem for
inheritance tax.
Uh, which is what I want totalk about.
Uh, so this slide just showsthe setup of you know, the two
companies.
Um, yeah, so inheritance tax.
(24:28):
I want to talk a bit aboutinheritance tax because it's
becoming a bigger problem forpeople, since, in the budget now
we have, pensions also formpart of um of people's taxable
estate, so inheritance, that's amuch bigger problem for people.
Now there is um work in thebackground, people trying to get
that um pushed back on.
But as things stand, pensionsare now part of your estate, so
(24:51):
people are going to pay moreinheritance tax.
Um, there is some planning thatcan be done, um with property
companies in fact in any companybut I'm going to pay more
inheritance tax.
There is some planning that canbe done with property companies
In fact, any company.
But I'm going to talk aboutproperty companies because you
tend not to pass on a dentalcompany to children.
You tend to sell it and thenmove on in life.
But this also applies to anycompany, and that's growth
(25:13):
shares.
So's a growth share.
So growth share is a fixed linein the sand on the value of a
company.
So the scenario is is this James, you have a property company
that, at today, is worth 1million pound and it's in a
fantastic area, and we sit down.
You tell me, David, it's worth amillion today, but in 10 years
(25:35):
it's going to be 2 million.
And I've got a problem becausethe doctor's told me I'm not
doing so well and I might nothave so long to live right.
But even not in that extremescenario, we've got to think
about inheritance tax becauseyour plan is to hold this long
term.
So what growth shows do is wehave a corporate lawyer who
drafts articles and ashareholders agreement to
(25:56):
convert that one million poundand to crystallize it into the
existing shares, and then weissue a separate class of shares
called growth shares, and anyincrease in value is allocated
to those growth shares and thosegrowth shares are issued to the
kids today.
So any future value is passeddown tax-free, because it's not
(26:17):
a passing down of value, it's anissuing of shares that
subsequently grow in value.
So I'll say that again themillion pound is put into the
existing shares that you keep,but we issue new shares and any
growth is automaticallyallocated to those which are
given to the children andthey're worth a pound today, but
(26:39):
in 10 years they're worth amillion.
That we know.
So there's a million poundpassed down tax-free and that's
a special kind of tax claimthere and it's that's.
Dr James (26:48):
That's a hack right there you can, that you can
allocate all of the growth tothose shares that have been
distributed.
I and that's.
David (26:56):
Yeah, that's fascinating that you can do that works
really well for investmentsbecause investments, by
definition, over time go up invalue.
Yeah, um, and it's more so forinvestments because practices,
as I say, most people sell it onthe open market and don't.
It's quite rare you pass apractice down like that, so just
wanted to uh mention that's agood tax planning opportunity
(27:18):
there.
Dr James (27:19):
Presumably that works outside of property with other
assets as well, just maybe notdone as frequently.
David (27:24):
Correct.
Yeah, it's shares, so it'scompanies.
But if you have assets within acompany, same principle applies
.
Dr James (27:32):
Yeah, interesting.
David (27:35):
Yeah, righto, so that's associates.
Um, I've done a slide onincorporation for sole traders
and I think it's important toflag that.
You know, often people thinkthat you know, if I draw all the
money from my business, it'snot right for me to have a
company, and in general that'sright.
(27:55):
But there is an exception tothat and that is if you're a
practice owner with a bank loan,and probably shouldn't say this
, but of all my clients, theones who are most stressed and
under financial pressure areprincipals who bought a practice
that's not inside limitedcompany, because they get
hammered on paying the bank backand paying tax on the bank
(28:17):
repayments.
So whenever I talk to anassociate who's buying a
practice, I will always try andsteer them toward well, can you
buy it through a company?
If it's NHS, you can't.
If it's not alreadyincorporated, you can't, because
you buy an NHS contract througha partnership mechanism where
you join as a partner and theold principal retires or comes
(28:38):
off the contract and a companycannot be a party to an NHS
contract.
It can be an owner but not aparty.
So on a sale, you can't do it.
But if you've bought, you know,or if you own a practice and it
is a sole trader and you dohave a bank loan, you can
incorporate it.
