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Renovating a dental practice can feel like writing cheques into a black hole. Chairs, HVAC, electrics, partitions, compliance work, reception fit-out, lighting, plumbing, fire systems… the invoices stack up fast, and the tax impact is usually treated as an afterthought. We want to change that. Tax relief through capital allowances can turn a big chunk of commercial property and fit-out spend into real cash flow, and when it’s done properly it is solid, HMRC-recognised planning rather than anything gimmicky.
We’re joined by Chris Lonergan from Bonham and Brooke, a specialist team that blends tax, accountancy and quantity surveying to find what many practices miss. We unpack the key categories dentists need to know: structures and buildings allowance (slow, 3% per year) versus plant and machinery allowances (often far faster). Chris shares a real dental fit-out where around £470,000 of £471,000 spend qualified, and explains how that can translate into tens of thousands in corporation tax savings or even a six-figure income tax repayment for the right circumstances.
We also get practical on the “who can claim and when” questions: what happens if the property sits in a SIPP, how allowances can be unlocked when you buy from residential use, a charity or a developer, and why leasehold improvements can still qualify because the relief follows the party who paid. Then we finish with the weird but real edge cases that show why itemised invoices and specialist review matter, right down to doors, hinges and functional finishes.
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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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Episode Transcript
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Dr James (01:43):
Welcome everybody to this webinar where we are doing
part number two of theextremely, extremely extremely
popular how UK generalprinciples can become as tax
efficient as possible.
And this is topical because ofcourse we're coming up to the
end of financial year deadline,which is April the 6th.
So a lot of this stuff when weimplement it over the next two
weeks, well, it'll be active forthis tax year.
(02:03):
That's not to say that we can'tever do it.
There's always going to be somevalue in learning these sorts
of things, but certainly thesooner we can implement it, the
sooner we can benefit from it.
Well, let's just say there isuh there's there's there's
there's there's it's it's it'sit's encouraging or there's an
incentive there uh is what I'mgetting at.
This webinar is aimed primarilyat dental principles.
You can use a lot of the stuffthat we're talking about in your
(02:25):
dental practice.
However, if you are alsoplanning on becoming a principal
at some point, well, that ofcourse applies to you.
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
(02:45):
understanding investing.
All of this content counts asverifiable CPD, and you can
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In addition to this, we alsoinclude a whopping 10% discount
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Please use the link in thedescription to claim your
(03:07):
verifiable CPD for this episode.
I'm very pleased to introduceor reintroduce, should I say,
Mr.
Chris Lonergan this evening.
Chris, how are you?
Chris (03:19):
How are you?
Dr James (03:22):
I'm good, mate.
I'm good, mate.
I'm I'm doing well.
A lot of fun stuff uh and newstuff at Dennis and Vest, so
it's definitely keeping me busy,uh, which is which is fun.
I can't quite believe it's theend of March already, but here
we are.
But Chris, maybe what it couldbe good to do, just to kick
things off, because we want toget down to business SAP really
uh and start talking about thematter at hand.
(03:42):
Uh maybe what it could be goodto do is a little bit of a
reintroduction as to yourselffor the benefit of the audience.
Chris (03:47):
No problem, James.
Before we start, can I just sayit's a bit of a shame we're not
here together in uh in purpose,in person.
Dr James (03:57):
Um we've got we've got the Victoria line to thank for
that this evening, but we wethought on our feet.
We thought on our feet, didn'twe?
Because we we're both we'reboth able to still have the
interview.
I've just found somewhere thatwe could uh we could conduct
this interview, we findsomewhere on the fly, but
anyway, it is what it is.
Chris (04:14):
It is what it is, and uh obviously if we have any tech
issues as we go along, James,and we need to recommit another
time, then that's fine by me,right?
But we'll just crack on, and uhthis is like round two of a
heavyweight boxing match betweenyou and me, mate.
Dr James (04:29):
Uh you make it sound arduous, it was it is it was
fun, Chris.
It was fun, and it will be fun.
It will be fun.
Chris (04:38):
But the most important thing, James, is that I think um
from the the last webinar,there are 15 or 20 people that
we're still talking to, you andme, who are looking to get value
out of the conversation that wehad.
So it hasn't just been like atheoretical academic exercise,
we're actually delivering somevalue to some of your your guys
(05:00):
and to people who've now becomeclients and uh friends of mine
too.
So that's the most importantthing I would say.
Um I have some slides uh whichwe can run through just to give
a little bit of a frame to thiswebinar.
Um but very, very briefly, I'ma guy who spent about 30 years
(05:23):
in construction, engineering,and tax and accountancy.
Uh my interest in life ishelping people pay less tax, be
very blunt about it, whetherit's income tax or corporation
tax.
My role in life is to helppeople pay less tax legally.
Uh, my big interest is inproperty.
(05:47):
And as you said earlier, um adental practice clearly needs a
property from which to operate,and a group will need more than
one premises, and it's a biginvestment to um say fit out or
buy, um, particularly if youwere to go into a squat, for
example, and have to completelyfit out the squat from scratch.
(06:09):
It can cost a lot of money.
Um, and again, my interest inworking with dentists, dental
principals, and other people isto just make sure they are using
tax as a weapon, if you like,to improve the cash flow in the
business, uh, reduce the cost ofa capital project, and also
(06:31):
reduce their tax bill.
Now, have you gone, James?
Dr James (06:37):
No, so that's no still here, it's just the camera
going in and out a little bit,but we're good to go.
Chris (06:41):
That's that's what it's all about.
You know, we had some goodbanter last time, uh bit of QA.
Um, I have got uh fair amountof technical ability, but I find
these webinars work best whenit's just a chat.
We'll go through some examples,talk about some of the issues
which are facing uh dentists atthe moment, uh, and how we might
(07:02):
be able to help them.
And then obviously, very happyto field any questions from you
or from anybody in the group,uh, either live or afterwards.
Dr James (07:12):
Sure.
And just a little bit ofhousekeeping before we jump into
that presentation.
As I was saying earlier, guys,this uh webinar is all about uh
us sharing and benefiting fromChris's knowledge and experience
in these areas that we'retalking about.
What Chris was talking aboutjust a second ago.
There will be some CPDavailable for this webinar, 60
minutes to be precise, that'sfor smart money members, club
(07:34):
members.
Uh details in that to beannounced at the end of the
webinar.
And as I was saying just asecond ago, as Chris was saying
just a second ago, there will bethe opportunity to ask
questions, specific questions toyour staff and your tax
circumstances and your dentalpractice.
All we ask is that we hold allquestions to right at the end of
the webinar.
If you want, you can pop themin the chat in the meantime, and
(07:55):
we will get to them wheneverthe webinar concludes or
whenever Chris is wrapping upthe presentation part of the
webinar.
Chris, over to you.
Okay.
Chris (08:02):
Now you have to help me a bit here, James.
Is this is this where I sharemy screen?
Dr James (08:06):
Yeah, go for it.
So, yeah, if you want to jumpstraight into your presentation,
that sounds good.
So basically, if you're happy,there's a little button at the
bottom that says share screen.
So if you hit that, yeah,something's happening.
