UK Dentists: Collect your verifiable CPD for this episode here >>> https://courses.dentistswhoinvest.com/smart-money-members-club
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Your dental limited company can be brilliant for control and planning, but it can also leave you staring at a growing bank balance you cannot access without a hefty tax hit. We sit down with specialist dental accountant David Hossein to lay out the real-world options for extracting wealth tax efficiently, from the basics (salary, dividends, expenses) to the lesser-known moves that can make a meaningful difference over time.
We get specific on what HMRC typically accepts, what needs evidence, and what tends to cause trouble. That includes the £100,000 income cliff edge, how employer pension contributions can reduce corporation tax, and the practical checklist of allowable expenses many UK dentists miss. We also dig into the grey areas listeners always ask about: course travel, business meetings, employing family members, directors’ loans, trivial benefits, and why vouchers are not treated as “non-cash” in the way people assume.
If you are investing through companies or thinking about buying or selling a practice, this matters even more. We explain why property often sits in an SPV, how intercompany loans work, and the “trading company vs investment company” trap that can put Business Asset Disposal Relief (BADR) at risk. For principals, we outline planning ideas around share sales, holding companies, substantial shareholding exemption, and even how surplus cash might be treated on a sale when contracts are drafted correctly.
If you find this useful, subscribe, share it with a colleague, and leave us a review so more dentists can find smarter, calmer ways to handle tax and build long-term wealth.
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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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Dr James (01:43):
Lots of dentists have money in their limited company,
which is effectively strandedthere because of tax.
And when I say stranded, what Imean is we can get it, but it's
just gonna cost us a lot to beable to extract it into our own
personal name.
And that's why today's podcastis hosted by myself and also Mr.
David Hossein, specialistaccountant to dentist.
(02:05):
We're gonna be discussing allof the methods that are out
there that can be used toextract wealth from your limited
company.
Both the common knowledgemethods 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.
(02:26):
As ever, you can claim your CPDfor this episode within the
official Dentists Who InvestSmart Money Members Club.
Smart Money Members Club alsoincludes multiple mini courses
and webinar series on financefor dentists, including how to
become as tax efficient aspossible, as well as
understanding investing.
All of this content counts asverifiable CPD, and you can
(02:47):
download your certificates thereand then upon completion of
each lesson.
In addition to this, we alsoinclude a whopping 10% discount
on your dental indemnity and a5% discount on lab bills for
dental principals, amongst otherperks and discounts for
members.
Please use the link in thedescription to claim your
verifiable CPD for this episode.
Everybody, welcome to thiswebinar.
(03:11):
This evening we're talking taxefficiency and how to
efficiently extract your moneyfrom your limited company
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
(03:33):
thing, and that's why I'm joinedtoday by Mr.
David Hossine, expertaccountant to dentists.
David, I'm looking forward tothis one.
Where should we start?
David (03:44):
Hi James, yeah.
Uh I'm excited to be here.
Um so we we can we can jump in,I suppose.
I've got the slides already in.
Dr James (03:52):
Let's do that.
Let's do that.
Bit of housekeeping just beforewe do that.
Tonight is gonna 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 QA section, which is gonnabe about 35, 40 minutes in.
(04:13):
So then what that means is it'sa first come, first served
basis.
Basically, the first questionswe see in the chat, we're gonna
answer as many as we can upuntil that R mark that we talked
about just a second ago.
So, yeah, if everyone's happy,as you said, David, now's the
time we can get we can jumpstraight in, right?
David (04:29):
Yeah, let's get started.
So do you want me to share thescreen?
Dr James (04:36):
Yeah, let's do it.
Let's do it.
You should have permissions, Ibelieve.
David (04:39):
Oh, okay.
So bit of uh IT knowledge now.
Let me see if I can figure thisout.
Dr James (04:45):
It's all right.
Uh zoom right at the bottom.
See the button that says share.
David (04:50):
Yeah.
I've got three I've got threescreens, it's just figuring out
the right one.
Dr James (04:54):
Oh, right, right, right, right.
David (04:55):
Gotcha.
So let's try again.
Um, how's that?
Can you see uh how to extractwealth from your limited
company?
We we certainly can.
We're looking good.
Super.
Okay, so yeah, so if you'rehere, you obviously have a
limited company.
Um the question then becomesyou know, how are we extracting
(05:18):
things in a tax-sufficient way?
Um now, second slide there.
Can I just check?
Can you see that it's moved foryou?
Dr James (05:24):
Uh it hasn't quite yet, David, actually.
Um I've got the wrong screen,that's why.
David (05:29):
Let me show you.
Dr James (05:29):
No, it's all right.
It's all right.
David (05:31):
Uh so I'll start again.
Uh stop share.
Sure.
That's the problem withmultiple screens.
Okay, so we try again.
Um how about that?
Does it say overview?
Dr James (05:45):
Yeah, no, I were cooking.
David (05:46):
Yeah, you're in the right place.
Good.
All right, so um, it's not thatlong ago, so it's only 2006
since dentists who were actuallyallowed to have a limited
company.
There were concerns about umlimited liability and so on, and
whether it's appropriate forhealthcare professionals to have
it, and how that opens thedoors to corporate ownership.
But we are we are able to tradeas dentists as a limited
(06:10):
company.
Um obvious tax benefit is thatit allows you to control the
level of income tax you pay onyour earnings.
So your earnings can be acertain level, but you control
what income tax you pay based onwhat you draw out of the
company.
That that's a starting point.
Um, a bit of a quirk with thisis that if you are a dental
associate in the NHS, um, youcan have a company, but you
(06:31):
can't superannuate, which isdifferent for principals who can
and they um can have a companyand still superannuate insofar
as they have a salary anddividends, whereas associates
are unfortunately not allowed.
So I don't make that rule, butit is important to say.
So if anybody listening tothinking about going with a
company, you have to know ifyou're an NHS dentist, you can't
(06:53):
have a superannuation goingforward.
So, okay.
So hopefully that's clear toeverybody.
Uh, next slide.
So wealth extract wealthextraction.
So a big part of extractingwealth will be minimizing the
tax that you pay because theless that goes to HMRC, uh, the
more is available for yourself.
(07:14):
Um, so using a limited company,whether it's an associate or
principal, um, will ultimatelyaccrue a significant amount of
cash inside the company, right?
Because that's the wholepurpose of the company.
You're gonna control what youtake out, therefore the company
will be left with cash.
So that's certainly somethingthat should be uh talked through
before having a company andhave a strategy about well, you
(07:36):
know, I'm gonna have this car,so I know what I want to do with
it.
Um, and we'll talk about someof those kind of options here,
not as financial advice, butjust more on the tax side of it.
So that's that's my remote, ifyou like.
Uh, we'll also discuss uh forassociates and principals
because they both have differentunique problems, I suppose, if
you can call it that.
Uh so starting with associates,so hiring associates use a
(08:02):
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 pounds, what onearth is going on?
Should I be paying that much?
What can I do about it?
And conversation is usually,well, you know, you earn money,
you you pay income tax on it,but if you can uh if you're not
(08:23):
spending all of it and you'vegot a plan for that money, then
yes, a company can help you.
Um tends to be that we like tofor people to have uh less than
£100,000 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
(08:44):
£12, uh 570 tax for yourallowance, and on that chunk of
your income above £100, you areeffectively paying 60% tax,
which is not good for um for youto be doing basically, and just
controlling that.
So keep yourself at 100.
Uh, but certainly that thelower you go, the more you save.
Um, so you've got your company.
(09:07):
Um, we need to think aboutwell, have you claimed all for
your expenses that you'reallowed to, and any allowances
and any basic things that can bedone to minimize that.
Because again, minimize thetax, 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
(09:29):
100,000.
And this also applies toassociates who are not having
companies, um, that you can putmoney into a pension to bring
your income down, again,avoiding that 100,000 plus
strap.
Um, paying into a pension, youcan do that into a private
pension for your company.
It is fully tax deductible.
So that portion of your incomethat you put into a pension is
effectively subject to zero umzero tax, which is really good.
(09:53):
Um, and it's an expense.
So I want to make that clearthat payments into a pension,
whilst they are investments,they are also an expense for for
your uh tax purposes.
Other investment options uhkind of tend to be around
putting into a property or stockshares and crypto.
The difference with those typesof investments is that they are
(10:16):
not an expense, and that can besometimes uh confusing.
And we get clients saying,Well, look, I've put 100,000
into crypto, so I've got noprofit this year, but it's not
an expense, it's an investment.
It's only pensions that qualifyas a deduction against your
income for um corporation tax.
So just to make that clear.
Um holding of the investments,so it's quite common for
(10:41):
properties to be held in aseparate company, and that is 10
well, that tends to be drivenby the lenders who want to have
a charge over a new cleancompany that is not mixed in
with any other activities.
Whereas um it's quite okay foran associate who wants to put
money into crypto or stocks orshares to hold that um in their
(11:02):
associate company.
There's no there's norequirement to move it out if
it's just stocks, shares, andother investments.
It can become a problem if youthen have an associate dental
company that becomes a practiceowning company, which does
happen.
So, again, talk that throughwith your account in the barrel.
Should I have my investments ina separate company?
Um, if you've got aspirationsto want to practice, how would
(11:24):
that work in terms of umsplitting those two things out?
Because it is important, andwe'll get to that when we look
at practice owners in a minute.
Okay.
Dr James (11:33):
Nice one.
By the way, David, I don't knowif there's any way to just make
the slides just a little teenybit bigger on the screen.
Because if possible, if it's ifit's not, it's not.
David (11:44):
No, it is, so I must have done the wrong screen.
I've done the wrong screenagain.
Let me let me uh start again.
Dr James (11:48):
It's alright.
If it's if it's not it, if it'sgonna be a big problem, we're
we're fine.
The main uh value is comingfrom what you're telling us.
David (11:56):
Let me see.
I'll tell you what, third timelucky.
Dr James (11:58):
Let me let me start again.
It's it's alright, it'salright, no biggie.
Uh so on, two.
David (12:06):
So is that big?
Dr James (12:10):
Oh, that is so much better.
I'm glad that I asked.
Excellent.
David (12:13):
Excellent.
Thanks.
And apologies to everyone.
I've got three screens and justyeah, it's not always obvious.
No problem.
Okay, so uh this kind of slidejust is a list of common
expenses that we see.
It's a PDF that is available,and I will send this, James.
You can pass this on afterwardsof just look.
These are things that you couldbe incurring that you might not
(12:34):
be telling your accountant, andtherefore you could be missing
out on some tax relief.
And again, this applies tolimited companies as well as uh
sole traders.
So if you're an associate witha sole trader, this would still
apply to you.
Um I'll talk through it becausesometimes that you know can be
interesting.
Um, so starting at the top,protective clothing.
So if you've bought scrubs andthings that are 100% clothing
(12:57):
for work, that is a taxdeductible expense, so you can
claim uh for that.
Um, the cleaning of that isalso so if you've got a bag of
scrubs and you're sending it tothe the cleaner once a month,
that's also a business expenseand it's tax deductible.
Printing, postage, andstationary.
Um, if you buy pens, stamps,pads, diaries, we we tend to say
(13:24):
you know, you claim about £50 ayear just just for that sort of
stuff.
PSP we call it printing,postage and stationary.
Um travel expenses.
So as a dentist, you will betraveling for courses, you'll be
traveling to see um uh 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
(13:45):
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 spend yourphone, you might have just said
something in your diary thatsays today I would travel to
London or to Scotland orwherever.
But you can claim for that thatis a business expense.
So is your phone?
(14:05):
We all use our phone for Ithink I use my phone, majority
of my phone is for businesswork.
So I think that would be thesame for a lot of a lot of
dentists, and we do um ask youto tell us 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 aswell.
(14:26):
Um, you will be paying forsubscriptions, so your GDC
subscriptions, um, BDAsubscriptions, those are things
that should be obvious.
Course fees is where it gets alittle bit colourful, and we can
have a lot of um colourfulconversations with the clients
about um course fees, andespecially if they're overseas.
(14:47):
Now, is it an expense?
That's the first thing.
So if you're going to um for aCPD um to go on a course that
relates to the work you'recurrently 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 um and it's for
(15:08):
the work that you're currentlydoing, that is still an expense.
As is the travel, as are thehotel costs.