So you know.
Going back to the title, howcan you extract effectively
(29:00):
extract wealth from a limitedcompany or have one in the first
place?
An example here on screen.
I'm not sure if I can see this,but this um practice is making
profits of 283 and, on the basisthat all, all profits are used
personally because we've got theloan repayments of 56,000 that
are still subject to let me getthe mouse on it that's subject
(29:21):
to income tax, this client isstill going to save 8.8 thousand
pounds per year in tax.
Incorporation of your soletrader practice is something to
think about as a good planningopportunity.
It does involve a refinance, soyou'd need to get a new loan in
the company name.
Perhaps that as a good planningopportunity?
Um, it does involve a refinance, so you'd need to get a new
loan in the company name.
Perhaps that's a good thing,because interest rates are
(29:41):
coming down now, so you mighthave a high rate that you could
actually benefit from a lowerone.
Um, but it stops you payingincome tax on the part of the
profits that you pay to the bankand it could well save you tax.
So, um, also, it's worth saying, the NHS local teams are a lot
more happier to not give you aheadache now, so they understand
the pressure NHS practices areunder because you need to get
(30:03):
their approval, and theyunderstand the pressures that
are on the NHS practices so theygive you less headache these
days.
It's not guaranteed, but it'sworth mentioning.
Okay, yes, worth worthmentioning.
Okay, just, uh, radio.
(30:27):
So the sale of next is for.
So, for principles, the sale ofyour practice will be probably
the most significant financialmilestone of your career.
A dental practice is a veryvaluable asset.
Um, the market wasn't greatlast year, so we had a good year
2022, for sales.
Forputs were very active,interest rates were low 23, 24,
not great.
Not great in terms of theoffers that we had for clients
(30:49):
and deals that actuallycompleted.
There were a lot of clients whogot offers that were messed
about and then they fell throughfor whatever reason, and
multiples were prettyconsistently low.
It's getting more active now.
Multiples are better.
So last year it would have said6.5 was about the average for
profits.
(31:09):
In terms of valuations, 7.25 ismore consistent now.
So people are paying more fordental practices, corporates are
and, as I say that's fueled bywhat interest rates are coming
down, so corporates can buycheaper, and that has an impact
as well.
Um, and there are corporates outthere who are getting ready for
their exit and that puts a lotof pressure for people to buy
(31:29):
and, you know, be part of theexit of that corporate, which is
good.
So we are seeing more offersfor clients to sell.
So when you're in thatsituation, whether it's this
year, next year or for thefuture, you've got, I suppose,
two options for you in terms ofcapital taxes when you sell.
You have BADR, business assetdisposal relief, which is 14% at
(31:53):
the moment, going to 18% inApril, or substantial
shareholding exemption if yousell via a holding company,
which is zero, which soundsreally good and that can be
certainly better than 18%, butit's only for a certain scenario
, if you're going to reinvestthe money and I'll explain in
the following slides which iswhat it says there.
(32:15):
So consider SSA if reinvestingthe funds.
Dr James (32:19):
If you're a UK dentist and you wish to add to your
verifiable CPD portfolio forthis learning cycle, it's worth
knowing that Dentists Who Investhas over a thousand minutes of
free verifiable CPD on ourwebsite.
Verifiable CPD on our websiteJust simply head over to
(32:41):
wwwdentistwhoinvestcom and hitthe video slash CPD tab and you
can go right ahead and helpyourself to as much CPD as you
need.
You'll also find a link thattakes you straight to the CPD
section of the Dentists WhoInvest website in the podcast
description off the Dentists WhoInvest website in the podcast
description.
David (32:57):
How is this relevant?
So if you own your dentalpractice fire-limited company,
you can sell the shares to thebuyer and you will potentially
pay 14% if that completes beforeApril, or 18% thereafter.
There are conditions for that.
So for the prior two years upto your sell, you have to have
(33:18):
been an employee or director andowned more than 5% of a trading
company.
And that's relevant becausewhen we talk about investing
through your company, we havesome clients with over a million
pound in crypto it's just donereally well and over a million
(33:39):
in property.