Chris (08:18):
So can you tell me when you can see it okay yourself?
Dr James (08:20):
We're in.
We're in, yeah.
Looks good.
Chris (08:23):
We're in.
Cool.
Thank you very much, James.
And um, what I didn't sayearlier, and I should have done,
is really like to thank youagain for organizing this and
giving us the chance to speak tosome of the people in your
network and in your group,right?
So that's really, really very,very good of you.
Um so I want to talk todayabout using taxation to your
(08:47):
advantage within a dentalpractice, either to improve your
cash flow, in turn improve thereturn on investment you have as
a practitioner, um, and to saveyour tax bill, reduce your tax
liability and cut down theamount of money you pay to the
revenue in terms of tax.
Now I've got about five or sixslides only, James, and a couple
(09:11):
of examples from recent workthat we've done with dentists,
just to place everything intocontext.
Okay, so if that works for you,mate, I'll just crack on.
Excellent.
Um and it's nice to meeteverybody.
Um, it'd be good to get somequestions at the end just to
make sure that everybody's stillthere and listening to what I'm
saying.
So if I move it down.
(09:40):
Okay, I'm sorry, James.
This is uh a different setup tonormal, so it may take me two,
it may take me a couple of goesto get it working properly.
Um I'm Chris, you you knowJames.
It's a very, very short slide.
Uh this is a I'm calling this2.0 because we did a 1.0, worked
(10:02):
really well.
Uh, and this is going to beeven better.
So with that in mind, I'll tellyou a little bit about my
company.
Uh we're called Bonham andBrooke.
Um, not planning to read all ofthese slides out to you because
everybody can read themselves.
Just pick out some some keyfactors.
Uh so we're a tax consultancy,uh, we're based in London, we're
(10:25):
growing really fast.
When I last spoke to James, wehad 75 people in the company.
Uh, that's three and a halfmonths ago.
We now have 95 people.
So we've started another 20people since last time we spoke,
James.
Uh in fact, I think we startedfive people uh this month.
So we're on a real upswing.
(10:47):
Why we're on an upswing?
Because we're very good athelping people um reduce their
tax bills, improve their cashflow, and uh really, really
transform their businesses froma financial perspective.
Um as I mentioned before, Iwork a lot in the property
sector.
Property taxation is a huge,huge market.
(11:09):
It's not particularly wellunderstood.
And I have a bunch ofspecialist people in the company
who are really expert atmaximizing the tax leaf
available from investment incommercial property.
And when we're talking aboutinvestments in commercial
property, what we're reallysaying is that if you buy a
property, if you build aproperty, if you convert,
(11:32):
renovate, extend, or fit out aproperty, then you incur a
substantial amount of capitalexpenditure, and there is tax
relief available from incurringthat capital expenditure.
Um the opportunity and uh Ithink the main opportunity uh is
that what we see is that tax isoften an afterthought when
(11:57):
someone's done something, andI'll show you in a few minutes'
time why tax ought to beconsidered right at the
beginning of making aninvestment rather than
afterwards as a way of savingmoney.
Um, and of course, we're goodfriends with you, James.
They've been very supportiveboth ways, and so we're a
partner of yours, and uh it'sgreat to work with you.
(12:20):
Um it's probably a bit syrupy,but um there we are.
We're just telling the truth.
It's it's it's great to workwith you.
So we're expanding, we're goodat what we do, we help people
save money, we improve cashflow, we help with financing
indirectly, um, and we enjoyworking with dentists.
So rather than diving straightinto capital allowances, which
(12:42):
is the main topic of myconversation and tax relief, I
wanted to start off just by kindof reminding everybody what's
going on at the moment whenyou're running a practice.
Um, and these seem to me to bethe five key areas that when I
talk to dentists, they have um abig concern or a big interest.
(13:06):
Where I can help is withfinancing and cash flow and tax
and investment.
The other areas are outside ofmy scope, um, but I figure that
helping in two out of fiveareas, which are really key, is
a useful thing to be able to do,James.
Um, if we're talking aboutfinancing and cash flow, again,
these are the kind of thingswhich I guess everybody on the
(13:28):
call would recognize.
Uh costs are going up, marginsare being squeezed, uh cash flow
is uh can be very, veryproblematic.
And obviously, capitalinvestments in chairs and
machines, um, maybe IT systemsis significant, particularly
when you're setting up apractice, and that can type a
(13:49):
lot of your cash, which eithermeans you have to borrow money
or has another impact on thebusiness.
Maybe you can't extract theprofits that you'd like to from
the business to uh fuel yourselfand your family.
Clearly, there's a tax burden,um, and it's either a
corporation tax version ifyou've limited, or income tax if
(14:10):
you're a sole practitioner or apartnership.
And again, that's a big drainon your finances.
The last thing which we'retalking to dentists a lot about
at the moment is access tofinance.
So finance is becoming moreexpensive, and my view is that
anything which helps you improveyour ability to borrow money
and borrow money cheaply, andthen to maximize your cash flow
(14:34):
as much as possible is going tobe beneficial when you're either
setting up, expanding, orrunning a practice.
Other last point before I diveinto something even more
practical is that there are lotsof underutilised tax reliefs
that many, many people are notaware of.
(14:56):
And in fact, capital allowancesis one of those tax reliefs
that's not particularly wellknown, and it ends up with
people paying far too much tax.
So, like I said at thebeginning, my role in life is to
educate people to understandthat there are tax reliefs, how
they apply in the dental sector,and then to help them go and
grab them to improve thefinancial performance of their
(15:19):
uh of their businesses or thempersonally.
So the matter at hand are thesethings called capital
allowances.
Um I'm sure some people willhave heard them already, but as
a quick run through, uh HMRCencourages capital expenditure,
particularly on property.
Uh, main reason being that anyevery pound spent on commercial
(15:43):
property generates a significantamount of spend in the supply
chain in the commercial propertymarket and ultimately ends up
generating a lot of tax forHMRC.
So there's good business sensein HMRC encouraging people to uh
improve the kind of estate ofproperties that we have in this
(16:08):
in this in this country.
Um however, tax relief is notavailable on capital expenditure
in the same sense as it wouldbe, say, on buying some services
or buying some consumables, taxrelief on capital expenditure
is available by way of what arecalled capital allowances.
Uh we call them CAs.
(16:29):
So capital allowances providetax relief relating to the
capital expenditure oncommercial assets, so that's
property and also equipment.
Um it's a very, very complextopic, capital allowances.
The legislation which it refersback to is called the Capital
Allowances Act 2001, and it getsamended on a regular basis.
(16:52):
Um HMRC likes to change therules every year or every two
years just to keep everybody ontheir toes.
So there's a requirement tokeep up to date with legislation
to know how to best helppeople.
Um the tax relief is availablefor anybody who pays tax.
People who are who don'tqualify for the relief would be
(17:16):
charities or pension funds oranybody who doesn't pay tax.
So, for example, the publicsector doesn't pay tax, so any
capital investment in the publicsector doesn't qualify for
capital allowances.
Um people say to me, is taxrelief through capital
allowances something that's abit risky?
Uh, the answer is no.