Um where it gets colourful isthe timings involved because
HMRC will want to say, well,look, you you travel the day
before, you land, sleep, startthe course, sleep, come back.
And if there's an element ofpersonal enjoyment, um they
(15:29):
won't give you the uh the travelin those days, hotels.
So we we do tend to get askedthat quite a bit about well,
what if I stay an extra week ora few days here?
And um yeah, that that's theofficial line with it.
So we sometimes get asked,well, look, the course is
finished on a Thursday and on aFriday.
I'm you know, I want the Fridayto myself, and what what can I
(15:50):
do?
And if you've got an extra day,what why don't you just go and
talk to a lab out there or somekind of supplier, and you can
tell me that that was that was abusiness day as well.
So just be reasonable.
But courses tend to be,especially with overseas travel,
a bit bit colourful in terms ofwhat is what is possible.
Um, because everybody likes ourladie, don't they?
Um legal and professional soshould be pretty
(16:15):
straightforward.
Unfortunately, you know, thereare lawyers out there who do
make dentists' lives difficultand patients uh are advertised.
And if you've got a legal feeyou've had to pay to defend
yourself, that is fully taxdeductible.
Um, legal fees that might notbe so obvious, and it's worth
saying for um as well aseducation purposes is if you're
(16:37):
buying a practice or you've putan offer on a practice and
you've had to pay legal fees andyou've incurred costs, but it
doesn't go through, it fallsthrough for whatever reason you
know your your lending pulledout at the last minute or change
of circumstances.
Legal fees for an abortedpurchase are unfortunately not
tax deductible.
So that's that's the bad newson legal fees.
(16:59):
Uh your accountance fees, soyour accountant's fees to
prepare your tax return and allthe phone calls and so on is an
expense, so make sure that'sincluded.
As is your indemnity insurance,any books and journals,
payments to charities, computerexpenses.
You might have put a laptopthat you do work on, that's
that's a business expense.
As is an iPad, you know, youcan be using that for looking at
(17:22):
scans and x-rays and so on.
Um, use of home, you can claim£302 a year, no questions asked,
so mate, so 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 uh claim that as anexpense.
So those are your commonexpenses.
(17:43):
Um thinking beyond that, um wethen get into, I suppose, a bit
more thinking on planning.
Um, so you have a limitedcompany, you're drawing salary
and dividends, um, you're taxedon that.
Now yeah, it's it's I mean it'sa good question to ask what
(18:04):
what what have we got availablewithin the family?
Is maybe a spouse at home withthe kids, or do they have maybe
a lower rate of tax they'repaying if they've not got you
know a very high-paying job?
Um, they can be involved in thebusiness, either as an employee
or as a shareholder, uh,potentially both.
Um, what's right for youdepends on a lot of
(18:25):
circumstances, but certainly umone of those two options would
would be um you know advisableif they're paying a lower rate
of tax, why not uh um involvethem?
Has to be done correctly, butum obviously talk that through
the accountant.
I've put on there other familymembers as well, just because
it's something we get asked alot um about about grandparents.
(18:48):
So if you have a limitedcompany, we get asked, well, can
I employ my uh grandparents?
And the answer is you can givea job to whoever you like, um,
is is the answer.
Now that sh should you is thequestion.
So I think where it becomes agood idea is if you are
supporting your grandparentsanyway.
(19:08):
So you know you they've raisedyou and you want to support them
in their old age, and they cando 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
they can generally be justifiedto be doing some work, you can
employ your grandparents, andand that money that you're
giving um to your parents thenis an expense for the company.
(19:30):
So again, it's it's bringingbringing the tax liabilities
lower.
Um directors' loans is anothermethod of taking money out, so
getting money out of a companyto you personally is one of
three ways salary, dividends, orloan.
Directors' loans have to bepaid back, and if they aren't,
then they are just converted toa dividend, so not so tax
(19:53):
efficient, and that section of455 taxes is essentially a
dividend tax.
But where director's loan canbe tax sufficient is actually if
you are planning to loan moneyto your company.
Um, we often see this whereagain go into the practice uh
acquisition.
So dentist has a limitedcompany, has put an offer on a
(20:14):
practice, is going to buy, um,but needs to you know get the
deposit from his savings accountinto the company because it's
the company buying it.
That money that is lent to thecompany is a loan to the
company, and that can be used tooffset against any dividends
that are taken.
So to bring to convert that umconvert dividends taken into
(20:35):
actually a repayment of the loanand and you know bring the
income tax down that way.
So loans to the company can bea good idea and bring tax down.
So we like that one.
Um trivial benefits, you know,not everybody is aware, so it's
worth adding on there.
You can uh pay £50 non-cashexpenses per employee up to £300
(20:59):
per year.
So if yourself you have alimited company, you are a
director, you're an awesomeemployee, and perhaps your
spouse is also an employee, sobetween the two of you, you can
have £600 of uh um Christmaspresents or whatever you want to
choose.
Uh that's good to know.
Uh you can also, on top ofthat, so not not included in
(21:21):
that, you can also host anannual party.
So you you know, go out for anice meal at a cost of £150 per
head.
Um that's an annual uhallowance there.
So that's also good to know.
Dr James (21:35):
David, only um £50, uh the £300 per year employee uh
still that's divvied up into the£50 non-cash expenses.
Does that also apply todirectors?
David (21:46):
Directors are employees, yes.
Dr James (21:49):
Oh, there you go.
Okay.
Good.
Just to bring that one up,wasn't sure.
David (21:55):
No problem.
Yep, good question.
Um you you also have businessmeetings, and um again, let's
say you are going to a meetingwhere you are discussing
business, the business ofdentistry.
Let's say you meet your uhprincipal for a coffee or for a
meal to talk about things, um,that can be paid through the
(22:18):
company.
It's not an expense in that itwon't reduce your corporation
tax, but it's better to be paidfrom company money um 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 it's better to dothings like that through the
company.
(22:38):
Um so that's good.
We've talked about mobilephones and laptops, so I won't
say that again.
Um cars is a big expense forpeople, and your company can
provide that to you as anexpense, that is much better
than buying a car through moneythat has been subject to
(23:00):
corporation tax, 25%, and thendividend tax of potentially 33%.
So if you are not adverse to anelectric car, and some people
obviously prefer petrol, but youknow, a lot of our clients you
know, do you have electric cars?
And the answer is always put itfor the company, it's uh it's
gonna be an expense for you.
As is a bicycle.
(23:22):
So if like me, you've recentlytaken up road biking because you
like to get out and about, um,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 corporation tax
and dividend taxes.
(23:42):
So don't uh don't miss that oneif you if you do ride a bike.
Um okay, so next slide is onproperties.
I want to talk a bit aboutproperties because it is very
common.
We have a lot of dentists whoum limited companies and it's a
you know everybody loves bricksand mortar, so interproperty.
(24:05):
Um so just an overview here.
So, I mean what's the benefit?
So as a higher rate taxpayer,um there's no tax relief for
mortgage interest that wasabolished years ago, um, which
is really horrible because youcan if you buy a property
personally, your higher ratetaxpayer, you rent it out for a
grand, you're paying the bank$800, you know, $900 a month in
(24:27):
interest, but you're taxed onthe grand.
So once you paid the tax, oftenwe have you know situations
where people are putting moneyinto the property just to cover
its expenses, so that's cashflow negative, not good at all.
Uh, that's not the case forcompanies because companies get
the interest as an expense thatbrings the tax down.
Um, that's what it says there.
(24:47):
Um, lenders will want a specialpurpose vehicle, i.e., a
separate company for that.
Um, they want it clearlyseparate with 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 director shareholders
in both companies, that's fine.
(25:09):
There's no tax issues there.
Um, and it can be written offin future if uh that's a
decision that's made in futurewithout tax consequences.
I have put on the consider exittaxes because it is something
that people often forget thatyou might buy a buy to let in
the property.
Sorry, you might buy a buy tothe property in the company, but
(25:31):
if I want to buy that from you,I don't want to buy a company.
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 youneed to take it out as a
dividend.
So when you're doing your sums,just make sure you've you've
thought that bit through thatyou might have to pay dividend
taxes when it comes out.
Um however, as I say, soproperty is very popular, and it
(25:54):
can soon um you know someassociates who are quite adamant
they do not want to be practiceowners, and they're very doing
very well in property, and itgrows and grows and grows, and
over time it becomes um a goodproblem, but a problem for
inheritance tax, uh, which iswhat I want to talk about.
Uh so this slide just shows thesetup of you know the two
(26:15):
companies.
Um, yeah, so inheritance tax.
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
estates.
So inheritance tax is a muchbigger problem for people now.
There is um work in thebackground, people trying to get
(26:37):
that um pushed back on, but asthings stand, pensions are now
part of your estate, so peopleare gonna pay more inheritance
tax.
Um, there is some planning thatcan be done um with property
companies, in fact, it and anycompany, but I'm gonna talk
about property companies becauseyou tend not to pass on a
dental company to children.
Um you tend to sell it and thenmove on in life, but this also
(27:01):
applies to any company, um, andthat's growth shares.
So um what's a growth share?
So growth share is a fixed umline in the sand on the value of
a company.
So the scenario is is thisJames, you have a property
company that at today is worthone million pound, and it's in a
(27:21):
fantastic area, and we sit downand you tell me, David, it's
worth a million today, but inten years it's going to be two
million, and I've got a problembecause the doctors told me I'm
not doing so well and I mightnot have 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 shares do is weum have a corporate lawyer who
(27:44):
drafts articles and ashareholders' agreement to
convert that £1 million and tocrystallize it into the existing
shares, and then we issue aseparate class of shares called
growth shares, and any increasein value is allocated to those
growth shares, and those growthshares are issued to the kids
today, so any future value ispassed down tax-free because
(28:08):
it's not a passing down of um ofvalue, it's an issuing of
shares that subsequently grow invalue.
So I'll say that again.
The million pound is put intothe existing shares that you
keep, but we issue new shares,and any growth is automatically
allocated to those which aregiven to the children, and
(28:29):
they're worth a pound today, butin ten years they're worth a
million that we know.
So there's a million poundpassed down tax-free, and that's
um a special kind of tax planethere.
Dr James (28:38):
And it's that's that's a hack right there.
You can that you can allocateall of the growth to those
shares that have beendistributed.
I mean, that's yeah, that'sfascinating that you can do
that.
David (28:49):
Works really well for investments because investments
by definition over time go up invalue.
Dr James (28:54):
Yeah.
David (28:54):
Um, and it's more so for investments because practices
are the same, most people sellit on the open market.
And um, don't pay it's quiterare you pass a practice down
like that.
So just wanted to uh mentionthat's a good good tax planning
opportunity there.
Dr James (29:09):
Presumably that works outside of property with other
assets as well, so just maybenot done as frequently.
David (29:15):
Correct, yeah.
It it's shares, so it'scompanies, but if you have
assets within a company, thesame principle applies.
Dr James (29:23):
Yeah, interesting.
David (29:25):
Yeah.
Right, 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
think that you know, if I drawall the money from my business,
I it's not right for me to havea company.
And in general, that's right,but there is an exception to
(29:47):
that, and that is if you're apractice owner with a bank loan.
And I probably shouldn't saythis, but of all my clients, the
ones who are most stressed andunder financial pressure are
principals who've bought apractice that's not inside
limited company because they gethammered on paying the bank
back and paying tax on the bankrepayments.
(30:09):
So whenever I talk to anassociate who's buying a
practice, I will always try andsteer them towards well, can you
buy it through a company?
Um 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
off the contract, and a companycannot be a party to an NHS
(30:31):
contract.
It can be an owner but not aparty, so on a sale, you can't
do it.
But um if you've bought, youknow, or if you own a um a
practice and it is a soletrader, and you do have a bank
loan, you can incorporate it.
So, you know, going back to thetitle, how can you extract
effectively extract wealth fromthem to company or have one in
(30:52):
the first place?
An example here on screen, I'mnot sure if everyone can see
this, but this um uh practice ismaking profits of 283, and on
the basis that all pract allprofits are used personally,
because we've got the loanrepayments of 56,000 that are
still subject to mouse on it,that's subject to income tax.
This um client is still goingto save 8.8,000 pounds per year
(31:17):
in tax.