And if that's all within thedental practice company, is it a
trading company anymore or isit an investment company?
And if it is an investmentcompany, so 51% more of assets
and trading activity you won'tget the 14%, it will be 24.
So for dental practice owners,most likely you'll have your
(34:00):
investments outside.
That's one strong reason to doit to not jeopardize your
business asset disposal relief,to pay the lower rate of tax on
sale, but also, if you thinkabout it, if you're selling your
practice and your practicecompany has all this investment,
you want to retain that becauseyou've invested for long term.
So how do you take it out?
It's complicated.
It's better just to have it ina separate company through loans
(34:22):
, and then those those loans aredealt with on the sale.
It's much easier to deal withit that way.
So, um planning uhopportunities around that?
Certainly um shares can begifted to your, so you get a
million pound of lifetime gains.
If the practice is going tomake a gain of 2 million, why
not have that split 50-50 withyour partner?
(34:42):
We'll save a lot of tax.
Children it's possible to makeyour adult children so 18 plus
shareholders if we have somepractices that go for 4 or 5
million and you need to spreadit out a bit further.
However, kids are differentthan your spouse because your
(35:03):
spouse, you live with everythingshared um hmrc.
Well, if you're giving sharesto your children, if you're
gifting shares, you've gifted it.
A gift is a gift is a gift,that's what.
So once that money's with thekids, it's.
You can't ask them to pay itback.
They might you know,quote-unquote buy you things,
but that's out of their goodheart and not immediately,
(35:23):
certainly.
So that's how that all worksand that's how it's structured.
Dental practice One company,investments, the other nice and
easy on the sale, the dentalpractice goes, the investment
company stays.
Next is if you have a veryclear plan that I'm going to
(35:43):
sell my practice and I'm goingto get £2 million and I'm going
to reinvest all of it in thisnew business that I've got.
I'm very clear on property andit's going to be reinvested.
There is something called asubstantial shareholding
exemption where you put in aholding company like this, so
the holding company now owns thedental practice company.
(36:04):
You may or may not have aproperty company in there when I
put it in for illustrationpurposes.
And it's the holding companythat sells the shares and gets
the two million.
And if it's owned the shares inthe dental practice for more
than 12 months, um, with a fewother conditions, it will pay
zero percent because there's anexemption for that, which is
great, because why pay tax ifyou don't have to?
(36:26):
If you're absolutely clear,you're going to roll it over
into new things.
And we often get asked onholding companies um, should I
have one?
I'm not sure what I'm going todo.
So I've got a dental practiceand I've heard, you know,
somebody's told me to put aproperty company, a holding
company, in place, and I alwayssay, well, if you are not clear
(36:47):
right now, then don't do itbecause, don't forget, you've
got 12 months pre-sale um.
A sales process will take yousix months minimum by the times
heads of terms are signed andyou'll be talking to buyers for
two, three months before that.
So you've easily got ninemonths anyway um for you know,
to get through and pretty closeto sale you'll you'll know what
your plans are so you can put ina holding company towards the
(37:11):
end.
But if you start with the oneand you need to take it out,
that's complicated and timeconsuming and expensive.
So my kind of default positionis don't have one if you don't,
if you're not 100 clear why youneed it, because it can always
be added in later and David.
Dr James (37:28):
Just to clarify one thing on that, because I was
having this conversationrecently, uh, with my accountant
and he was saying that there's,if you do a share transfer to a
holding company, there's notnormally a tax liability for
that, is there?
David (37:45):
No, there's a process to go through to make sure there's
no issues with it, calledclearance.
So there are tax laws ontransferring the shares and we
write to HMRC to say we areseeking advanced clearance that
this proposed transfer of sharesis outside of related
(38:05):
employment related securitiesand there is no charge to tax by
doing it.
There is one department at hmrcthat works really well and it's
this department reconstructions.
They reply within two weeks andyou can talk to them on email.
Every other department is phonecall, but the reconstructions
department, because it servicesbig multinationals, is actually
very well run and you willusually get a reply within two
(38:27):
weeks to say, yep, go ahead, noproblems.