It's not what you might call aJimmy Carr scheme where you have
(17:39):
to go and apologize to people18 months later for getting
involved in some sort of taxwheeze.
Um, this is very, very solidtax planning.
It's actually encouraged byHMRC, um, but you still need to
get it right, otherwise um youdon't maximize your claim, or
there is potential for themunpicking it through an inquiry.
(17:59):
So we specialize in capitalallowances to do with property
purchases and propertyconstruction.
And to be good at this, uh youneed to have a blend of
expertise, which would be uhlegal expertise to do with
contracts, uh, constructionexpertise, quantity surveying
expertise to do with valuingbuildings, accountancy
(18:23):
expertise, and tax expertise.
Um, and if you had on top ofthat uh a kind of expertise of
getting on with people, it'squite a multidimensional type
area that we work in.
Um it's a specialist typefinancial service, it's allied
to some of the work thataccountants do.
So frequently we partner withaccounting firms to do the
(18:48):
specialist work, which they havemaybe started off by doing
someone's sets of accounts.
But should hasten to add thatvery few accountants can do what
we do.
And in fact, um I'm currentlyunpicking a capital allowances
claim that's been done by adental accountant who I shall
not name for obvious reasons,who's completely messed it up,
(19:11):
and now their client ispotentially looking at an
inquiry from HMRC for a massiveoverclaim through lack of
knowledge about actually whatworks in capital allowances.
So bit of a negative comment,but we do see examples where
people try and help to the bestof their ability but stray out
(19:33):
of their sort of comfort zoneand end up needing some rescue
from me.
Dr James (19:38):
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(21:24):
of this podcast.
Chris (21:40):
But these are the kind of areas where you would normally
incur capital expenditure in adental practice.
And the ones I've highlightedin red are the ones where we add
a lot of value.
Um clinical equipment anddiagnostics and pieces of what I
would call loose equipment orfixtures in a building are very,
(22:02):
very easy to claim the taxrelief on.
It's really the building workswhere you require lots and lots
of specialist expertise tomaximize the value of the claim.
And you can see the kind ofareas where we add a lot of
value.
Um in terms of the tax reliefavailable in a building, there's
(22:24):
effectively three sorts of taxrelief which might apply to a
dental practice and in fact haveapplied to dental practices
I've worked with in the past.
Um there are what are calledstructures and buildings
allowances that are to do withthe fabric of a building.
So if you were to build theshell of a building from
scratch, uh you would put up thefoundations, the walls, the
(22:47):
roof, uh, and then that would bethe shell of a building.
Then you might fit it out withfloors, ceilings, partitions.
And this is again the fabricand the shell of a building.
Uh that investment qualifiesfor something called structures
and buildings allowance.
If you then look at theequipment you put into a dental
(23:08):
surgery, which should be chairs,lamps, desks, tables, um, these
are things which are pieces ofloose equipment.
Uh, there's capital ouncesavailable from them, but
generally an accountant wouldknow what to do with them.
Um, there's also items whichare, if you like, built into the
building or buried in thebuilding.
So we're talking aboutelectrics, plumbing, heating and
(23:30):
ventilation, solar equipment,any fitted items, kitchens,
toilets, bathrooms, receptionareas, changing areas, signage,
car.
Lighting, these are all areaswhere there's massive tax relief
available.
But again, you need to knowwhat you're doing to maximize
(23:52):
the claim available for adentist or in fact for anybody.
And the last thing which isless relevant in the dental
world is something called landremediation relief, which is if
you were to buy a piece of landand build something on it and
clean it up, there'd be taxrelief available from the
cleaning up.
(24:13):
Probably more likely if youwere to buy a big old Victorian
building and it had asbestos init for some reason, and you
either remove the asbestos orencapsulated the asbestos to
make it fit for purpose for the21st century, then there's tax
relief available specificallyfor treating that kind of
(24:35):
contaminant in the building.
That encourages people, as Isay, to improve the quality of
the building and the stock ofthe building.
So there are different sorts oftax relief available.
And again, you have to knowwhich things qualify for which
sort of tax relief, and then beable to maximize the value for
(24:55):
one of my clients.
Here's an example of a projectto put things into context,
James.
Again, this is a secondhandproperty.
It's uh either an Edwardian orVictorian type property
somewhere up north.
Let's say it's in Leeds,hypothetically.
So somebody's bought asemi-detached house, which
(25:20):
they're planning to convert intothe surgery on the right hand
side, um, engaged an architectto draw the plans up, um,
engaged a builder to do thebuilding, engaged a designer and
um a decorator to do thedecorating, brought the
equipment, and I think three tofour months later, there was a
(25:45):
fully functioning dentalpractice.
Now, all that expenditurequalifies for quite significant
tax relief.
And if I place this projectinto context, the actual
conversion of the house intosomething which was much more
like a surgery in terms of thewalls, ceilings, and floors was
(26:08):
about £180,000.
The partitions about £20,000.
So around £200,000 was spent onputting this property into the
right kind of configuration tobe a surgery.
Um, in fact, we're just lookingat one in West London right now
where the total expenditure isabout £750.
So this is a bit less than£750, but these days, um, say to
(26:33):
build a squat from scratchcould easily be half a million
pounds, um, maybe up to amillion pounds, depending on the
size of the property and thelevel of fit out specification
that you want to work to.
Again, you can see that this isthis is typical, James, that
there's maybe £50,000 oflighting and electrical systems,
(26:53):
£25,000 of fire alarms, £50,000of air con, plumbing, fitted
work.
So, in total, there's asignificant spend here, and
pretty much all that spendqualifies for tax relief.
Uh, here's a real example froma practice that I just worked
(27:14):
with up in Leeds.
Uh, it this was uh twodifferent uh rooms.
Um £471,000 spent across thetwo rooms to really bring them
up to a different spec.
Of that £471, there was about£1,000 which didn't qualify for
(27:36):
tax relief.
And that was because they hadto do a BAT survey, okay, and
BAT surveys don't qualify forcapital ounces tax relief.
But we actually found £470,000of tax relief in this
expenditure, which split intothose two categories, and those
two categories are reallyimportant, James, because the
(27:59):
ones called plant and machineryallowances can be used in an
accelerated way to reduce yourtax bill and improve your cash
flow.
Whereas the ones calledstructures and buildings
allowances are much, much slowertax relief, and you can use
them at 3% a year.
So it takes 33 and a thirdyears to use up all those
(28:21):
allowances.
Um, consequently, plant andmachinery allowances are the
things which really bringmassive value very, very quickly
in terms of cash flow and taxreduction to a dentist.
And as you can see, of this471, more than 50% was available
(28:42):
to uh Simon, as this dentist iscalled, um to reduce his tax
bill.
In fact, in Simon's case, hehad carried out the work a year
ago, so he'd paid for it and wasmaking quite significant
profits as a dentist.
Uh so working with hisaccountant, we put that tax
(29:06):
relief into a previous tax yearfor him, and it actually ended
up generating him a verysignificant tax refund from
HMRC.
So I've taken Simon's projecthere and given some examples um
based on the figures that Ishowed you on the last slide, uh
(29:28):
the benefit from the claim umif you were a corporation
taxpayer, would vary between£50,000 and £66,000.