So incorporation of your soletrader practice is something to
think about as a good planningopportunity.
Um, it does involve arefinance, so you'd need to get
a new loan in the company name.
Perhaps that's a good thingbecause interest rates are
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
(31:40):
profits that you pay to thebank, and it it could well save
you tax.
So um also it's worth sayingthe NHS local teams are a lot
more happier to not give you aheadache now.
So they understand the pressureNHS practices are under because
you need to get their approval,and they understand that you
know the pressures that are onNHS practices, so they they give
you less headache these days.
It's not guaranteed, but uhyeah, it's worth worth
(32:03):
mentioning.
Okay.
So for principals, the sale ofyour practice will be probably
the most significant financialmilestone of your career.
Um a dental practice is a veryvaluable asset.
(32:24):
Um the market wasn't great lastyear, so we had a good year,
2022, for sales.
Um corporates were very active,interest rates were low.
Um 23, 24, not great.
Not great in terms of theoffers that we had for clients
and deals that actuallycompleted.
There were a lot of clients whogot offers that were messed
(32:44):
about and then they you knowfell through for whatever
reason.
Um, and multiples were prettyconsistently low.
Um, it's getting more activenow.
Multiples are better.
So last year I would have said6.5 was about the average for
profits in terms of valuations,7.25 is is uh more consistent
now.
So people are paying more fordental practices corporates are.
(33:07):
Uh and as I say, that's fueledby well, interest rates are
coming down, so corporates canbuy cheaper, and that has an
impact as well.
Um, and there are corporatesout there who are getting ready
for their exit, and that puts alot of pressure for people to
buy and you know be part of theexit of that corporate, which is
good.
So we are seeing more offersfor clients um to sell.
(33:27):
So when you're in thatsituation, whether it's this
year or next year, or for thefuture, you've you've got I
suppose two options for you interms of capital taxes when you
sell.
Uh, you have BADR, businessasset disposal relief, um, which
is 14% at the moment, going to18% in April.
Or substantial shareholdingexemption if you sell via a
(33:50):
holding company, which is zero,which sounds really good.
And that can be certainlybetter than um 18%, but um it's
only for a certain scenario ifyou're going to reinvest the
money, and I'll explain in inthe following slides, um, which
is what it says there.
So consider SSA if reinvestingthe funds.
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of this podcast.
David (36:00):
How is this relevant?
So if you own your dentalpractice fire limited company,
um you can sell the shares tothe buyer and you will
potentially pay 14% if thatcompletes before April or 18%
thereafter.
Um, there are conditions forthat.
Um, so for the prior two yearsup to your sell, you have to
(36:21):
have been an employee ordirector and owned more than 5%
of a trading company, and that'srelevant because when we talk
about investing through yourcompany, we have some clients
with over a million pounds incrypto because they've just done
really well at it, and over amillion in property.
(36:43):
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
investments outside.
(37:04):
That's one strong reason to doit to not jeopardize your
business asset disposal relief,uh, to pay a lower rate of tax
on sale.
Um, 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
(37:25):
loans, and then those thoseloans are dealt with on the
sale, it's much easier to dealwith it that way.
So um, planning uhopportunities around that
certainly um shares can begifted to your spouse, so you
get a million pounds of lifetimegains.
If the practice is going tomake a gain of two million, why
not have that split 50-50 withyour partner?
(37:45):
Um we'll save a lot of tax.
Um children, it's possible tomake your adult children say 18
plus shareholders.
If you know we have somepractices that go for four or
five million and you need tospread it out a bit further,
however, kids are different thanyour spouse because your
(38:06):
spouse, you live with everythingshared.
Um HMRC, well, if you're givingshares to your children, if
you're gifting shares, you'vegifted it.
A gift is a gift, is a gift, iswhat they say.
So once that money's with thekids, it's theirs, you can't ask
them to pay it back.
Um they might, you know, quoteunquote buy you things, but
that's that's out of their goodheart, not immediately,
(38:26):
certainly.
Um so that's that's how thatone works.
Um and that's how it'sstructured, dental practice, one
company, investments the other,nice and easy on the sale.
The dental practice goes, theinvestment company stays.
Next is if you have a veryclear plan that I'm gonna sell
(38:47):
my practice and I'm gonna gettwo million pounds and I'm gonna
reinvest all of it in thiseither new business that I've
got, I'm very clear on property,and it's gonna be reinvested.
Uh, there is something called asubstantial shareholding
exemption where you put in aholding company like this.
So the holding company now ownsthe dental practice company.
(39:08):
You may or may not have aproperty company in there, but
I'll put it in for illustrationpurposes, and it's the holding
company that sells the sharesand 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 0%
because there's an exemptionfor that, which is great,
because why pay tax if you don'thave to?
(39:29):
If you're absolutely clear,you're going to roll it over
into new things.
We often get asked on holdingcompanies um, should I have when
I'm not sure what I'm going todo?
So I've got a dental practice,and I've heard you know,
somebody's told me to put aproperty company a holding
company in place.
And I always say, Well, if youare not clear right now, then
(39:51):
don't do it because don't forgetyou've got 12 months pre-sale.
Um, a sales process will takeyou six months minimum by the
time heads of terms are signed,and you'll be talking to buyers
for two, three months beforethat.
So you've easily got ninemonths anyway, um for you know
to get through.
And pretty close to sale,you'll you'll know what your
plans are.
So you can put in a holdingcompany towards the end, but if
(40:15):
you start with one and you needto take it out, that's
complicated and time consumingand 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.
Dr James (40:30):
And David, just to clarify one thing on that,
because I was having thisconversation recently uh with my
accountant, and he was sayingthat there's if you do a share
transfer to a holding company,there's not normally a tax
liability for that, is there?
David (40:48):
No, there's a process to go through to make sure there's
no issues with it called umclearance.
So there are tax laws on umtransferring of shares, and we
we write to HMRC to say we areseeking advanced clearance that
this proposed transfer of sharesis outside of related uh
(41:08):
employment-related securitiesand and that there's no charge
to tax by doing it.
And there is one department atHMRC that works really well, and
it's this department,Reconstructions.
They reply within two weeks,and you can talk to them on
email.
Every other department is aphone call.
Uh, but the Reconstructionsdepartment, because it services
big multinationals, is actuallyvery well run, and you will
(41:29):
usually get a reply within twoweeks to say, yep, go ahead, no
problems.
So it's very quick to put inplace as well.
Dr James (41:35):
Interesting, because that's just something.
I mean, we're taxed foreverything, aren't we?
You know what it feels like,but that's something that we're
not taxed for, which I findinteresting.
David (41:45):
Yes, and I think rightly so, because you're not receiving
any money.
Um, it's different, and we hadthis with a client recently
where they were actuallytransferring shares.
So um dentist A wanted to givehis shares in his company to
another dentist for shares intheir company, so swapping
shares between due dentalpractices, and there was no cash
(42:08):
being transferred, but there isa tax charge because there's an
exchange of values and there'sno exemption for that.
So it was a bit um difficultbecause there was swapping
shares without any cash moving,but they had a 14% tax charge,
and there's unfortunatelynothing we could do on that one.
There's not an exemption forthat.
But whereas a company that youown, as you say, there's no cash
moving hands, so why should youpay tax?
(42:29):
Okay, uh, so next slideextracting uh cash.
So it is that we you know it isquite common we do see clients
who have not invested money,they've not put it into stocks
(42:50):
or pensions or or property, orthey have done and they've got
cash left over, and they don'twant to take it as a dividend
because why would you if youdon't need it?
Um it's more relevant toprincipals who are selling the
business, and you know, there isa way that says there you
convert you can convert cash tocapital.
So by default, cash is usuallytaxed as income, but if you uh
(43:14):
include it on the sale of yourpractice and the share purchase
contract is worded correctly,that cash can be bought from you
by the buyer at capital taxrates of uh 14 or 18 percent,
um, which is quite handy.
So you don't need to freak outif you've got hundreds of
thousands in cash and you'reselling your practice, you don't
need to take it as a dividend,you can just add it to the gain
(43:36):
and be paid at 14, 18%.
So that's another another wayto deal with excess cash.
Dr James (43:44):
Interesting one on um entrepreneurship for VADR, and
maybe we're getting a little bitbeyond the scope of this
presentation, but they seem to,I mean, once upon a time it was
10 million, right?
Tax-free, and then 10, and thenit was capital gains above
that, and now it's like uh onemillion, isn't it?
(44:06):
One million, but you still gettaxed, you still you know I get
taxed 14% on that one million,or and it will be 18% soon.
David (44:14):
Yep, and it was 10 million at one point, I remember
those days, and I don't want tosound pompous, but one million
today's money is quite differentthan 10 million 10 years ago.
So there's no adjustment forinflation at all there, is
there?
Dr James (44:27):
Yeah, maybe we're getting beyond the scope of
this.
What's your what's yourpersonal because obviously with
when people set up their dentalpractice and they're like, yeah,
okay, I'm gonna get them abrilliant exit in like 10 years,
15 years.
Do you think I know it's hardto comment, but do you think
they're gonna keep it in someform or just keep watering it
down just out of interest?
David (44:46):
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 that.
It's been quite, you know, inthe in the news a lot.
Very prominent wealthy peoplewho have moved overseas because
they don't want to pay thatrate.
So I and that's bad forbusiness.
That's bad for that's bad forthe business of raising taxes.
(45:09):
We want people to stay in thiscountry and pay taxes.
The more people that pay at alower rate is better than
because the people that willmove this will move overseas are
the people with the mostassets, if you think about it.
So I don't think it's good forbusiness.
Dr James (45:24):
Yeah, remains to be seen.
That one is here for themoment.
Um, but when you get into thesethings like running a business,
and you're like, you know, mostof the time it's quite a while
before you get your your yourexit, you know what I mean?
And you kind of you get into itwith this in mind, and then
there's no guarantee that it'sgonna be here or it's gonna be
watered down.
Further still.
But yeah, no, I was justinterested on your thoughts on
(45:46):
that one.
We can't no we can't predictthe future.
David (45:49):
No, and it's politics, isn't it?
So what's right and what'spolitically uh sexy is is two
different things, isn't it?
Dr James (45:56):
So cool.
Just interested to know whatyou thought.
We'll see.
David (46:03):
Okay, so yeah, that's it.
So I hope that was cool.
Sorry, I spoke quite fastthere.
I think I got a bit excited onmy topic.
Dr James (46:13):
No, I think that was the perfect tempo personally,
and I think we actually all oweDavid a clap up.
So I'm gonna start to clap upon everyone else's behalf.
I'm sure there's peopleclapping behind the cameras this
evening as well.
David, thank you for uh sharingthat enlightening as always.
And you know what?
I said to David before we didthis webinar tonight, I was
like, right, tell us about allthe stuff that we know about
just so that we can have a recapand ensure that we're covering
(46:36):
all bases.
And that that tax deductible,that little that's that 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
ensure we've covered all bases,and also the things that people
(46:57):
don't know about as much, whichis really interesting.
Because actually, whenever wewere talking about VADR just a
second ago, I think there's lotsof people who still don't know
about that, and lots ofprincipals as well that that I
talk to whenever we bring it up.
And it's all it's all justabout that.
Yes, we were talking about itgetting watered down, it's still
one of the lowest taxes thatthere is, and it's one of the
incentives that there is forpeople to go out there and still
(47:20):
be entrepreneurs and beprincipals in this day and age.
So, yeah, some interestingstuff, guys.
We said that we would do somequestions.
We've got about 15 minutes forquestions.
So, what we are now gonna do israttle through as many of them
as you can, and I can see thatthere's been quite the influx in
(47:41):
the chat box, which is cool,which is good to see.
So, David, if you're happy,should we just go ahead and get
cracking?
See how far we get?
David (47:48):
Yeah, it's a really good question.
Um yeah, so I think the firstof them.
Dr James (47:54):
Yeah, I'll read how I'll read them out if you want.
Uh you can do the thinking.
How about that?
Yeah, all right, cool.
First one for Ryan Stewart.
Shout out, Ryan Stewart.
Hope you're doing good.
Is the buying of lunch coffee?
Ryan's thinking of a stomach,respect.
Is the buying of lunch lastcoffee during a normal working
day a business expense?