Dr James (38:29):
So it's very quick to put in place as well interesting
, because that's just somethingI mean we're taxed for
everything, aren't we?
You know it feels like, butthat's something I mean we're
taxed for everything, aren't we?
You know it feels like, butthat's something that we're not
taxed for, which I findinteresting yes, and I think
rightly so, because you're notreceiving any money.
David (38:46):
It's different, and we had this with a client recently
where they were actuallytransferring shares.
So, um, dentist a wanted togive his shares in his company
to another dentist for shares intheir company.
So swapping shares between duedental practices, and there was
no cash being transferred butthere was a tax charge because
(39:08):
there's an exchange of valuesand there's no exemption for
that.
So it was a bit difficultbecause there was swapping
shares without any cash movingbut they had a 14% tax charge
and, unfortunately, nothing wecould do on that one.
There's not an exemption forthat.
But where it's a company thatyou own, as you say, there's no
cash moving hands.
So why should you pay tax?
Okay, so next slide Extractingcash.
(39:43):
Okay, yep, uh, so next slideextracting, uh, cash.
So it is that we.
You know it is quite good.
We do see clients who have notinvested money, they've not put
it into stocks or pensions or orproperty, or they have done,
they've got cash left over andthey don't want to take it as a
dividend, because why would youif you don't need it?
Um, it's more relevant toprincipals who are selling the
business and you know there is away that says that you convert.
(40:03):
You can convert cash to capital.
So by default, cash is usuallytaxed as income.
But if you include it on thesale of your practice and the
share purchase contract isworded correctly, that cash can
be bought from you by the buyerat capital tax rates of 14 or
(40:24):
18%, which is quite handy.
So you don't need to freak out.
If you've got hundreds ofthousands in cash and you're
selling your practice, you don'tneed to take it as a dividend.
You can just add it to the gainand be paid at 14, 18%.
Dr James (40:34):
So that's another way way to to deal with excess cash
interesting one on umentrepreneurs really for badr,
and maybe we're getting a littlebit beyond the scope of this
presentation, but they seem to.
I mean, once upon a time it was10 million right tax-free, and
(40:56):
then 10, and then it was capitalgains above that, and now it's
like, uh, 1 million, isn't it 1million?
David (41:04):
but you still?
Dr James (41:05):
get taxed you still.
You know I get taxed 14 on that1 million or, and it will be 18
soon yep, and it was 10 millionat one point.
David (41:13):
I remember those days and I don't want to sound pompous,
but 1 million today's money isquite different than 10 million
10 years ago.
So there's no adjustment forinflation at all.
There is there.
Dr James (41:23):
I'm going to get my brilliant exit in like 10 years,
15 years, Do you think?
I know it's hard to comment,but do you think they're going
to keep it in some form or justkeep watering it down just out
of interest?
David (41:43):
I think we've lost a lot of people through that.
I think people have goneoverseas who don't want to be
tax resident because of capitalgains tax.
Now I think we have seen thatit's been quite in the news a
lot Very prominent wealthypeople who have moved overseas
because they don't want to paythat right.
So and that's bad for business,that's bad for that's bad for
(42:04):
the business of raising taxes.
We want people to stay in thiscountry and pay taxes.
The more people that pay alower rate is better than
because the people that willmove will move overseas are the
people with the most assets, ifyou think about it.
So I don't think it's good forbusiness.
Dr James (42:21):
Yeah, remains to be seen that one is here.
For the moment, when you getinto these things like running a
business, and you're like youknow, most of the time it's
quite a while before you getyour exit.
You know what I mean and youkind of you get into it with
this in mind and then there's noguarantee that it's going to be
here or it's going to bewatered down further still.
But yeah, no, I was justinterested on your thoughts on
(42:42):
that one.
We can't know what.
We can't predict the future.
David (42:45):
No, and it's politics, isn't it?
So what's right?
And what's politically sexy istwo different things, isn't it
so cool?
Just interested to know whatyou thought we'll see.
Okay, so yeah, that's it.
That's the last slide, so Ihope that all right sorry, I
spoke quite fast there.