Uh Simon, as it happened, forsome reason was an
unincorporated business andoperating as a sole
(29:48):
practitioner.
So he was actually on 45%income tax rate and he received
a check for £118,000 from HMRC.
Now bearing in mind he'd spentabout £471, £118,119 is a
massive, massive reductioneffectively in the cost of
(30:11):
carrying out this works.
Um his comment to me was if I'dknown at the beginning I was
going to get £119,000 of taxback from doing this work, um, I
might have borrowed less money.
I might have spent on ratherbetter equipment, which would
(30:32):
have given my practice an evenbetter look and feel.
And I would have really beenable to work out what the proper
return was on my investment inthis building work by taking
everything into account.
It was a fantastic um sort ofbonus to have for him
afterwards, because I'm not sureanybody's going to walk away
(30:55):
from getting £119,000 of cashback from HMRC.
Um but truly, he really wouldhe's really said that if he was
to do this again, uh he wouldlike to know what he was likely
to get in future at thebeginning to help him with his
decision making about how tofund and what specification to
(31:18):
use on his surgery work.
So as you can see from this, umthe figures are quite
substantial, James.
And the tax relief availablefrom this kind of investment is
very, very significant andreally should be taken into
consideration if you're going tomake any investments.
Dr James (31:40):
I think uh one interesting thing to mention as
well, Chris.
If I if I may just jump in atthis point, I know in this
example that this was uh wellthe taxes already paid, you
know, it was in with even, butit was in it was within it was
rather recent, it was within thelast 12 months.
You may have mentioned thistonight, and apologies if I
didn't hear you say this, butthere is no uh they call in
(32:04):
legal terms a statute oflimitations, right?
You know what I mean?
There's no there's no limit interms of when you can claim
these back, providing they wereunclaimed in the first place,
right?
Even if you bought the buildingfrom someone else.
Chris (32:15):
Absolutely right, and you're just you've jumped ahead
of three slides, James.
Dr James (32:19):
So I'll beg your pardon of all the voices.
I wasn't I wasn't sure you weregonna bring it up.
It just it just caught my earlast time.
It was interesting.
Chris (32:27):
I was gonna test you later, so you've actually just
uh so you can adjust there.
All right.
Um again, I I've got three orfour more slides, then we can
take some some questions, James.
Um, I thought people on thecall might be interested to
understand how the tax savingswork.
Um in this case, this is umthese are accurate figures from
(32:53):
the the guy I worked with.
Uh, I think he's got two dentalpractices, so the turnover from
his practice is about 1.2million, which I understand is
pretty good.
Um, and of that he was makingabout 30% trading profit.
Um but he also was within histrading profit um able to
(33:15):
expense £50,000 in terms ofdepreciation.
So his true profit is actually£410,000 of that £1.2 million.
Uh if you were a corporationtaxpayer, uh then your tax bill
would be about £102,000.
Um, but using again an examplefor capital allowances, it's
(33:37):
typical that you might get£100,000 of capital allowances
back.
So the capital allowancesactually are a bit like
depreciation.
Uh in America they're calledtax depreciation.
So your tax due is based onwhat's called your taxable
profit.
The capital allowances thenreduce your taxable profit, and
(34:00):
that reduces the tax you have topay.
So, in this simple example,someone has saved £25,000.
I can't really use Simon'sproper figures here, James,
because they're confidential.
Um, but I can use an examplethat shows, again, this is a
very, very significant financialbenefit for someone who
actually can make a claim.
(34:21):
Um, going on to what you weresaying, James, there are
different scenarios under whichyou can make a claim for tax
relief relating to property.
Uh, very simple scenarios wouldbe if you were buying a
residential property forcommercial proper for commercial
purposes.
So if you were to buy a semi ora detached house, like one of
(34:42):
my clients has done in Glasgowto convert into a surgery, then
that can free up the capitalallowances buried in that
property.
And the reason it frees it upis purely because uh residential
property is not commercial,therefore the owner of a
residential property cannotclaim capital allowances, but
(35:04):
when there's a change of useagreed through planning, it
unlocks normally about 25% ofthe price of the property as tax
relief.
The same thing would be true ifyou were buying a property from
a non-taxpaying body, publicsector, charity, SIP, pension
funds, because again, theyfailed the test of having to pay
(35:25):
tax, and therefore buying theproperty unlocks normally again
about 25% of the purchase priceof a property.
And the last scenario would beum if you were to buy a property
from a developer or a builder,then to qualify for capital
allowances, you need to hold aproperty as an asset, and a
builder would normally hold aproperty as trading stock.
(35:46):
So, again, a develop a builderor a developer is disqualified
from making capital allowancesclaims, therefore, the capital
allowances transfer onto theperson who buys the property
from the builder or developer.
So there are scenarios that wesee quite a lot with dentists,
James.
Um there are other scenarios aswell, but going on to what you
(36:08):
were saying, you're absolutelyright.
If you're looking atconstruction type work, um,
fitting out, extending,building, converting,
renovating, there is no statuteof limitations or no time limit
on how far you can go back toanalyze that work to look for
unclaimed capital allowances,which is exactly what you were
(36:32):
saying before.
There is no statute oflimitations.
Um I would say, however, thatanything that's done more than
say 10 or 15 years ago may wellhave been redone, James.
And so um you'd be able tocount the most recent capital
work, but the work done like 20years ago, for example,
(36:55):
effectively would have beendestroyed by the new work, and
HMRC won't let you claim twice.
But anyway, yes, there is notime limit for going back to
look at constructionexpenditure, and we spend a lot
of our time uh trying to, if youlike, value the assets in a
building which have beenconstructed quite a long time
(37:17):
ago.
And that really is everything.
And my summary is that there'smassive tax relief available
from investments in commercialproperty.
Uh, dentists are one of thegroups of people in the country
who invest hugely in commercialproperty um to run their
(37:39):
practices, and then increasinglyto provide the look and feel
and the customer experience, ifyou like, that makes them an
attractive practice.
Um the tax saving is very, verysignificant.
The cash flow impact is very,very significant.
If you do an evaluation beforeyou start a project, it can help
(38:00):
with the financing and it canhelp you maximize the return on
investment.
Um, you need special people tobe able to maximize these claims
or do these assessments with acombination of skills that are
quite unusual to find in oneperson.
And my team, which is acrossthe country, is very good at
(38:21):
doing this work.
Um, we partner with you, weprovide a good service, um, and
we're very, very keen to talk topeople to see if we can help
them unlock some of thispotential tax relief and cash
savings in their property.
So that's it for me, James.
I can't hear you.
Dr James (38:42):
Uh can you hear me now?
Chris (38:44):
Yes, I can.
Dr James (38:45):
Yeah.
I was just saying, thanks forthat, super valuable.
And yeah, it was definitelyeye-opening, I guess, whenever
when you and I initially startedtalking, just how much of a
untapped, I guess, potentialhere there is.
And obviously, we just need toensure that it's done properly,
of course, um, by someone whoactually has expertise in this
(39:09):
area, but there is, I guess, anopportunity on the table, I
think it's fair to say, uh, fordental practices that are out
there.