David (48:16):
The answers 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 you
took her out for a costa coffee,um, that would be put on a
daily basis, no.
It's only if it's because it'sit's what's the purpose of it?
The purpose of that coffee isto fill your stomach.
(48:38):
But if you've had that coffeeto have a meeting with somebody,
then then you can't do it.
Dr James (48:41):
Good.
And that's a good example ofsomething that you in the second
situation you were talkingabout just a second ago, when
you're taking somebody out forlunch, you can put it through
the limited company, but it'snot tax deductible, right?
But it'll still be cheaper todo it that way.
David (48:53):
Correct.
Dr James (48:54):
Yeah, cool.
Good stuff.
Next question from AA uhpseudonym there, I believe.
Can you involve children over17 years of age?
And are there any limits ontheir involvement?
David (49:11):
Great question.
Yes, you can.
Um, they can't be shareholders,and potentially that's you know
not a good thing either at thatage, but they can be employees,
so they can do work.
Um obviously you've gotnational minimum wage to think
about, so you know they're anemployee, you have to not uh pay
them pennies.
Um in terms of limitations, Ithink that HMRC would look at
(49:34):
that and say, Well, what workhave you given them?
Um you wouldn't give them apractice manager's job, you
wouldn't give them seek receivedduties, but they could be doing
um 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,whether they do it well or not,
is as I say, HMRC can'tperformance manage your staff.
(49:56):
Some staff are good, some staffare not great.
Um, but it should be relevantin terms of their market 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?
Um, but going back to involvinga family member, your child is
your family member, you'regiving them pocket money, let
them earn it.
So, yeah, definitely.
Dr James (50:17):
Good stuff.
Next question from Amanda,Amanda Naylor Is an electric car
as an expense only relevant ifbuying you?
David (50:28):
Um no, but and it's only for limited companies, but if
it's uh new or secondhand, it'sstill a um a tax expense.
The only difference is asecondhand electric car um isn't
a hundred percent expense inthe first year, it's eighteen
percent per year, so it's adifferent rate.
You you still get the taxfrequence over a longer period
of time.
(50:48):
Um that's if you're buying it,if you're leasing, then it's
just whatever you're payingmonthly for it, but you can
still get it as an expense forthe company.
Cool.
Dr James (51:00):
John Gaddis, can you get the cycle to work scheme,
the back purchase, and stillclaim some motor expenses for
between practices, courses, andmeetings?
David (51:13):
Yes, you can.
Dr James (51:13):
Yeah, yeah.
David (51:14):
You're not forced to, you know, HMRC can't force you to
cycle every day.
It rains quite a lot in thiscountry.
So one day you might cycle, oneday you might go into car.
Dr James (51:24):
Seems reasonable.
Jeremy Williams, question fromJeremy Williams.
Used cars can be claimed, butare claimed at 18% a year for
five years?
Yeah.
Yeah.
I think it was a statement morethan a question, that one, but
yeah, it's accurate.
Uh okay.
Uh question from ARPS.
Do you still need to pay IHT ontax or sorry, sorry, beg your
(51:48):
pardon?
Do you still need to pay IHT ortax when you sell the practice
and you're resident, forinstance, in Dubai?
David (52:00):
Yeah.
Um, I think that one needs aproper look at before yes or no.
Um can't can't give you a yesor no or not.
I would have to look at it andsee how long are you there for,
when did you move, what's the umwhat's your involvement in the
company at the point.
There's a lot in there.
Um so look get get it looked upproperly.
I couldn't give a yes or no ornot.
Dr James (52:21):
Seems reasonable.
And you know what?
It's probably a good point tomention that after this webinar,
we are gonna be sending out anemail which has an opportunity
within it to connect with David.
There's gonna 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 a substitute for good tax
advice.
David is also available on theFacebook group as well, Mr.
David Hossine.
(52:41):
So feel free to look him up ifyou want to ask anything more
specific about what we weretalking 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
childcare?
Would that be classed as anexpense?
David (53:00):
Okay, um, childcare is not an expense, but you might
pay them for doing other work.
So this this is where youyou've got to think it through.
So you you you want to pay thegrandparents because they're
helping you out with the kids.
You can't say that take yourcity because that's not a
business expense.
Or you might be paying them forhelp with admin and they mine
(53:23):
the kids for free, if that makessense.
It's uh it's how it's umpackaged up and sold to the tax
man, um, and often it's it's aconversation around it looking
presentable and reasonable.
Um and there's usually a way,there is usually a way we we we
do have people to go down thatroute, but you are employing
them and giving them duties thatyou can kind of show, but
(53:43):
they're mining the kids for freeas a result of it, and it's
it's it's kind of anunderstanding, uh, if that makes
sense.
But from HMRC's perspective,you're not paying them to mind
your kids, they would not giveyou that at all.
You can't you can't do that.
Dr James (53:56):
Fair enough.
And second question is for the£150 annual party allowance,
does your company bank accountor receipt need to show the
practic the precise amount of£150 exactly?
David (54:13):
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 not
need it than you know, be askedand have an inquiry and be like,
look, my bank statement sayswhatever San Corolla's off as
enduring.
But it's also like they mightwant to see the receipt and
look, we haven't had this, but Ialways do it for myself and I
tell clients just take a photobecause if they ever wanted to
(54:35):
see how many starters have yougot how many meals per person,
and that detail would be on theinvoice.
So yeah.
Dr James (54:42):
Is that £150 per head per employee?
Yes, per employees.
Okay.
That's quite the party, then,right?
You can really look after them.
And is it just just the one,just one off?
David (54:53):
No, no, it's an you could have two events each, £75.
So it's just that's the annualuh allowance, doesn't have to be
one of them.
Dr James (55:01):
Right, I see, fair enough.
All right, no problem.
Another question.
Uh, as a dental associate, canI employ children aged over 18
pounds for my limited company?
David (55:15):
Hmm.
If they're doing what you cangive a job to anybody.
Is you know, HMRC can't tellyou who to employ and who not to
employ.
But with it being a familymember, they would again look
for what are you paying themversus 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.
(55:39):
You might give them some money,and uh you you can do that
through payroll, is the rightway to do it.
So absolutely.
Dr James (55:46):
Interesting.
Next question is coming in howcan I 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 gonna be releasingthe full presentation, the full
video on the mailing list andthe website.
So that should be out thisSaturday.
(56:08):
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 uhfor attending 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
a second ago.
(56:28):
It's gonna be the full whack,it's gonna be the whole 60
minutes, so you might as wellclaim it if it's there and it's
free.
So good thing to know.
Thank you for that question.
Next question from Pratik (56:36):
What are the ways to be tax
efficient with a company whenyou're salaried and already
earning in a higher tax bracket?
I've been exploring this andthere seems to be minimal ways,
mainly SIP contributions.
David (56:52):
So I think if you're saying that you're salaried and
you don't have a company, isthat is that what the I think
that's what the back maybe if Iread it out again, what are the
ways to be tax efficient with acompany when you're salaried and
already earning a higher taxbracket?
Dr James (57:09):
Yeah, there's kind of a I think so.
From what I gather, you'resaying that you're employed.
David (57:17):
Oh, he's put a comment.
I'm I am salaried, but alsohave a company for other
purposes.
Dr James (57:21):
So oh, right, that makes sense then.
Okay.
David (57:25):
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 youwon't pay income tax on it.
And then all the things wetalked about apply to that
company then.
Dr James (57:36):
Fair enough.
Hopefully that clears thingsup.
Pratique, let us know if we'vegot that situation right just
there, and that that that thathelps.
Uh yeah, I don't think there istoo many exotic ways beyond
what we said this evening.
Is there, David?
David (57:48):
No, and anything exotic, um, have double checked because
exotic things have a way of uhcausing future exotic problems
for you.
Seems reasonable.
Dr James (57:57):
John Gallis, what is the benefit to a practice bar?
Hang on, let me just see thisquestion right here.
A practice bar to buy cash inthe business, is there a limit
to this?
David (58:09):
There's no benefit because you pay it out to the
seller.
Um, and there the the question,is there 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 thedeals that I've done, you you
know that cash is paid out tothe seller, so you don't get it,
and why would you?
Because you have to thenfinance that acquisition with
(58:29):
interest and so on.
So you don't want to inherit alot of cash.
Um, is there a limit to itpotentially for the seller if
they've got three million incash?
Again, going back to is it atrading company or an investment
company?
But it's an issue for theseller, not the buyer, so you
you'd be okay with that.
Dr James (58:45):
Thank you for that one.
Question from Davik Patel (58:46):
Can your dental company loan money
to your property investmentcompany if the directors and
shareholders are not the same?
Dental equal husband and wife,property equal husband with
third party person?
If not, is there a way to do itand what are the implications
and things to consider?
David (59:08):
It is possible.
So the question is (59:09):
can you loan it?
Yes, you can.
You can loan money to anycompany.
Um the the the kind of where Isay there's no tax problems
where it's common control andownership is where you are gonna
write that loan off, but whereyou were doing it with a third
party, I will assume that youwant that loan repaid in future,
which is fine.
It's only if you're gonna writethe loan off for you know if
(59:32):
one business is being sold oryou just don't want to repay it
for whatever reason, but whenthere's a third party involved,
a loan is a loan.
That's a loan, there'sabsolutely fine to do that.
Uh any considerations, have itall in writing, a proper written
agreement, um, preferablydrafted by a lawyer, because you
know, that's good businesspractice.
Dr James (59:53):
The writing off thing that you mentioned just a second
ago, I mean, surely it can't beas simple as you have the
dental company, you lend a wholeload of money over, invest it
in properties, and then youdon't have to pay a penny back.
Is there some sort of penaltythere?
David (01:00:07):
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.
Um the buyers of the practicewould, their lawyers would want
to see a copy of that umdocumentation.
And we we prepare those, soit's um it's possible to do.
It's not it's not much work,but you do have to have the
(01:00:28):
paperwork, it has to be properlyminuted, board meeting dates
and so on, signatures.
Dr James (01:00:32):
Because that seems like a little bit of a hack
right there.
That seems like a a way thatit's possible to get money very
tax efficiently across anothercompany and then invest it.
David (01:00:43):
Yeah, it it is.
And HMRC say that you can't setout with that intention.
So you can because a loan is aloan, so you make a loan with
the intention of it beingrepaid, but it it's very common
that circumstances transpirethat the company receiving the
loan has invested it, it can'trepay it without liquidating the
(01:01:04):
assets, and the directors haveagreed not to recover it.
But it's you can't set out withthat intention formally, but
it's it's very common.
Dr James (01:01:15):
And it's enough to be by way of by way of an explainer
as to why you're doing that,it's enough to be able to say
I've bought all these propertiesand I can't conveniently
liquidate them.
Absolutely, and that's fine,even though even though even
though on the balance sheetthere is enough money there,
right?
David (01:01:31):
Yes, but it's not liquid, is it?
Dr James (01:01:37):
Really?
Right, wow, okay, interesting.
There we go.
Glad you asked that question,Debbie.
Yeah, that's a reallyinteresting point there.
Anyway, um, okay, coming up tothe final whistle.
No, I think we've got time forone more, and that's from Ryan
Stewart again.
Trivial benefits.
Can I buy six 50-point Amazonvouchers?
(01:02:00):
You can, right?
You can as long as it's notcash, isn't it?
David (01:02:03):
Vouchers are cash.
Dr James (01:02:04):
Oh, are they?
Oh, never mind.
Uh without these beingredeemed, single 300-pound
transaction.
Ryan, why do I get theimpression you're gonna rush off
after this webinar and doexactly this?
Uh, you've you've thought thisthrough.
Uh deemed a single 300-poundtransaction, 600 pound if I go
mad for the wife, and and who ismy secretary to?
(01:02:27):
Okay.
Uh, or do they need to bespread out throughout the course
of the year, basically, is whatRyan's asking.
David (01:02:33):
Ryan sounds really fun.
Um yeah, it is it's limited to50 pounds per transaction, and
it can't be vouchers.
Vouchers are cash, basically.
Dr James (01:02:42):
So right.
But then the second part ofthat, I guess, what Ryan is
getting at is if you do them allin one evening, like a little
flurry, three uh six fifty poundvouchers, that's okay.
Or six, not sorry, notvouchers, six fifty-pound
expenses.
David (01:02:56):
Yes.