Dr James (43:06):
I think I got a bit excited on my no no, I think
that was the perfect tempopersonally, and I think we
actually all owe David a clap up, so I'm going to start to clap
up on everyone else's behalf.
I'm sure there's peopleclapping behind the cameras this
evening as well.
David, thank you for, uh,sharing that enlightening as
always.
And you know what I said that,David, before we did this
webinar tonight.
I was like, right, tell usabout all the stuff that we know
(43:28):
about, just so that we can havea recap and ensure that we're
covering all bases and that thattax deductible that little
slide that you had of all taxdeductible expenses that was a
really good one to screenshot,which people might like to do in
the recording of this webinar,which we're going to be
releasing to the mailing listvery soon.
So, yeah, recovering the stuffthat we know, but we want to
(43:52):
ensure we've covered all basesand also the things that people
don't know about as much, whichis really interesting because,
actually, whenever we weretalking about badr just a second
ago, I think there's lots ofpeople who still don't know
about that and lots ofprinciples as well that I talk
to whenever we bring it up andit's all.
It's all just about that's.
Yes, we were talking about itgetting watered down.
It's still one of the lowesttaxes that there is and it's one
(44:13):
of the incentives that there isfor people to go out there and
still be entrepreneurs and beprincipals in this day and age.
So yeah, some interesting stuff, guys.
We said that we would do somequestions.
We've got about 15 minutes forquestions, so what we are now
going to do is rattle through asmany of them as you can, and I
(44:34):
can see that there's been quitethe influx in the chat box,
which is cool, which is good tosee.
So, David, if you're happy,should we just go ahead and get
cracking?
David (44:44):
See how far we get.
Yeah, that's a really goodquestion, sir.
Yeah, so I think the first one.
Dr James (44:52):
Yeah, I'll read them out if you want and you can do
the thinking.
How about that?
Yeah, I'll read them out if youwant and you can do the
thinking.
How about that?
Cool, yeah, all right, cool.
First one from Ryan Stewart.
Shout out, ryan Stewart, hopeyou're doing good.
Is the buying of lunch coffeeRyan's thinking of a stomach
respect?
Is the buying of lunch slashcoffee during a normal working
day a business expense?
David (45:13):
The answer's in the question.
During a normal working day, no.
But if you, um, let's say youwanted to have a catch-up with,
uh, one of the nurses or thepractice manager and you took
her out for a cost of coffee, umthat would be put on a daily
basis?
No, it's only if it's becauseit's.
What's the purpose of it?
The purpose of that coffee isto fill your stomach.
Dr James (45:34):
But if you've had that coffee to have a meeting with
somebody, then you can't do itGood, and that's a good example
of something that you, in thesecond situation you were
talking about just a second ago.
When you're taking somebody outfor lunch, you can put it
through the limited company, butit's not tax deductible, right?
But it'll still be cheaper todo it that way.
Cool, Good stuff.
(46:07):
Next question from AA pseudonymthere, I believe.
David (46:08):
Can you involve children over 17 years of age and are
there any limits on theirinvolvement?
Aren't be shareholders andpotentially that's, you know,
not a good thing either at thatage.
But they can be employees sothey can do work.
Um, obviously, you've gotnational minimum wage to think
about, so you know they're anemployee.
You have to not pay thempennies.
Um, in terms of limitations, Ithink that hmrc would look at
(46:31):
that and say, well, what workhave you given them?
Um, you wouldn't give them apractice manager's job, you
wouldn't give them cqc duties,but they could be doing social
media work for you.
Um, admin work.
And you would tend to say, well, yep, I've employed my child.
Giving them work to do, whetherthey do it well or not, is, as
I say, hmrc can't performancemanage your staff.
(46:53):
Some staff are good, some staffare not great, but it should be
relevant in terms of theirmarket hourly rate.
So if it wasn't your child,would another child be paid that
?
And what hours are available tothat child outside of school?
But going back to involving afamily member, your child is
your family member.
You're giving them pocket money.
Let them earn it.
So, yeah, definitely.
Dr James (47:14):
Good stuff.
Next question from amandaamanda nailer is an electric car
as an expense only relevant ifbuying new um, no, but, and it's
only for limited companies.