The the the thing that really,just as you were saying a second
ago, uh, the thing that reallykind of caught my eye, or one of
the things that caught my eye,was that you can't, it can go
back indefinitely, like as itcan be claimed even if it's like
30 years ago or something alongthose lines.
And chances are, and I wantedto ask you on that, actually, in
(39:32):
your experience out of thedental practices that you've
worked with, how many times isthis stuff just like totally
untapped where they just haven'tbeen claimed at all?
Or uh, you know, capitalallowances just weren't even a
thing that have been mentionedto a particular dentist uh via
their accountant or or whatever.
Uh I guess I'd like to knowthat.
(39:53):
And then follow-up, slightfollow-up question.
What proportion of the timehave they been done, but they
could capital allowances havebeen filed for, but they could
have been done much better?
I'm interested to know thesplit on that one.
Is it is it is it rare thatthey're done to a very high
standard?
Is kind of what I'm getting at.
Chris (40:10):
Two questions there that I will unpack, as people now
say.
Um first question (40:14):
I think that maybe the 2080 rule applies
with dentists, James.
That's okay.
Dr James (40:25):
I mean, I'm glad I asked this question.
This is interesting.
Yeah, knowledge.
Okay, Pareto's law, Pareto'slaw, idiot.
Chris (40:33):
It applies in a lot of different situations, doesn't
it?
Dr James (40:36):
Yeah.
Chris (40:37):
Um, I if I look at the last 40 or 50 dentists that I've
spoken to, yeah, I would sayabout 20% of them have been um
made aware of capital allowancesby their accountant.
Okay.
And they will be people whomaybe have got a relatively
(40:57):
large accountant, maybe in thetop 20 or the top 50 in the
country.
Dr James (41:03):
Yeah.
Chris (41:04):
Um, we're certainly if your accountant was one of the
really big ones, like you know,PWC or KPMG or all these really
kind of um household names, thenthey will certainly have looked
at it.
But again, there's not manydental practices where PWC would
be interested in becausethey're just not big enough to
(41:25):
be the kind of client they goafter.
So I would say about 80% ofpeople have uh never heard of
capital allowances, 20% have.
Of the 20% that have, um, Iwould say um about half are
people where their accountantwould refer them to somebody
(41:45):
like me, or in fact to me,because it's a specialist skill.
So they would they would pickup the opportunity if you like,
James, they'd also know that itwas outside of their skill set
and they needed somebody um withdifferent skills to do it, and
then it's probably about 10%who'd have a go, right?
And as I said before, I'mcurrently trying to fix
(42:08):
something where someone's had ago um and made a real Horlicks
of it.
Um so that's my experience ofthe last 40 or 50 dentists that
I've spoken to.
I mean, it's not everybody inthe country, mate, so um you can
only I I can only tell you whatI've come across.
They're the kind of figures Iwould say.
(42:29):
Um, and in terms of the kind ofquality and the value of a
claim, um, I mean, a specialistwill always do a better job than
a general accountant.
Um, it's a very complex area,there's a lot of legislation,
uh, there are a lot of differentchanges that happen.
You've got to know aboutbuilding works and uh how you
(42:52):
can maximize the different typesof allowances.
Very few accountants would havepeople who've got building and
construction experience.
Uh, so we'll always do a betterjob on them.
Um, and even if um somebody wasuh uh an experienced um
property type accountant, we'dprobably do about 20% better
(43:16):
than them anyway, because of thetrips to the trade that you
only pick up from being aspecialist in something.
That's a bit of a ramble,James, but did it answer your
question?
Dr James (43:27):
No, that that is actually the reason why I like
questions like that, becauseeven though the answer is
slightly it's it's it's in thefield knowledge, as in it's from
your experience.
It's always going to be a dickyour finger put it in the air
thing, somewhat, because 50 isnot like the biggest sample
size, right?
But at the same time, it's but50 has still got some validity
(43:49):
though, right?
Like it's not like there's likefive of them, you know.
So it's it kind of gives us alittle bit of an idea as to
what's out there.
So 80% is pretty significant.
And I was wondering anotherthing, Chris, that you said to
me once in in one of ourconversations, um, you were
saying that uh as part of whatyou do or what you'd advocate is
you actually go out to thedental practice and have a look
(44:12):
around to figure out what wherethe capital allowances come
from, which is obviously notsomething that a typical
accountant would do, they wouldjust do it from behind a desk.
What are you looking for iswhat I'm where I'm going with
that.
What are you looking for whenyou do that?
Chris (44:28):
So if I there's two things there, I think, James.
If I draw a distinction betweenme and the accountancy firm.
Sure.
Um, firstly, uh, if you were toif you were to buy a property,
for example, from a builder, uh,let's say you bought a property
for half a million pounds,yeah?
Dr James (44:47):
Yeah.
Chris (44:47):
Uh what you would normally get is a receipt from
the builder going to James, Dr.
James Martin, one property,£500,000, yeah?
Dr James (44:56):
Yeah.
Chris (44:58):
And you'd pay that bill.
Um if I was to say to you, whatis the inherent value of the
electrical systems inside thatbuilding, you'd go, I have no
idea, Chris, because all I'vegot is an invoice that says one
building, £500,000.
Um, so you need to you need tosurvey a property to effectively
(45:20):
do a reconstruction of how muchthe various items inside that
side that building would havecost to build the building,
right?
So you need to send a surveyorin, the surveyor would be a
quantity surveyor, they would beable to value the electrical
systems, the plumbing, and allthe items in a building, um,
which again, an accountantcannot do.
(45:42):
They're also not allowed to dobecause for an accountant to
make capital analysis claims,they need information to the
level of quality which eitherACCA or ICAW or their governing
body would require for them tobe covered on their professional
indemnity insurance.
But because we're surveyors, wehave different skills and we
(46:07):
have a way of working with HMRCthat recognizes the fact that
we're builders rather thanaccountants.
So we can go into places whereaccountants cannot go.
Right?
That's a good point, I think,for me to make.
Okay.
(46:37):
So if you work just off costsand diagrams, you're going to
miss things because you have toyou're not working off reality,
you're working off theory.
Um, and then if we go into abuilding looking for allowances,
um we will establish the valueof electrical systems, plumbing
(46:59):
systems, carpets, uh tiles, uhpartitions, uh, lighting,
heating, uh H VAC.
If I'm repeating myself, I'msorry here, James, but really
everything that goes into abuilding is effectively
allowable for tax relief.
So we look for everything umsignage, CCTV, fire alarms,
(47:26):
external lighting, even gates,um and back doors and stairwells
and lifts and elevators, allthese things are part of our job
when we go looking for really.
They're part of what you wouldcall energy efficiency type
(48:08):
systems.
Dr James (48:10):
Sure.
Yeah, yeah, yeah.
No, just curious.
Were you were you finishedthere?
Because there's a few morequestions.
There's another question that'sjust popped up in the chat.
Okay.
Sure.
Okay, cool.
Let's have a look at that then.
Uh, next question in the chatis from uh Minakshi.
Uh shout out to Minakshi.