300 pound of wine that's 50pounds each in one transaction.
Yeah, as long as it's you know,I think the key is a
transaction, I would have it asone bank payment, two bank
payments, three bank payments.
Like just do them separately,don't just buy six bottles of
wine for 50 pounds each, becausethat could be seen as one
purchase.
Just have it as separatepayments.
Nice.
(01:03:17):
All in the same day, yep, gomad, as you say.
Dr James (01:03:20):
And then am I right in saying, okay, no, no, that's
fine.
Yeah, that makes sense.
Because you could, yeah, youcould have it's it's basically
purchases, right?
You can have multiple items ineach purchase, but the purchase
can't exceed 50 points.
Yeah, is another way of sayingthat.
Lots of dentists have money in their limited company,
which is effectively strandedthere because of tax.
And when I say stranded, what Imean is we can get it, but it's
just gonna cost us a lot to beable to extract it into our own
personal name.
And that's why today's podcastis hosted by myself and also Mr.
David Hossein, specialistaccountant to dentist.
(02:05):
We're gonna be discussing allof the methods that are out
there that can be used toextract wealth from your limited
company.
Both the common knowledgemethods 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.
(02:26):
As ever, you can claim your CPDfor this episode within the
official Dentists Who InvestSmart Money Members Club.
Smart Money Members Club alsoincludes multiple mini courses
and webinar series on financefor dentists, including how to
become as tax efficient aspossible, as well as
understanding investing.
All of this content counts asverifiable CPD, and you can
(02:47):
download your certificates thereand then upon completion of
each lesson.
In addition to this, we alsoinclude a whopping 10% discount
on your dental indemnity and a5% discount on lab bills for
dental principals, amongst otherperks and discounts for
members.
Please use the link in thedescription to claim your
verifiable CPD for this episode.
Everybody, welcome to thiswebinar.
(03:11):
This evening we're talking taxefficiency and how to
efficiently extract your moneyfrom your limited company
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
(03:33):
thing, and that's why I'm joinedtoday by Mr.
David Hossine, expertaccountant to dentists.
David, I'm looking forward tothis one.
Where should we start?
David (03:44):
Hi James, yeah.
Uh I'm excited to be here.
Um so we we can we can jump in,I suppose.
I've got the slides already in.
Dr James (03:52):
Let's do that.
Let's do that.
Bit of housekeeping just beforewe do that.
Tonight is gonna 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 QA section, which is gonnabe about 35, 40 minutes in.
(04:13):
So then what that means is it'sa first come, first served
basis.
Basically, the first questionswe see in the chat, we're gonna
answer as many as we can upuntil that R mark that we talked
about just a second ago.
So, yeah, if everyone's happy,as you said, David, now's the
time we can get we can jumpstraight in, right?
David (04:29):
Yeah, let's get started.
So do you want me to share thescreen?
Dr James (04:36):
Yeah, let's do it.
Let's do it.
You should have permissions, Ibelieve.
David (04:39):
Oh, okay.
So bit of uh IT knowledge now.
Let me see if I can figure thisout.
Dr James (04:45):
It's all right.
Uh zoom right at the bottom.
See the button that says share.
David (04:50):
Yeah.
I've got three I've got threescreens, it's just figuring out
the right one.
Dr James (04:54):
Oh, right, right, right, right.
David (04:55):
Gotcha.
So let's try again.
Um, how's that?
Can you see uh how to extractwealth from your limited
company?
We we certainly can.
We're looking good.
Super.
Okay, so yeah, so if you'rehere, you obviously have a
limited company.
Um the question then becomesyou know, how are we extracting
(05:18):
things in a tax-sufficient way?
Um now, second slide there.
Can I just check?
Can you see that it's moved foryou?
Dr James (05:24):
Uh it hasn't quite yet, David, actually.
Um I've got the wrong screen,that's why.
David (05:29):
Let me show you.
Dr James (05:29):
No, it's all right.
It's all right.
David (05:31):
Uh so I'll start again.
Uh stop share.
Sure.
That's the problem withmultiple screens.
Okay, so we try again.
Um how about that?
Does it say overview?
Dr James (05:45):
Yeah, no, I were cooking.
David (05:46):
Yeah, you're in the right place.
Good.
All right, so um, it's not thatlong ago, so it's only 2006
since dentists who were actuallyallowed to have a limited
company.
There were concerns about umlimited liability and so on, and
whether it's appropriate forhealthcare professionals to have
it, and how that opens thedoors to corporate ownership.
But we are we are able to tradeas dentists as a limited
(06:10):
company.
Um obvious tax benefit is thatit allows you to control the
level of income tax you pay onyour earnings.
So your earnings can be acertain level, but you control
what income tax you pay based onwhat you draw out of the
company.
That that's a starting point.
Um, a bit of a quirk with thisis that if you are a dental
associate in the NHS, um, youcan have a company, but you
(06:31):
can't superannuate, which isdifferent for principals who can
and they um can have a companyand still superannuate insofar
as they have a salary anddividends, whereas associates
are unfortunately not allowed.
So I don't make that rule, butit is important to say.
So if anybody listening tothinking about going with a
company, you have to know ifyou're an NHS dentist, you can't
(06:53):
have a superannuation goingforward.
So, okay.
So hopefully that's clear toeverybody.
Uh, next slide.
So wealth extract wealthextraction.
So a big part of extractingwealth will be minimizing the
tax that you pay because theless that goes to HMRC, uh, the
more is available for yourself.
(07:14):
Um, so using a limited company,whether it's an associate or
principal, um, will ultimatelyaccrue a significant amount of
cash inside the company, right?
Because that's the wholepurpose of the company.
You're gonna control what youtake out, therefore the company
will be left with cash.
So that's certainly somethingthat should be uh talked through
before having a company andhave a strategy about well, you
(07:36):
know, I'm gonna have this car,so I know what I want to do with
it.
Um, and we'll talk about someof those kind of options here,
not as financial advice, butjust more on the tax side of it.
So that's that's my remote, ifyou like.
Uh, we'll also discuss uh forassociates and principals
because they both have differentunique problems, I suppose, if
you can call it that.
Uh so starting with associates,so hiring associates use a
(08:02):
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 pounds, what onearth is going on?
Should I be paying that much?
What can I do about it?
And conversation is usually,well, you know, you earn money,
you you pay income tax on it,but if you can uh if you're not
(08:23):
spending all of it and you'vegot a plan for that money, then
yes, a company can help you.
Um tends to be that we like tofor people to have uh less than
£100,000 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
(08:44):
£12, uh 570 tax for yourallowance, and on that chunk of
your income above £100, you areeffectively paying 60% tax,
which is not good for um for youto be doing basically, and just
controlling that.
So keep yourself at 100.
Uh, but certainly that thelower you go, the more you save.
Um, so you've got your company.
(09:07):
Um, we need to think aboutwell, have you claimed all for
your expenses that you'reallowed to, and any allowances
and any basic things that can bedone to minimize that.
Because again, minimize thetax, 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
(09:29):
100,000.
And this also applies toassociates who are not having
companies, um, that you can putmoney into a pension to bring
your income down, again,avoiding that 100,000 plus
strap.
Um, paying into a pension, youcan do that into a private
pension for your company.
It is fully tax deductible.
So that portion of your incomethat you put into a pension is
effectively subject to zero umzero tax, which is really good.
(09:53):
Um, and it's an expense.
So I want to make that clearthat payments into a pension,
whilst they are investments,they are also an expense for for
your uh tax purposes.
Other investment options uhkind of tend to be around
putting into a property or stockshares and crypto.
The difference with those typesof investments is that they are
(10:16):
not an expense, and that can besometimes uh confusing.
And we get clients saying,Well, look, I've put 100,000
into crypto, so I've got noprofit this year, but it's not
an expense, it's an investment.
It's only pensions that qualifyas a deduction against your
income for um corporation tax.
So just to make that clear.
Um holding of the investments,so it's quite common for
(10:41):
properties to be held in aseparate company, and that is 10
well, that tends to be drivenby the lenders who want to have
a charge over a new cleancompany that is not mixed in
with any other activities.
Whereas um it's quite okay foran associate who wants to put
money into crypto or stocks orshares to hold that um in their
(11:02):
associate company.
There's no there's norequirement to move it out if
it's just stocks, shares, andother investments.
It can become a problem if youthen have an associate dental
company that becomes a practiceowning company, which does
happen.
So, again, talk that throughwith your account in the barrel.
Should I have my investments ina separate company?
Um, if you've got aspirationsto want to practice, how would
(11:24):
that work in terms of umsplitting those two things out?
Because it is important, andwe'll get to that when we look
at practice owners in a minute.
Okay.
Dr James (11:33):
Nice one.
By the way, David, I don't knowif there's any way to just make
the slides just a little teenybit bigger on the screen.
Because if possible, if it's ifit's not, it's not.
David (11:44):
No, it is, so I must have done the wrong screen.
I've done the wrong screenagain.
Let me let me uh start again.
Dr James (11:48):
It's alright.
If it's if it's not it, if it'sgonna be a big problem, we're
we're fine.
The main uh value is comingfrom what you're telling us.
David (11:56):
Let me see.
I'll tell you what, third timelucky.
Dr James (11:58):
Let me let me start again.
It's it's alright, it'salright, no biggie.
Uh so on, two.
David (12:06):
So is that big?
Dr James (12:10):
Oh, that is so much better.
I'm glad that I asked.
Excellent.
David (12:13):
Excellent.
Thanks.
And apologies to everyone.
I've got three screens and justyeah, it's not always obvious.
No problem.
Okay, so uh this kind of slidejust is a list of common
expenses that we see.
It's a PDF that is available,and I will send this, James.
You can pass this on afterwardsof just look.
These are things that you couldbe incurring that you might not
(12:34):
be telling your accountant, andtherefore you could be missing
out on some tax relief.
And again, this applies tolimited companies as well as uh
sole traders.
So if you're an associate witha sole trader, this would still
apply to you.
Um I'll talk through it becausesometimes that you know can be
interesting.
Um, so starting at the top,protective clothing.
So if you've bought scrubs andthings that are 100% clothing
(12:57):
for work, that is a taxdeductible expense, so you can
claim uh for that.
Um, the cleaning of that isalso so if you've got a bag of
scrubs and you're sending it tothe the cleaner once a month,
that's also a business expenseand it's tax deductible.
Printing, postage, andstationary.
Um, if you buy pens, stamps,pads, diaries, we we tend to say
(13:24):
you know, you claim about £50 ayear just just for that sort of
stuff.
PSP we call it printing,postage and stationary.
Um travel expenses.
So as a dentist, you will betraveling for courses, you'll be
traveling to see um uh 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
(13:45):
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 spend yourphone, you might have just said
something in your diary thatsays today I would travel to
London or to Scotland orwherever.
But you can claim for that thatis a business expense.
So is your phone?
(14:05):
We all use our phone for Ithink I use my phone, majority
of my phone is for businesswork.
So I think that would be thesame for a lot of a lot of
dentists, and we do um ask youto tell us 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 aswell.
(14:26):
Um, you will be paying forsubscriptions, so your GDC
subscriptions, um, BDAsubscriptions, those are things
that should be obvious.
Course fees is where it gets alittle bit colourful, and we can
have a lot of um colourfulconversations with the clients
about um course fees, andespecially if they're overseas.
(14:47):
Now, is it an expense?
That's the first thing.
So if you're going to um for aCPD um to go on a course that
relates to the work you'recurrently 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 um and it's for
(15:08):
the work that you're currentlydoing, that is still an expense.
As is the travel, as are thehotel costs.
Um where it gets colourful isthe timings involved because
HMRC will want to say, well,look, you you travel the day
before, you land, sleep, startthe course, sleep, come back.
And if there's an element ofpersonal enjoyment, um they
(15:29):
won't give you the uh the travelin those days, hotels.
So we we do tend to get askedthat quite a bit about well,
what if I stay an extra week ora few days here?
And um yeah, that that's theofficial line with it.
So we sometimes get asked,well, look, the course is
finished on a Thursday and on aFriday.
I'm you know, I want the Fridayto myself, and what what can I
(15:50):
do?
And if you've got an extra day,what why don't you just go and
talk to a lab out there or somekind of supplier, and you can
tell me that that was that was abusiness day as well.