David (47:28):
But if it's new or second hand, it's still a tax expense.
The only difference is asecond-hand electric car um,
isn't 100.
Expense in the first year is 18per year.
So it's different, right?
You still get the tax reportsover a longer period of time, um
, that's if you're buying it.
If you're leasing, then it'sjust whatever you're paying
(47:51):
monthly for it, but you canstill get it as an expense for
the company cool.
Dr James (47:57):
John gaddis, can you get the cycle to work scheme,
the bike purchase and stillclaim some motor expenses for
between practices, courses andmeetings?
Yes, you can.
Yeah, yeah you're not.
David (48:11):
You're not forced to.
You know, hmt can't force youto cycle.
Every day it rains quite a lotin this country, so one day you
might cycle, one day you mightgo in the car seems reasonable.
Dr James (48:22):
Jeremy williams.
Question from jeremy williamsused cars can be claimed, but
are claimed at 18 a year forfive years, correct?
Yeah?
Yeah, I think it was astatement more than a question,
that one, but yeah, it'saccurate, okay.
Question from Arps Do you stillneed to pay IHT on tax?
(48:43):
Sorry, sorry, big pardon.
Do you still need to pay IHT ortax when you sell the practice
and you're resident, forinstance, in Dubai?
David (48:53):
Yeah, yeah, um, I think that one needs a proper look at
before yes or no.
Um, can't give you a yes or noor not.
I would have to look at it andsee how long you're there.
For when did you move?
What's the um?
What's your involvement in thecompany at the point?
There's a lot in there, um.
(49:15):
So get it looked at properly.
I couldn't give a yes or no ornot seems reasonable and you
know what?
Dr James (49:19):
it's probably a good point to mention that after this
webinar, we are going to besending out an email which has
an opportunity within it toconnect with David.
There's going to be a link inthere that you can use if you
want to speak to David aboutanything that we talked about
tonight, because none of this isreally substitute for good tax
advice.
David is also available on thefacebook group as well, Mr David
(49:45):
Hossein, so feel free to lookhim up if you want to ask
anything more specific about wewere talking about this evening
specific and relevant to yourown personal circumstances.
Next question from simab.
Two questions from simab.
What is the maximum amount youcan pay grandparents for child
care?
Would that would be classed asan expense?
David (49:57):
um.
Child care is not an expense,but you might pay them for doing
other work.
So this, this is where you'vegot to think it through.
So you, you want to pay thegrandparents because they're
helping you out with the kids.
You can't say that becausethat's not a business expense.
But you might be paying themfor help with admin and they
(50:19):
mind the kids for free, if thatmakes sense.
It's how it's packaged up andsold to the taxman, and often
it's a conversation around itlooking presentable and
reasonable, and there's usuallya way.
There is usually a way.
We do have people who go downthat route, but you are
employing them and giving themduties that you can kind of show
, but they're minding the kidsfor free as a a result of it and
(50:41):
it's it's, it's kind of anunderstanding.
Uh, if that makes sense, butfrom hmrc's perspective, you're
not paying them to mind yourkids.
They would not give you that atall.
You can't.
You can't do that fair enough.
Dr James (50:54):
And second question is for the 150 pounds annual party
allowance, does your companybank account or receipt need to
show the practice, the preciseamount of 150 pounds exactly?
David (51:10):
I would take a photo of the receipt and just keep it in
your phone.
It's uh, it's better to have it.
It's better to have it and notneed it.
And you know, be asked and havean inquiry and be like, look,
my bank statement says whateversan carlos office I'm doing.
But it's also like they mightwant to see the receipt and look
, we haven't had this.
But I always do it for myselfand I talk like just take a
photo, because if they everwanted to see how many stars if
(51:33):
you go, how many meals, becauseper person and that detail would
be on the invoice.
Dr James (51:37):
So yeah, is that £150 per head?
Yes, per employee Per annum.
Okay, that's quite the partythen, right, you can really look
after them.
And is it just the one?
Just one off.
David (51:50):
No, no, you could have two events, each £75.
So it's just, that's the annualallowance.