Uh, if the construction work isdone from a SIP, uh as a money
(48:33):
in a SIP as property uh belongsto SIP, does capital allowances
still apply?
Chris (48:40):
Unfortunately not, James.
Dr James (48:43):
Oh, really?
Chris (48:44):
Okay, so that's right there.
A SIP is obviously a financialwrapper which uh doesn't pay any
tax.
So effectively, if you spendmoney on a property from within
a SIP, then um the allowancesare held in limbo, I suppose is
(49:07):
the best way of putting it.
Um if you were to sell theproperty from the SIP to
somebody else, then theallowances would become unlocked
and they'd go over to theperson who buys the property
from you.
Um it's just I mean, you know,it works both ways.
If you buy a property from aSIP, you unlock the allowances.
Dr James (49:29):
Yeah.
Chris (49:29):
Um if you put the property into a SIP, I mean
that's another point actually.
If you've got anybody that youknow who's thinking of putting a
property into a SIP, then it'dbe a good idea to get the
capital allowances from theproperty before you put it into
the SIP, so you can use thecapital allowances against
either your income tax or yourcorporation tax.
(49:50):
Um, because I say the SIPdoesn't pay tax, so it has no
real use for tax relief.
Dr James (49:59):
Yeah, 100%.
That's actually a brilliantquestion.
That's actually a really goodquestion.
Chris (50:03):
Um sorry about that.
I wish it was different, butit's not.
And again, there are quite afew um financial decisions to be
made here.
I mean, I've I know somedentists, James, who um buy a
property in a SIP and then theyuse the income and the profits
from their trade, the dentaltrade, to pay for any fit-out
(50:27):
work.
Um, it can be more taxefficient to pay for the fit-out
work and any equipment fromyour trading company rather than
from the SIP.
But there are we're going intokind of, I mean, I'm having to
talk about these areas, but it'sslightly more advanced
financial planning to work outwhether you should pay for the
(50:47):
um the works or buy the buildingin a SIP or in your trading
business.
If it was me, I guess I wouldtry and pay for things out of my
trading business because thetax benefit from my trading
business is going to be moresignificant than out of my SIP.
Um, but I mean there are otherthings you need to take into
(51:09):
consideration as well.
Um, but if if anybody wants totalk about the options they've
got for where which kind ofwhere they pay for the work,
then again, we're quite happy tohave that chat and maybe give
some advice on where to pay forit from.
Dr James (51:27):
Sure.
Sounds good.
And actually worth mentioningas well that for the people on
the webinar who want who wish tospeak to Chris, we will be
sending out a link that you canuse to uh connect with Chris at
the end of the webinar viaemail.
And then also in addition tothat, obviously Chris's details
are in front of you right thereas well for your for your
benefit.
Chris, I had, you know what,we're coming up to the hour
(51:49):
mark, and I like to keep thesethings, you know, Einstein said
a great thing.
Every everything should be asyou shouldn't you should make
things as simple as possible,but not any simpler.
And I love that quote, okay?
And what I'm I love that quotebecause it's like, okay, we want
to simplify stuff, but we wantto do it justice at the same
time, you know.
And I think we've done a reallywell-rounded job of
(52:09):
representing capital allowancesand what you guys do this
evening.
I had one more fun thing justto wrap up on actually providing
anybody else doesn't have anyquestions.
I remember last time you weretelling me about all the little
niche things out there.
Because what you want to do,where possible, now correct me
if I'm wrong, you're the experton this, you've got the
structures and buildingsallowance, and you've got the
plant machinery.
Yeah.
Yeah.
Yes.
(52:29):
And where possible, you want tomake a distinction, you want to
get as many things as possibleto be the plant machinery uh
allowances because they give youimmediate tax relief rather
than spread over exactly howmany years.
And one example of that that Ireally like that you came up
with, you were like, it's veryimportant to get an itemized
bill or an itemized invoice foryour dental practice, and it has
(52:52):
to be itemized in reallygranular detail.
And one example you give was itwas about the doors in the
dental practice, right?
I know this sounds so niche,and everybody's rolling their
eyes, like, what the hell?
This is gonna be really boring.
But it I I found it reallyinteresting, uh, I guess.
And you were saying that if youitemize the doors and the
hinges separately, the doors arebuildings allowance, but the
(53:15):
hinges are plant machinery justbecause they're tech they're
technically a little hinge,right?
So it's a machinery, they are apiece of plant and machinery.
Yeah, yeah, yeah, yeah.
And that was it.
Have I got that right?
Have I remembered thatcorrectly?
Yes, you have.
Okay.
Chris (53:33):
You have that plant and machinery is a very, very wide
concept, right?
Um, plant and machineryallowances were invented in the
17th century, right?
Dr James (53:48):
Yes.
Chris (53:49):
And and at the time a hinge was, you know, the height
of technology, probably.
So I mean, nothing's changedsince then, but you but you're
right.
To put your example intoslightly um more graphic
context, if you were to buy adoor and and if you were to buy
and hang a door in a dentalpractice, it might cost you 300
(54:12):
quid.
If I'm an accountant, I look atthat door and I see 300 quid of
structures and buildingsallowance, which is a very slow
tax relief that writes down over33 years.
If I look at it as a capitalallowances person, I go, well,
the door locking mechanism ismechanical, that's plantar
(54:35):
machinery.
The the closing mechanism atthe top is plantar machinery,
um, the hinges are plantermachinery, the cutting of the
holes in the doors to put thesethings in is planter machinery.
So there's probably um ahundred pounds or 120 pounds of
(54:57):
planter machinery in that door,which as you say can be moved
from the kind of slow lane intothe fast lane.
Um, so yeah, I I find thatquite fascinating as well,
James.
What also I find fascinating isthat if you I worked on a
hotel, for example, um the hotelwas on quite a noisy street and
(55:22):
so the hotel company um spenthundreds of thousands of pounds
on special acoustic curtains toreduce the noise pollution in
the rooms.
Um and because those thosecurtains have a um a sort of
(55:44):
function rather than just beingcurtains, those curtains
qualified as platter machineryas opposed to normal curtains,
which are normally structuresand buildings.
I had another client which wasa big wedding venue up in
Northumberland, and it was aGreek-themed wedding venue.
They spent half a millionpounds on some plastering,
(56:08):
nymphs and fawns and all thiskind of stuff.
Um and we argued successfullythat that plastering created the
ambience for the wedding venue,which had a Greek theme.
And so, again, half a millionpounds was moved from plastering
into um something with afunctional purpose, which was
creating the look and feel andthe ambience for that venue.
(56:32):
Another example was an airconditioning system.
Um, if you uh build a room witha false ceiling, and you can
argue that the false ceiling ispart of the airflow in a
building, then again the fullthe ceiling becomes a functional
item as opposed to a ceiling.
So you can move the ceilingfrom structures into plants and
(56:55):
machinery.
Carpets, um, if you were to buysome carpets for your practice
and you were to buy carpetsquares and stick them down,
they're plant and machinery.
But if you were to buy a fittedcarpet and fit it, then it's
structures.
So there are lots and lots oflittle mad things here, uh,
James.