So just be reasonable.
But courses tend to be,especially with overseas travel,
a bit bit colourful in terms ofwhat is what is possible.
Um, because everybody likes ourladie, don't they?
Um legal and professional soshould be pretty
(16:15):
straightforward.
Unfortunately, you know, thereare lawyers out there who do
make dentists' lives difficultand patients uh are advertised.
And if you've got a legal feeyou've had to pay to defend
yourself, that is fully taxdeductible.
Um, legal fees that might notbe so obvious, and it's worth
saying for um as well aseducation purposes is if you're
(16:37):
buying a practice or you've putan offer on a practice and
you've had to pay legal fees andyou've incurred costs, but it
doesn't go through, it fallsthrough for whatever reason you
know your your lending pulledout at the last minute or change
of circumstances.
Legal fees for an abortedpurchase are unfortunately not
tax deductible.
So that's that's the bad newson legal fees.
(16:59):
Uh your accountance fees, soyour accountant's fees to
prepare your tax return and allthe phone calls and so on is an
expense, so make sure that'sincluded.
As is your indemnity insurance,any books and journals,
payments to charities, computerexpenses.
You might have put a laptopthat you do work on, that's
that's a business expense.
As is an iPad, you know, youcan be using that for looking at
(17:22):
scans and x-rays and so on.
Um, use of home, you can claim£302 a year, no questions asked,
so mate, so 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 uh claim that as anexpense.
So those are your commonexpenses.
(17:43):
Um thinking beyond that, um wethen get into, I suppose, a bit
more thinking on planning.
Um, so you have a limitedcompany, you're drawing salary
and dividends, um, you're taxedon that.
Now yeah, it's it's I mean it'sa good question to ask what
(18:04):
what what have we got availablewithin the family?
Is maybe a spouse at home withthe kids, or do they have maybe
a lower rate of tax they'repaying if they've not got you
know a very high-paying job?
Um, they can be involved in thebusiness, either as an employee
or as a shareholder, uh,potentially both.
Um, what's right for youdepends on a lot of
(18:25):
circumstances, but certainly umone of those two options would
would be um you know advisableif they're paying a lower rate
of tax, why not uh um involvethem?
Has to be done correctly, butum obviously talk that through
the accountant.
I've put on there other familymembers as well, just because
it's something we get asked alot um about about grandparents.
(18:48):
So if you have a limitedcompany, we get asked, well, can
I employ my uh grandparents?
And the answer is you can givea job to whoever you like, um,
is is the answer.
Now that sh should you is thequestion.
So I think where it becomes agood idea is if you are
supporting your grandparentsanyway.
(19:08):
So you know you they've raisedyou and you want to support them
in their old age, and they cando 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
they can generally be justifiedto be doing some work, you can
employ your grandparents, andand that money that you're
giving um to your parents thenis an expense for the company.
(19:30):
So again, it's it's bringingbringing the tax liabilities
lower.
Um directors' loans is anothermethod of taking money out, so
getting money out of a companyto you personally is one of
three ways salary, dividends, orloan.
Directors' loans have to bepaid back, and if they aren't,
then they are just converted toa dividend, so not so tax
(19:53):
efficient, and that section of455 taxes is essentially a
dividend tax.
But where director's loan canbe tax sufficient is actually if
you are planning to loan moneyto your company.
Um, we often see this whereagain go into the practice uh
acquisition.
So dentist has a limitedcompany, has put an offer on a
(20:14):
practice, is going to buy, um,but needs to you know get the
deposit from his savings accountinto the company because it's
the company buying it.
That money that is lent to thecompany is a loan to the
company, and that can be used tooffset against any dividends
that are taken.
So to bring to convert that umconvert dividends taken into
(20:35):
actually a repayment of the loanand and you know bring the
income tax down that way.
So loans to the company can bea good idea and bring tax down.
So we like that one.
Um trivial benefits, you know,not everybody is aware, so it's
worth adding on there.
You can uh pay £50 non-cashexpenses per employee up to £300
(20:59):
per year.
So if yourself you have alimited company, you are a
director, you're an awesomeemployee, and perhaps your
spouse is also an employee, sobetween the two of you, you can
have £600 of uh um Christmaspresents or whatever you want to
choose.
Uh that's good to know.
Uh you can also, on top ofthat, so not not included in
(21:21):
that, you can also host anannual party.
So you you know, go out for anice meal at a cost of £150 per
head.
Um that's an annual uhallowance there.
So that's also good to know.
Dr James (21:35):
David, only um £50, uh the £300 per year employee uh
still that's divvied up into the£50 non-cash expenses.
Does that also apply todirectors?
David (21:46):
Directors are employees, yes.
Dr James (21:49):
Oh, there you go.
Okay.
Good.
Just to bring that one up,wasn't sure.
David (21:55):
No problem.
Yep, good question.
Um you you also have businessmeetings, and um again, let's
say you are going to a meetingwhere you are discussing
business, the business ofdentistry.
Let's say you meet your uhprincipal for a coffee or for a
meal to talk about things, um,that can be paid through the
(22:18):
company.
It's not an expense in that itwon't reduce your corporation
tax, but it's better to be paidfrom company money um 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 it's better to dothings like that through the
company.
(22:38):
Um so that's good.
We've talked about mobilephones and laptops, so I won't
say that again.
Um cars is a big expense forpeople, and your company can
provide that to you as anexpense, that is much better
than buying a car through moneythat has been subject to
(23:00):
corporation tax, 25%, and thendividend tax of potentially 33%.
So if you are not adverse to anelectric car, and some people
obviously prefer petrol, but youknow, a lot of our clients you
know, do you have electric cars?
And the answer is always put itfor the company, it's uh it's
gonna be an expense for you.
As is a bicycle.
(23:22):
So if like me, you've recentlytaken up road biking because you
like to get out and about, um,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 corporation tax
and dividend taxes.
(23:42):
So don't uh don't miss that oneif you if you do ride a bike.
Um okay, so next slide is onproperties.
I want to talk a bit aboutproperties because it is very
common.
We have a lot of dentists whoum limited companies and it's a
you know everybody loves bricksand mortar, so interproperty.
(24:05):
Um so just an overview here.
So, I mean what's the benefit?
So as a higher rate taxpayer,um there's no tax relief for
mortgage interest that wasabolished years ago, um, which
is really horrible because youcan if you buy a property
personally, your higher ratetaxpayer, you rent it out for a
grand, you're paying the bank$800, you know, $900 a month in
(24:27):
interest, but you're taxed onthe grand.
So once you paid the tax, oftenwe have you know situations
where people are putting moneyinto the property just to cover
its expenses, so that's cashflow negative, not good at all.
Uh, that's not the case forcompanies because companies get
the interest as an expense thatbrings the tax down.
Um, that's what it says there.
(24:47):
Um, lenders will want a specialpurpose vehicle, i.e., a
separate company for that.
Um, they want it clearlyseparate with 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 director shareholders
in both companies, that's fine.
(25:09):
There's no tax issues there.
Um, and it can be written offin future if uh that's a
decision that's made in futurewithout tax consequences.
I have put on the consider exittaxes because it is something
that people often forget thatyou might buy a buy to let in
the property.
Sorry, you might buy a buy tothe property in the company, but
(25:31):
if I want to buy that from you,I don't want to buy a company.
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 youneed to take it out as a
dividend.
So when you're doing your sums,just make sure you've you've
thought that bit through thatyou might have to pay dividend
taxes when it comes out.
Um however, as I say, soproperty is very popular, and it
(25:54):
can soon um you know someassociates who are quite adamant
they do not want to be practiceowners, and they're very doing
very well in property, and itgrows and grows and grows, and
over time it becomes um a goodproblem, but a problem for
inheritance tax, uh, which iswhat I want to talk about.
Uh so this slide just shows thesetup of you know the two
(26:15):
companies.
Um, yeah, so inheritance tax.
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
estates.
So inheritance tax is a muchbigger problem for people now.
There is um work in thebackground, people trying to get
(26:37):
that um pushed back on, but asthings stand, pensions are now
part of your estate, so peopleare gonna pay more inheritance
tax.
Um, there is some planning thatcan be done um with property
companies, in fact, it and anycompany, but I'm gonna talk
about property companies becauseyou tend not to pass on a
dental company to children.
Um you tend to sell it and thenmove on in life, but this also
(27:01):
applies to any company, um, andthat's growth shares.
So um what's a growth share?
So growth share is a fixed umline in the sand on the value of
a company.
So the scenario is is thisJames, you have a property
company that at today is worthone million pound, and it's in a
(27:21):
fantastic area, and we sit downand you tell me, David, it's
worth a million today, but inten years it's going to be two
million, and I've got a problembecause the doctors told me I'm
not doing so well and I mightnot have 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 shares do is weum have a corporate lawyer who
(27:44):
drafts articles and ashareholders' agreement to
convert that £1 million and tocrystallize it into the existing
shares, and then we issue aseparate class of shares called
growth shares, and any increasein value is allocated to those
growth shares, and those growthshares are issued to the kids
today, so any future value ispassed down tax-free because
(28:08):
it's not a passing down of um ofvalue, it's an issuing of
shares that subsequently grow invalue.
So I'll say that again.
The million pound is put intothe existing shares that you
keep, but we issue new shares,and any growth is automatically
allocated to those which aregiven to the children, and
(28:29):
they're worth a pound today, butin ten years they're worth a
million that we know.
So there's a million poundpassed down tax-free, and that's
um a special kind of tax planethere.
Dr James (28:38):
And it's that's that's a hack right there.
You can that you can allocateall of the growth to those
shares that have beendistributed.
I mean, that's yeah, that'sfascinating that you can do
that.
David (28:49):
Works really well for investments because investments
by definition over time go up invalue.
Dr James (28:54):
Yeah.
David (28:54):
Um, and it's more so for investments because practices
are the same, most people sellit on the open market.
And um, don't pay it's quiterare you pass a practice down
like that.
So just wanted to uh mentionthat's a good good tax planning
opportunity there.
Dr James (29:09):
Presumably that works outside of property with other
assets as well, so just maybenot done as frequently.
David (29:15):
Correct, yeah.
It it's shares, so it'scompanies, but if you have
assets within a company, thesame principle applies.
Dr James (29:23):
Yeah, interesting.
David (29:25):
Yeah.
Right, 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
think that you know, if I drawall the money from my business,
I it's not right for me to havea company.
And in general, that's right,but there is an exception to
(29:47):
that, and that is if you're apractice owner with a bank loan.
And I probably shouldn't saythis, but of all my clients, the
ones who are most stressed andunder financial pressure are
principals who've bought apractice that's not inside
limited company because they gethammered on paying the bank
back and paying tax on the bankrepayments.
(30:09):
So whenever I talk to anassociate who's buying a
practice, I will always try andsteer them towards well, can you
buy it through a company?
Um 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
off the contract, and a companycannot be a party to an NHS
(30:31):
contract.
It can be an owner but not aparty, so on a sale, you can't
do it.
But um if you've bought, youknow, or if you own a um a
practice and it is a soletrader, and you do have a bank
loan, you can incorporate it.
So, you know, going back to thetitle, how can you extract
effectively extract wealth fromthem to company or have one in
(30:52):
the first place?
An example here on screen, I'mnot sure if everyone can see
this, but this um uh practice ismaking profits of 283, and on
the basis that all pract allprofits are used personally,
because we've got the loanrepayments of 56,000 that are
still subject to mouse on it,that's subject to income tax.
This um client is still goingto save 8.8,000 pounds per year
(31:17):
in tax.
So incorporation of your soletrader practice is something to
think about as a good planningopportunity.
Um, it does involve arefinance, so you'd need to get
a new loan in the company name.
Perhaps that's a good thingbecause interest rates are
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
(31:40):
profits that you pay to thebank, and it it could well save
you tax.
So um also it's worth sayingthe NHS local teams are a lot
more happier to not give you aheadache now.
So they understand the pressureNHS practices are under because
you need to get their approval,and they understand that you
know the pressures that are onNHS practices, so they they give
you less headache these days.
It's not guaranteed, but uhyeah, it's worth worth
(32:03):
mentioning.
Okay.
So for principals, the sale ofyour practice will be probably
the most significant financialmilestone of your career.