Dr James (51:57):
It doesn't have to be one of them, right, I see, fair
enough.
Annual allowance doesn't haveto be one of them, right?
I see?
Fair enough, all right, noproblem.
Another question uh, as adental associate, can I employ
children aged over 18 pounds formy limited company?
David (52:14):
if they're doing what you can give a job to anybody, it's
.
You know hmrc can't tell youwho to employ and who not to
employ, but with it being afamily member, they would again
look for what are you payingthem versus what you would pay
joe blogs off the street?
And if your kids are doing youknow your social media and
marketing, which you know theydo kids are very good at that
(52:36):
you might give them some moneyand you can do that through
payroll.
Is is the right way to do it.
Dr James (52:41):
So absolutely interesting.
Next questions come in how canI access the recording?
Recording is going to beavailable on the podcast, the
dennison invest podcast, if youlike to listen to it in an audio
format.
We're also going to bereleasing the full presentation,
the full video.
We're also going to bereleasing the full presentation,
(53:03):
the full video, on the mailinglist and the website, so that
should be out this Saturday.
If not, it'll be very soon nextweek.
So definitely two best placesto keep your eye on is the
podcast and also the mailinglist.
And also another thing that Imeant to mention earlier you do
actually get some free CPD forattending this webinar tonight.
You just have to fill in ashort questionnaire that's going
to be included as part of thatvideo that we just talked about
(53:24):
a second ago.
It's going to be the full whack.
It's going to be the whole 60minutes.
So you might as well claim itif it's there and it's free.
So good thing you know.
Thank you for that question.
Next question from pratik whatare the ways to be tax efficient
with the company when you'resalaried and already earning in
a higher tax bracket?
David (53:43):
I've been exploring this and there seems to be minimal
ways, mainly set contributionsso I think, if you're saying
that you're salaried and youdon't have a company, is that,
is that what I think maybe, if Iread it out again, what are the
ways to be tax efficient with acompany when you're salaried
(54:03):
and already earning a higher taxbracket?
Dr James (54:06):
yeah, there's kind of a, I think.
So from what I gather, you'resaying that you're employed oh,
he's put a comment I'm.
David (54:15):
I am salaried, but also have a company for other
purposes, so oh right, thatmakes sense, then okay it's the
same principle.
Have the money that you can gointo the company and, um, don't
draw it, that won't.
That'll mean you won't payincome tax on it, and then all
the things we talked about applyto that company, though fair
enough.
Dr James (54:34):
Hopefully that clears things up.
Fatigue let us know if we'vegot that situation right just
there.
And that, that, that, that,yeah, I don't think there is too
many exotic ways beyond what wesaid this evening.
Is there David?
David (54:45):
No, and anything exotic, have double checked, because
exotic things have a way ofcausing future exotic problems
for you.
Dr James (54:52):
Seems reasonable.
John Gallis, what is thebenefit to a practice buyer?
Hang on, let me just see thisquestion right here.
A practice buyer to buy cash inthe business?
Is there a limit to this?
David (55:06):
there's no benefit because you pay it out to the
seller.
Um, and there the question isthere a limit?
It's a great question becauseit's potentially a problem for
the seller, not for the buyer,because if um, you know all the
deals that I've done, you knowthat cash is paid out to the
seller, so you don't get it.
And why would you?
Because you have to thenfinance that acquisition with
(55:26):
interest and so on, so you don'twant to inherit a lot of cash.
Um, is there a limit to it,potentially for the seller, if
they've got three million incash again going back to is it a
trading company or aninvestment companies?
But it's an issue for theseller, not the buyer.
Dr James (55:39):
So you'd be okay with it.
Thank you for that.
One question from davik patelcan your dental company loan
money to your propertyinvestment company if the
directors and shareholders arenot the same dental equal
husband and wife, property equalhusband with third party person
(56:00):
?
If not, is there a way to do itand what are the implications
and things to consider?
David (56:05):
it is possible.
So the question is can you loanit?
Yes, you can.
You can loan money to anycompany, um, the kind of where I
say there's no tax problems,where it's common control and
ownership is where you are goingto write that loan off, but
where you were doing it with athird party.