(57:16):
Um other aspect would be if youwere to buy um, say you were to
have a room and or x-ray roomor x-ray area and lead line the
walls, then again, the lead inthe walls becomes something that
has a function, which isobviously stop the x-rays uh
(57:36):
permeating out into the rest ofthe building.
So the lead in the walls wouldagain become plants and
machinery as opposed tostructural item.
I mean, as you can see, I'm notit's a bit mad.
Um, it's our life, so we liveit.
It's a bit mad, but you'reabsolutely right.
There are some things where yousit there and scratch your head
and go, that really oughtn't bea piece of plant and machinery.
(57:59):
Um, but it is, right?
Um there we are.
Dr James (58:04):
I think we could probably make a webinar all
about those, right?
I bet about those mad things.
I bet there's thousands ofthem.
By the way, I did see someonewrite on the screen, how can I
ask a question?
They were trying to communicatewith us.
Did you notice that?
Was it doodled?
Someone doodled on the screen.
They were it was like they weretrying to communicate to it uh
to a extraterrestrial, maybeyeah, like like a Ouija board or
(58:28):
something, you know what Imean?
Freak me out a little bit.
But um whoever that person was,feel free to jump on camera.
If you can't, there's a chatbutton at the bottom.
Okay, you can chip hit the chatbutton and type your question
in.
But if you can't figure thatout, feel free to jump on.
Uh just unmute yourself and aska question.
(58:49):
We've probably got time formaybe one more.
Um, there's a question in thechat, I'll answer that.
And to the person who was justuh doodling just then, trying to
communicate with us, if you'dlike to jump on, feel free to do
it just for just before we wrapup.
Or maybe it was John, I'm notsure because I see John's asked
the question here.
Okay, so question from JohnJohn Odney Odney, beg your
(59:13):
pardon.
Uh, I think that's from nine.
Uh, can these be claimed in aleased property question?
Chris (59:19):
100%.
Capital allowances belong tothe person who spends the money,
James.
So whether you are aleaseholder or a freeholder, if
you've spent the money, then theallowances belong to you.
The only caveat would be ifyour landlord made a
contribution to your costs fromdoing the building work, then
(59:43):
that portion of the buildingwork or the allowances from that
portion would belong to thelandlord purely because they
follow the person who's umfunded the works.
Welcome everybody to this webinar where we are doing
part number two of theextremely, extremely extremely
popular how UK generalprinciples can become as tax
efficient as possible.
And this is topical because ofcourse we're coming up to the
end of financial year deadline,which is April the 6th.
So a lot of this stuff when weimplement it over the next two
weeks, well, it'll be active forthis tax year.
(02:03):
That's not to say that we can'tever do it.
There's always going to be somevalue in learning these sorts
of things, but certainly thesooner we can implement it, the
sooner we can benefit from it.
Well, let's just say there isuh there's there's there's
there's there's it's it's it'sit's encouraging or there's an
incentive there uh is what I'mgetting at.
This webinar is aimed primarilyat dental principles.
You can use a lot of the stuffthat we're talking about in your
(02:25):
dental practice.
However, if you are alsoplanning on becoming a principal
at some point, well, that ofcourse applies to you.
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
(02:45):
understanding investing.
All of this content counts asverifiable CPD, and you can
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
(03:07):
verifiable CPD for this episode.
I'm very pleased to introduceor reintroduce, should I say,
Mr.
Chris Lonergan this evening.
Chris, how are you?
Chris (03:19):
How are you?
Dr James (03:22):
I'm good, mate.
I'm good, mate.
I'm I'm doing well.
A lot of fun stuff uh and newstuff at Dennis and Vest, so
it's definitely keeping me busy,uh, which is which is fun.
I can't quite believe it's theend of March already, but here
we are.
But Chris, maybe what it couldbe good to do, just to kick
things off, because we want toget down to business SAP really
uh and start talking about thematter at hand.
(03:42):
Uh maybe what it could be goodto do is a little bit of a
reintroduction as to yourselffor the benefit of the audience.
Chris (03:47):
No problem, James.
Before we start, can I just sayit's a bit of a shame we're not
here together in uh in purpose,in person.
Dr James (03:57):
Um we've got we've got the Victoria line to thank for
that this evening, but we wethought on our feet.
We thought on our feet, didn'twe?
Because we we're both we'reboth able to still have the
interview.
I've just found somewhere thatwe could uh we could conduct
this interview, we findsomewhere on the fly, but
anyway, it is what it is.
Chris (04:14):
It is what it is, and uh obviously if we have any tech
issues as we go along, James,and we need to recommit another
time, then that's fine by me,right?
But we'll just crack on, and uhthis is like round two of a
heavyweight boxing match betweenyou and me, mate.
Dr James (04:29):
Uh you make it sound arduous, it was it is it was
fun, Chris.
It was fun, and it will be fun.
It will be fun.
Chris (04:38):
But the most important thing, James, is that I think um
from the the last webinar,there are 15 or 20 people that
we're still talking to, you andme, who are looking to get value
out of the conversation that wehad.
So it hasn't just been like atheoretical academic exercise,
we're actually delivering somevalue to some of your your guys
(05:00):
and to people who've now becomeclients and uh friends of mine
too.
So that's the most importantthing I would say.
Um I have some slides uh whichwe can run through just to give
a little bit of a frame to thiswebinar.
Um but very, very briefly, I'ma guy who spent about 30 years
(05:23):
in construction, engineering,and tax and accountancy.
Uh my interest in life ishelping people pay less tax, be
very blunt about it, whetherit's income tax or corporation
tax.
My role in life is to helppeople pay less tax legally.
Uh, my big interest is inproperty.
(05:47):
And as you said earlier, um adental practice clearly needs a
property from which to operate,and a group will need more than
one premises, and it's a biginvestment to um say fit out or
buy, um, particularly if youwere to go into a squat, for
example, and have to completelyfit out the squat from scratch.
(06:09):
It can cost a lot of money.
Um, and again, my interest inworking with dentists, dental
principals, and other people isto just make sure they are using
tax as a weapon, if you like,to improve the cash flow in the
business, uh, reduce the cost ofa capital project, and also
(06:31):
reduce their tax bill.
Now, have you gone, James?
Dr James (06:37):
No, so that's no still here, it's just the camera
going in and out a little bit,but we're good to go.
Chris (06:41):
That's that's what it's all about.
You know, we had some goodbanter last time, uh bit of QA.
Um, I have got uh fair amountof technical ability, but I find
these webinars work best whenit's just a chat.
We'll go through some examples,talk about some of the issues
which are facing uh dentists atthe moment, uh, and how we might
(07:02):
be able to help them.
And then obviously, very happyto field any questions from you
or from anybody in the group,uh, either live or afterwards.
Dr James (07:12):
Sure.
And just a little bit ofhousekeeping before we jump into
that presentation.
As I was saying earlier, guys,this uh webinar is all about uh
us sharing and benefiting fromChris's knowledge and experience
in these areas that we'retalking about.
What Chris was talking aboutjust a second ago.
There will be some CPDavailable for this webinar, 60
minutes to be precise, that'sfor smart money members, club
(07:34):
members.
Uh details in that to beannounced at the end of the
webinar.