Um a dental practice is a veryvaluable asset.
(32:24):
Um the market wasn't great lastyear, so we had a good year,
2022, for sales.
Um corporates were very active,interest rates were low.
Um 23, 24, not great.
Not great in terms of theoffers that we had for clients
and deals that actuallycompleted.
There were a lot of clients whogot offers that were messed
(32:44):
about and then they you knowfell through for whatever
reason.
Um, and multiples were prettyconsistently low.
Um, it's getting more activenow.
Multiples are better.
So last year I would have said6.5 was about the average for
profits in terms of valuations,7.25 is is uh more consistent
now.
So people are paying more fordental practices corporates are.
(33:07):
Uh and as I say, that's fueledby well, interest rates are
coming down, so corporates canbuy cheaper, and that has an
impact as well.
Um, and there are corporatesout there who are getting ready
for their exit, and that puts alot of pressure for people to
buy and you know be part of theexit of that corporate, which is
good.
So we are seeing more offersfor clients um to sell.
(33:27):
So when you're in thatsituation, whether it's this
year or next year, or for thefuture, you've you've got I
suppose two options for you interms of capital taxes when you
sell.
Uh, you have BADR, businessasset disposal relief, um, which
is 14% at the moment, going to18% in April.
Or substantial shareholdingexemption if you sell via a
(33:50):
holding company, which is zero,which sounds really good.
And that can be certainlybetter than um 18%, but um it's
only for a certain scenario ifyou're going to reinvest the
money, and I'll explain in inthe following slides, um, which
is what it says there.
So consider SSA if reinvestingthe funds.
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of this podcast.
David (36:00):
How is this relevant?
So if you own your dentalpractice fire limited company,
um you can sell the shares tothe buyer and you will
potentially pay 14% if thatcompletes before April or 18%
thereafter.
Um, there are conditions forthat.
Um, so for the prior two yearsup to your sell, you have to
(36:21):
have been an employee ordirector and owned more than 5%
of a trading company, and that'srelevant because when we talk
about investing through yourcompany, we have some clients
with over a million pounds incrypto because they've just done
really well at it, and over amillion in property.
(36:43):
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
investments outside.
(37:04):
That's one strong reason to doit to not jeopardize your
business asset disposal relief,uh, to pay a lower rate of tax
on sale.
Um, 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
(37:25):
loans, and then those thoseloans are dealt with on the
sale, it's much easier to dealwith it that way.
So um, planning uhopportunities around that
certainly um shares can begifted to your spouse, so you
get a million pounds of lifetimegains.
If the practice is going tomake a gain of two million, why
not have that split 50-50 withyour partner?
(37:45):
Um we'll save a lot of tax.
Um children, it's possible tomake your adult children say 18
plus shareholders.
If you know we have somepractices that go for four or
five million and you need tospread it out a bit further,
however, kids are different thanyour spouse because your
(38:06):
spouse, you live with everythingshared.
Um HMRC, well, if you're givingshares to your children, if
you're gifting shares, you'vegifted it.
A gift is a gift, is a gift, iswhat they say.
So once that money's with thekids, it's theirs, you can't ask
them to pay it back.
Um they might, you know, quoteunquote buy you things, but
that's that's out of their goodheart, not immediately,
(38:26):
certainly.
Um so that's that's how thatone works.
Um and that's how it'sstructured, dental practice, one
company, investments the other,nice and easy on the sale.
The dental practice goes, theinvestment company stays.
Next is if you have a veryclear plan that I'm gonna sell
(38:47):
my practice and I'm gonna gettwo million pounds and I'm gonna
reinvest all of it in thiseither new business that I've
got, I'm very clear on property,and it's gonna be reinvested.
Uh, there is something called asubstantial shareholding
exemption where you put in aholding company like this.
So the holding company now ownsthe dental practice company.
(39:08):
You may or may not have aproperty company in there, but
I'll put it in for illustrationpurposes, and it's the holding
company that sells the sharesand 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 0%
because there's an exemptionfor that, which is great,
because why pay tax if you don'thave to?
(39:29):
If you're absolutely clear,you're going to roll it over
into new things.
We often get asked on holdingcompanies um, should I have when
I'm not sure what I'm going todo?
So I've got a dental practice,and I've heard you know,
somebody's told me to put aproperty company a holding
company in place.
And I always say, Well, if youare not clear right now, then
(39:51):
don't do it because don't forgetyou've got 12 months pre-sale.
Um, a sales process will takeyou six months minimum by the
time heads of terms are signed,and you'll be talking to buyers
for two, three months beforethat.
So you've easily got ninemonths anyway, um for you know
to get through.
And pretty close to sale,you'll you'll know what your
plans are.
So you can put in a holdingcompany towards the end, but if
(40:15):
you start with one and you needto take it out, that's
complicated and time consumingand 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.
Dr James (40:30):
And David, just to clarify one thing on that,
because I was having thisconversation recently uh with my
accountant, and he was sayingthat there's if you do a share
transfer to a holding company,there's not normally a tax
liability for that, is there?
David (40:48):
No, there's a process to go through to make sure there's
no issues with it called umclearance.
So there are tax laws on umtransferring of shares, and we
we write to HMRC to say we areseeking advanced clearance that
this proposed transfer of sharesis outside of related uh
(41:08):
employment-related securitiesand and that there's no charge
to tax by doing it.
And there is one department atHMRC that works really well, and
it's this department,Reconstructions.
They reply within two weeks,and you can talk to them on
email.
Every other department is aphone call.
Uh, but the Reconstructionsdepartment, because it services
big multinationals, is actuallyvery well run, and you will
(41:29):
usually get a reply within twoweeks to say, yep, go ahead, no
problems.
So it's very quick to put inplace as well.
Dr James (41:35):
Interesting, because that's just something.
I mean, we're taxed foreverything, aren't we?
You know what it feels like,but that's something that we're
not taxed for, which I findinteresting.
David (41:45):
Yes, and I think rightly so, because you're not receiving
any money.
Um, it's different, and we hadthis with a client recently
where they were actuallytransferring shares.
So um dentist A wanted to givehis shares in his company to
another dentist for shares intheir company, so swapping
shares between due dentalpractices, and there was no cash
(42:08):
being transferred, but there isa tax charge because there's an
exchange of values and there'sno exemption for that.
So it was a bit um difficultbecause there was swapping
shares without any cash moving,but they had a 14% tax charge,
and there's unfortunatelynothing we could do on that one.
There's not an exemption forthat.
But whereas a company that youown, as you say, there's no cash
moving hands, so why should youpay tax?
(42:29):
Okay, uh, so next slideextracting uh cash.
So it is that we you know it isquite common we do see clients
who have not invested money,they've not put it into stocks
(42:50):
or pensions or or property, orthey have done and they've got
cash left over, and they don'twant to take it as a dividend
because why would you if youdon't need it?
Um it's more relevant toprincipals who are selling the
business, and you know, there isa way that says there you
convert you can convert cash tocapital.
So by default, cash is usuallytaxed as income, but if you uh
(43:14):
include it on the sale of yourpractice and the share purchase
contract is worded correctly,that cash can be bought from you
by the buyer at capital taxrates of uh 14 or 18 percent,
um, which is quite handy.
So you don't need to freak outif you've got hundreds of
thousands in cash and you'reselling your practice, you don't
need to take it as a dividend,you can just add it to the gain
(43:36):
and be paid at 14, 18%.
So that's another another wayto deal with excess cash.
Dr James (43:44):
Interesting one on um entrepreneurship for VADR, and
maybe we're getting a little bitbeyond the scope of this
presentation, but they seem to,I mean, once upon a time it was
10 million, right?
Tax-free, and then 10, and thenit was capital gains above
that, and now it's like uh onemillion, isn't it?
(44:06):
One million, but you still gettaxed, you still you know I get
taxed 14% on that one million,or and it will be 18% soon.
David (44:14):
Yep, and it was 10 million at one point, I remember
those days, and I don't want tosound pompous, but one million
today's money is quite differentthan 10 million 10 years ago.
So there's no adjustment forinflation at all there, is
there?
Dr James (44:27):
Yeah, maybe we're getting beyond the scope of
this.
What's your what's yourpersonal because obviously with
when people set up their dentalpractice and they're like, yeah,
okay, I'm gonna get them abrilliant exit in like 10 years,
15 years.
Do you think I know it's hardto comment, but do you think
they're gonna keep it in someform or just keep watering it
down just out of interest?
David (44:46):
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 that.
It's been quite, you know, inthe in the news a lot.
Very prominent wealthy peoplewho have moved overseas because
they don't want to pay thatrate.
So I and that's bad forbusiness.
That's bad for that's bad forthe business of raising taxes.
(45:09):
We want people to stay in thiscountry and pay taxes.
The more people that pay at alower rate is better than
because the people that willmove this will move overseas are
the people with the mostassets, if you think about it.
So I don't think it's good forbusiness.
Dr James (45:24):
Yeah, remains to be seen.
That one is here for themoment.
Um, but when you get into thesethings like running a business,
and you're like, you know, mostof the time it's quite a while
before you get your your yourexit, you know what I mean?
And you kind of you get into itwith this in mind, and then
there's no guarantee that it'sgonna be here or it's gonna be
watered down.
Further still.
But yeah, no, I was justinterested on your thoughts on
(45:46):
that one.
We can't no we can't predictthe future.
David (45:49):
No, and it's politics, isn't it?
So what's right and what'spolitically uh sexy is is two
different things, isn't it?
Dr James (45:56):
So cool.
Just interested to know whatyou thought.
We'll see.
David (46:03):
Okay, so yeah, that's it.
So I hope that was cool.
Sorry, I spoke quite fastthere.
I think I got a bit excited onmy topic.
Dr James (46:13):
No, I think that was the perfect tempo personally,
and I think we actually all oweDavid a clap up.
So I'm gonna start to clap upon everyone else's behalf.
I'm sure there's peopleclapping behind the cameras this
evening as well.
David, thank you for uh sharingthat enlightening as always.
And you know what?
I said to David before we didthis webinar tonight, I was
like, right, tell us about allthe stuff that we know about
just so that we can have a recapand ensure that we're covering
(46:36):
all bases.
And that that tax deductible,that little that's that 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
ensure we've covered all bases,and also the things that people
(46:57):
don't know about as much, whichis really interesting.
Because actually, whenever wewere talking about VADR just a
second ago, I think there's lotsof people who still don't know
about that, and lots ofprincipals as well that that I
talk to whenever we bring it up.
And it's all it's all justabout that.
Yes, we were talking about itgetting watered down, it's still
one of the lowest taxes thatthere is, and it's one of the
incentives that there is forpeople to go out there and still
(47:20):
be entrepreneurs and beprincipals in this day and age.
So, yeah, some interestingstuff, guys.
We said that we would do somequestions.
We've got about 15 minutes forquestions.
So, what we are now gonna do israttle through as many of them
as you can, and I can see thatthere's been quite the influx in
(47:41):
the chat box, which is cool,which is good to see.
So, David, if you're happy,should we just go ahead and get
cracking?
See how far we get?
David (47:48):
Yeah, it's a really good question.
Um yeah, so I think the firstof them.
Dr James (47:54):
Yeah, I'll read how I'll read them out if you want.
Uh you can do the thinking.
How about that?
Yeah, all right, cool.
First one for Ryan Stewart.
Shout out, Ryan Stewart.
Hope you're doing good.
Is the buying of lunch coffee?
Ryan's thinking of a stomach,respect.
Is the buying of lunch lastcoffee during a normal working
day a business expense?
David (48:16):
The answers 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 you
took her out for a costa coffee,um, that would be put on a
daily basis, no.
It's only if it's because it'sit's what's the purpose of it?
The purpose of that coffee isto fill your stomach.
(48:38):
But if you've had that coffeeto have a meeting with somebody,
then then you can't do it.
Dr James (48:41):
Good.
And that's a good example ofsomething that you in the second
situation you were talkingabout just a second ago, when
you're taking somebody out forlunch, you can put it through
the limited company, but it'snot tax deductible, right?
But it'll still be cheaper todo it that way.
David (48:53):
Correct.
Dr James (48:54):
Yeah, cool.
Good stuff.
Next question from AA uhpseudonym there, I believe.
Can you involve children over17 years of age?