I will assume that you wantthat loan repaid in future,
which is fine.
(56:25):
It's only if you're going towrite the loan off, um, for you
know if one business is beingsold or you just don't want to
repay it for whatever reason.
But when there's a third partyinvolved, a loan is a loan,
that's a loan.
It's absolutely fine to do that.
Any considerations have it allin writing, a proper written
agreement, preferably drafted bya lawyer, because you know
(56:47):
that's good business practicethe writing off thing that you
mentioned just a second ago.
Dr James (56:52):
I mean, surely it can't be as simple as you have a
dental company, you lend awhole load of money over
invested in properties, and thenyou don't have to pay a penny
back.
Is there some sort of penaltythere?
David (57:04):
no, there's no penalty, but there does have to be a
director's board meeting, aresolution to approve the
write-off amounts signed, dated.
The buyers of the practicewould.
Their lawyers would want to seea copy of that documentation
and we prepare those.
So it's um, it's possible to do, it's not.
It's not much work, but you dohave to have the paperwork has
(57:25):
to be properly minuted, boardmeeting dates and so on,
signatures because that seemslike a little bit of a hack
right there.
Dr James (57:31):
That seems like a way that it's possible to get money
very tax-efficiently acrossanother company and then invest
it.
David (57:39):
Yeah, it is and hmrc say that you can't set out with that
intention.
So you can, because a loan is aloan.
So you make a loan with theintention of it being repaid.
But it's very common thatcircumstances transpire that the
company receiving the loansinvested it.
It can't repay it withoutliquidating the assets and the
(58:02):
directors have agreed not torecover it.
But it's.
Dr James (58:05):
You can't set out with that intention formally, but
it's, it's very common and it'senough to be by way of, by way
of an explainer as to why you'redoing that.
It's enough to be able to sayI've bought all these properties
and I can't convenientlyliquidate them absolutely, and
that's fine, even though, eveneven though, on the balance,
(58:26):
there is enough money there,right, yes, but it's not liquid,
is it?
Even though in the really, why?
Wow, okay, interesting, therewe go, interesting there we go.
Glad you asked that question,debbie.
(58:47):
Yeah, that's a reallyinteresting point there, anyway,
um, okay, coming up to thefinal whistle, now I think we've
got time for one more, andthat's from ryan stewart.
Again, trivial benefits.
Can I buy six 50 point amazonvouchers?
You can, right, you can, aslong as it's not cash, isn't it?
Vouchers are cash, oh, are they?
Oh, never mind, uh see them daywithout these being redeemed?
single 300 pound transaction.
(59:08):
Ryan, why do I get theimpression you're going to rush
off after this webinar and doexactly this?
You've thought this through.
Uh, deemed a single 300 poundtransaction 600 pound, if I go
mad for the wife and and who ismy secretary too, okay, uh, or
do they need to be spread outthroughout the course of the
(59:28):
year?
Basically, is what ryan'sasking ryan sounds really fun.
David (59:31):
Um, yeah, it is.
It's limited to 50 pound pertransaction and it can't be
vouchers.
Vouchers are cash, basically,so right.
Dr James (59:41):
But then the second part of that I guess what ryan
is getting at is if you do themall in one evening like a little
flurry, three, uh, six, fiftypound vouchers that's okay or
not?
Sorry, not vouchers.
David (59:51):
Six fifty pound expenses yes 300 pound of wine, that's 50
pound each in one transaction.
Yeah, as long as it's, you know, I think the key is the
transaction.
I would have it as one bankpayment, two bank payments,
three bank payments.
Like, just do them separately.
Don't just buy six bottles ofwine for 50 pound each because
that could be seen as onepurchase.
Just have it as separatepayments.
(01:00:12):
Nice, all in the same day.
Dr James (01:00:15):
Yep, go mad, as you say and then am I right in
saying, okay, no, no, that'sfine.
Yeah, that makes sense becauseyou could.
Yeah, you could have it's.
It's basically purchases, right, you can have multiple items in
each purchase, but the purchasecan't exceed 50 points.
Yeah, there's another way ofsaying that.
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