And are there any limits ontheir involvement?
David (49:11):
Great question.
Yes, you can.
Um, they can't be shareholders,and potentially that's you know
not a good thing either at thatage, but they can be employees,
so they can do work.
Um obviously you've gotnational minimum wage to think
about, so you know they're anemployee, you have to not uh pay
them pennies.
Um in terms of limitations, Ithink that HMRC would look at
(49:34):
that and say, Well, what workhave you given them?
Um you wouldn't give them apractice manager's job, you
wouldn't give them seek receivedduties, but they could be doing
um 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,whether they do it well or not,
is as I say, HMRC can'tperformance manage your staff.
(49:56):
Some staff are good, some staffare not great.
Um, but it should be relevantin terms of their market 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?
Um, but going back to involvinga family member, your child is
your family member, you'regiving them pocket money, let
them earn it.
So, yeah, definitely.
Dr James (50:17):
Good stuff.
Next question from Amanda,Amanda Naylor Is an electric car
as an expense only relevant ifbuying you?
David (50:28):
Um no, but and it's only for limited companies, but if
it's uh new or secondhand, it'sstill a um a tax expense.
The only difference is asecondhand electric car um isn't
a hundred percent expense inthe first year, it's eighteen
percent per year, so it's adifferent rate.
You you still get the taxfrequence over a longer period
of time.
(50:48):
Um that's if you're buying it,if you're leasing, then it's
just whatever you're payingmonthly for it, but you can
still get it as an expense forthe company.
Cool.
Dr James (51:00):
John Gaddis, can you get the cycle to work scheme,
the back purchase, and stillclaim some motor expenses for
between practices, courses, andmeetings?
David (51:13):
Yes, you can.
Dr James (51:13):
Yeah, yeah.
David (51:14):
You're not forced to, you know, HMRC can't force you to
cycle every day.
It rains quite a lot in thiscountry.
So one day you might cycle, oneday you might go into car.
Dr James (51:24):
Seems reasonable.
Jeremy Williams, question fromJeremy Williams.
Used cars can be claimed, butare claimed at 18% a year for
five years?
Yeah.
Yeah.
I think it was a statement morethan a question, that one, but
yeah, it's accurate.
Uh okay.
Uh question from ARPS.
Do you still need to pay IHT ontax or sorry, sorry, beg your
(51:48):
pardon?
Do you still need to pay IHT ortax when you sell the practice
and you're resident, forinstance, in Dubai?
David (52:00):
Yeah.
Um, I think that one needs aproper look at before yes or no.
Um can't can't give you a yesor no or not.
I would have to look at it andsee how long are you there for,
when did you move, what's the umwhat's your involvement in the
company at the point.
There's a lot in there.
Um so look get get it looked upproperly.
I couldn't give a yes or no ornot.
Dr James (52:21):
Seems reasonable.
And you know what?
It's probably a good point tomention that after this webinar,
we are gonna be sending out anemail which has an opportunity
within it to connect with David.
There's gonna 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 a substitute for good tax
advice.
David is also available on theFacebook group as well, Mr.
David Hossine.
(52:41):
So feel free to look him up ifyou want to ask anything more
specific about what we weretalking 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
childcare?
Would that be classed as anexpense?
David (53:00):
Okay, um, childcare is not an expense, but you might
pay them for doing other work.
So this this is where youyou've got to think it through.
So you you you want to pay thegrandparents because they're
helping you out with the kids.
You can't say that take yourcity because that's not a
business expense.
Or you might be paying them forhelp with admin and they mine
(53:23):
the kids for free, if that makessense.
It's uh it's how it's umpackaged up and sold to the tax
man, um, and often it's it's aconversation around it looking
presentable and reasonable.
Um and there's usually a way,there is usually a way we we we
do have people to go down thatroute, but you are employing
them and giving them duties thatyou can kind of show, but
(53:43):
they're mining the kids for freeas a result of it, and it's
it's it's kind of anunderstanding, uh, if that makes
sense.
But from HMRC's perspective,you're not paying them to mind
your kids, they would not giveyou that at all.
You can't you can't do that.
Dr James (53:56):
Fair enough.
And second question is for the£150 annual party allowance,
does your company bank accountor receipt need to show the
practic the precise amount of£150 exactly?
David (54:13):
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 not
need it than you know, be askedand have an inquiry and be like,
look, my bank statement sayswhatever San Corolla's off as
enduring.
But it's also like they mightwant to see the receipt and
look, we haven't had this, but Ialways do it for myself and I
tell clients just take a photobecause if they ever wanted to
(54:35):
see how many starters have yougot how many meals per person,
and that detail would be on theinvoice.
So yeah.
Dr James (54:42):
Is that £150 per head per employee?
Yes, per employees.
Okay.
That's quite the party, then,right?
You can really look after them.
And is it just just the one,just one off?
David (54:53):
No, no, it's an you could have two events each, £75.
So it's just that's the annualuh allowance, doesn't have to be
one of them.
Dr James (55:01):
Right, I see, fair enough.
All right, no problem.
Another question.
Uh, as a dental associate, canI employ children aged over 18
pounds for my limited company?
David (55:15):
Hmm.
If they're doing what you cangive a job to anybody.
Is you know, HMRC can't tellyou who to employ and who not to
employ.
But with it being a familymember, they would again look
for what are you paying themversus 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.
(55:39):
You might give them some money,and uh you you can do that
through payroll, is the rightway to do it.
So absolutely.
Dr James (55:46):
Interesting.
Next question is coming in howcan I 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 gonna be releasingthe full presentation, the full
video on the mailing list andthe website.
So that should be out thisSaturday.
(56:08):
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 uhfor attending 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
a second ago.
(56:28):
It's gonna be the full whack,it's gonna be the whole 60
minutes, so you might as wellclaim it if it's there and it's
free.
So good thing to know.
Thank you for that question.
Next question from Pratik (56:36):
What are the ways to be tax
efficient with a company whenyou're salaried and already
earning in a higher tax bracket?
I've been exploring this andthere seems to be minimal ways,
mainly SIP contributions.
David (56:52):
So I think if you're saying that you're salaried and
you don't have a company, isthat is that what the I think
that's what the back maybe if Iread it out again, what are the
ways to be tax efficient with acompany when you're salaried and
already earning a higher taxbracket?
Dr James (57:09):
Yeah, there's kind of a I think so.
From what I gather, you'resaying that you're employed.
David (57:17):
Oh, he's put a comment.
I'm I am salaried, but alsohave a company for other
purposes.
Dr James (57:21):
So oh, right, that makes sense then.
Okay.
David (57:25):
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 youwon't pay income tax on it.
And then all the things wetalked about apply to that
company then.
Dr James (57:36):
Fair enough.
Hopefully that clears thingsup.
Pratique, let us know if we'vegot that situation right just
there, and that that that thathelps.
Uh yeah, I don't think there istoo many exotic ways beyond
what we said this evening.
Is there, David?
David (57:48):
No, and anything exotic, um, have double checked because
exotic things have a way of uhcausing future exotic problems
for you.
Seems reasonable.
Dr James (57:57):
John Gallis, what is the benefit to a practice bar?
Hang on, let me just see thisquestion right here.
A practice bar to buy cash inthe business, is there a limit
to this?
David (58:09):
There's no benefit because you pay it out to the
seller.
Um, and there the the question,is there 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 thedeals that I've done, you you
know that cash is paid out tothe seller, so you don't get it,
and why would you?
Because you have to thenfinance that acquisition with
(58:29):
interest and so on.
So you don't want to inherit alot of cash.
Um, is there a limit to itpotentially for the seller if
they've got three million incash?
Again, going back to is it atrading company or an investment
company?
But it's an issue for theseller, not the buyer, so you
you'd be okay with that.
Dr James (58:45):
Thank you for that one.
Question from Davik Patel (58:46):
Can your dental company loan money
to your property investmentcompany if the directors and
shareholders are not the same?
Dental equal husband and wife,property equal husband with
third party person?
If not, is there a way to do itand what are the implications
and things to consider?
David (59:08):
It is possible.
So the question is (59:09):
can you loan it?
Yes, you can.
You can loan money to anycompany.
Um the the the kind of where Isay there's no tax problems
where it's common control andownership is where you are gonna
write that loan off, but whereyou were doing it with a third
party, I will assume that youwant that loan repaid in future,
which is fine.
It's only if you're gonna writethe loan off for you know if
(59:32):
one business is being sold oryou just don't want to repay it
for whatever reason, but whenthere's a third party involved,
a loan is a loan.
That's a loan, there'sabsolutely fine to do that.
Uh any considerations, have itall in writing, a proper written
agreement, um, preferablydrafted by a lawyer, because you
know, that's good businesspractice.
Dr James (59:53):
The writing off thing that you mentioned just a second
ago, I mean, surely it can't beas simple as you have the
dental company, you lend a wholeload of money over, invest it
in properties, and then youdon't have to pay a penny back.
Is there some sort of penaltythere?
David (01:00:07):
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.
Um the buyers of the practicewould, their lawyers would want
to see a copy of that umdocumentation.
And we we prepare those, soit's um it's possible to do.
It's not it's not much work,but you do have to have the
(01:00:28):
paperwork, it has to be properlyminuted, board meeting dates
and so on, signatures.
Dr James (01:00:32):
Because that seems like a little bit of a hack
right there.
That seems like a a way thatit's possible to get money very
tax efficiently across anothercompany and then invest it.
David (01:00:43):
Yeah, it it is.
And HMRC say that you can't setout with that intention.
So you can because a loan is aloan, so you make a loan with
the intention of it beingrepaid, but it it's very common
that circumstances transpirethat the company receiving the
loan has invested it, it can'trepay it without liquidating the
(01:01:04):
assets, and the directors haveagreed not to recover it.
But it's you can't set out withthat intention formally, but
it's it's very common.
Dr James (01:01:15):
And it's enough to be by way of by way of an explainer
as to why you're doing that,it's enough to be able to say
I've bought all these propertiesand I can't conveniently
liquidate them.
Absolutely, and that's fine,even though even though even
though on the balance sheetthere is enough money there,
right?
David (01:01:31):
Yes, but it's not liquid, is it?
Dr James (01:01:37):
Really?
Right, wow, okay, interesting.
There we go.
Glad you asked that question,Debbie.
Yeah, that's a reallyinteresting point there.
Anyway, um, okay, coming up tothe final whistle.
No, I think we've got time forone more, and that's from Ryan
Stewart again.
Trivial benefits.
Can I buy six 50-point Amazonvouchers?
(01:02:00):
You can, right?
You can as long as it's notcash, isn't it?
David (01:02:03):
Vouchers are cash.
Dr James (01:02:04):
Oh, are they?
Oh, never mind.
Uh without these beingredeemed, single 300-pound
transaction.
Ryan, why do I get theimpression you're gonna rush off
after this webinar and doexactly this?
Uh, you've you've thought thisthrough.
Uh deemed a single 300-poundtransaction, 600 pound if I go
mad for the wife, and and who ismy secretary to?
(01:02:27):
Okay.
Uh, or do they need to bespread out throughout the course
of the year, basically, is whatRyan's asking.
David (01:02:33):
Ryan sounds really fun.
Um yeah, it is it's limited to50 pounds per transaction, and
it can't be vouchers.
Vouchers are cash, basically.
Dr James (01:02:42):
So right.
But then the second part ofthat, I guess, what Ryan is
getting at is if you do them allin one evening, like a little
flurry, three uh six fifty poundvouchers, that's okay.
Or six, not sorry, notvouchers, six fifty-pound
expenses.
David (01:02:56):
Yes.
300 pound of wine that's 50pounds each in one transaction.
Yeah, as long as it's you know,I think the key is a
transaction, I would have it asone bank payment, two bank
payments, three bank payments.
Like just do them separately,don't just buy six bottles of
wine for 50 pounds each, becausethat could be seen as one
purchase.
Just have it as separatepayments.
Nice.
(01:03:17):
All in the same day, yep, gomad, as you say.
Dr James (01:03:20):
And then am I right in saying, okay, no, no, that's
fine.
Yeah, that makes sense.
Because you could, yeah, youcould have it's it's basically
purchases, right?
You can have multiple items ineach purchase, but the purchase
can't exceed 50 points.
Yeah, is another way of sayingthat.
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