And as I was saying just asecond ago, as Chris was saying
just a second ago, there will bethe opportunity to ask
questions, specific questions toyour staff and your tax
circumstances and your dentalpractice.
All we ask is that we hold allquestions to right at the end of
the webinar.
If you want, you can pop themin the chat in the meantime, and
(07:55):
we will get to them wheneverthe webinar concludes or
whenever Chris is wrapping upthe presentation part of the
webinar.
Chris, over to you.
Okay.
Chris (08:02):
Now you have to help me a bit here, James.
Is this is this where I sharemy screen?
Dr James (08:06):
Yeah, go for it.
So, yeah, if you want to jumpstraight into your presentation,
that sounds good.
So basically, if you're happy,there's a little button at the
bottom that says share screen.
So if you hit that, yeah,something's happening.
Chris (08:18):
So can you tell me when you can see it okay yourself?
Dr James (08:20):
We're in.
We're in, yeah.
Looks good.
Chris (08:23):
We're in.
Cool.
Thank you very much, James.
And um, what I didn't sayearlier, and I should have done,
is really like to thank youagain for organizing this and
giving us the chance to speak tosome of the people in your
network and in your group,right?
So that's really, really very,very good of you.
Um so I want to talk todayabout using taxation to your
(08:47):
advantage within a dentalpractice, either to improve your
cash flow, in turn improve thereturn on investment you have as
a practitioner, um, and to saveyour tax bill, reduce your tax
liability and cut down theamount of money you pay to the
revenue in terms of tax.
Now I've got about five or sixslides only, James, and a couple
(09:11):
of examples from recent workthat we've done with dentists,
just to place everything intocontext.
Okay, so if that works for you,mate, I'll just crack on.
Excellent.
Um and it's nice to meeteverybody.
Um, it'd be good to get somequestions at the end just to
make sure that everybody's stillthere and listening to what I'm
saying.
So if I move it down.
(09:40):
Okay, I'm sorry, James.
This is uh a different setup tonormal, so it may take me two,
it may take me a couple of goesto get it working properly.
Um I'm Chris, you you knowJames.
It's a very, very short slide.
Uh this is a I'm calling this2.0 because we did a 1.0, worked
(10:02):
really well.
Uh, and this is going to beeven better.
So with that in mind, I'll tellyou a little bit about my
company.
Uh we're called Bonham andBrooke.
Um, not planning to read all ofthese slides out to you because
everybody can read themselves.
Just pick out some some keyfactors.
Uh so we're a tax consultancy,uh, we're based in London, we're
(10:25):
growing really fast.
When I last spoke to James, wehad 75 people in the company.
Uh, that's three and a halfmonths ago.
We now have 95 people.
So we've started another 20people since last time we spoke,
James.
Uh in fact, I think we startedfive people uh this month.
So we're on a real upswing.
(10:47):
Why we're on an upswing?
Because we're very good athelping people um reduce their
tax bills, improve their cashflow, and uh really, really
transform their businesses froma financial perspective.
Um as I mentioned before, Iwork a lot in the property
sector.
Property taxation is a huge,huge market.
(11:09):
It's not particularly wellunderstood.
And I have a bunch ofspecialist people in the company
who are really expert atmaximizing the tax leaf
available from investment incommercial property.
And when we're talking aboutinvestments in commercial
property, what we're reallysaying is that if you buy a
property, if you build aproperty, if you convert,
(11:32):
renovate, extend, or fit out aproperty, then you incur a
substantial amount of capitalexpenditure, and there is tax
relief available from incurringthat capital expenditure.
Um the opportunity and uh Ithink the main opportunity uh is
that what we see is that tax isoften an afterthought when
(11:57):
someone's done something, andI'll show you in a few minutes'
time why tax ought to beconsidered right at the
beginning of making aninvestment rather than
afterwards as a way of savingmoney.
Um, and of course, we're goodfriends with you, James.
They've been very supportiveboth ways, and so we're a
partner of yours, and uh it'sgreat to work with you.
(12:20):
Um it's probably a bit syrupy,but um there we are.
We're just telling the truth.
It's it's it's great to workwith you.
So we're expanding, we're goodat what we do, we help people
save money, we improve cashflow, we help with financing
indirectly, um, and we enjoyworking with dentists.
So rather than diving straightinto capital allowances, which
(12:42):
is the main topic of myconversation and tax relief, I
wanted to start off just by kindof reminding everybody what's
going on at the moment whenyou're running a practice.
Um, and these seem to me to bethe five key areas that when I
talk to dentists, they have um abig concern or a big interest.
(13:06):
Where I can help is withfinancing and cash flow and tax
and investment.
The other areas are outside ofmy scope, um, but I figure that
helping in two out of fiveareas, which are really key, is
a useful thing to be able to do,James.
Um, if we're talking aboutfinancing and cash flow, again,
these are the kind of thingswhich I guess everybody on the
(13:28):
call would recognize.
Uh costs are going up, marginsare being squeezed, uh cash flow
is uh can be very, veryproblematic.
And obviously, capitalinvestments in chairs and
machines, um, maybe IT systemsis significant, particularly
when you're setting up apractice, and that can type a
(13:49):
lot of your cash, which eithermeans you have to borrow money
or has another impact on thebusiness.
Maybe you can't extract theprofits that you'd like to from
the business to uh fuel yourselfand your family.
Clearly, there's a tax burden,um, and it's either a
corporation tax version ifyou've limited, or income tax if
(14:10):
you're a sole practitioner or apartnership.
And again, that's a big drainon your finances.
The last thing which we'retalking to dentists a lot about
at the moment is access tofinance.
So finance is becoming moreexpensive, and my view is that
anything which helps you improveyour ability to borrow money
and borrow money cheaply, andthen to maximize your cash flow
(14:34):
as much as possible is going tobe beneficial when you're either
setting up, expanding, orrunning a practice.
Other last point before I diveinto something even more
practical is that there are lotsof underutilised tax reliefs
that many, many people are notaware of.
(14:56):
And in fact, capital allowancesis one of those tax reliefs
that's not particularly wellknown, and it ends up with
people paying far too much tax.
So, like I said at thebeginning, my role in life is to
educate people to understandthat there are tax reliefs, how
they apply in the dental sector,and then to help them go and
grab them to improve thefinancial performance of their
(15:19):
uh of their businesses or thempersonally.
So the matter at hand are thesethings called capital
allowances.
Um I'm sure some people willhave heard them already, but as
a quick run through, uh HMRCencourages capital expenditure,
particularly on property.
Uh, main reason being that anyevery pound spent on commercial
(15:43):
property generates a significantamount of spend in the supply
chain in the commercial propertymarket and ultimately ends up
generating a lot of tax forHMRC.
So there's good business sensein HMRC encouraging people to uh
improve the kind of estate ofproperties that we have in this
(16:08):
in this in this country.
Um however, tax relief is notavailable on capital expenditure
in the same sense as it wouldbe, say, on buying some services
or buying some consumables, taxrelief on capital expenditure
is available by way of what arecalled capital allowances.
Uh we call them CAs.
(16:29):
So capital allowances providetax relief relating to the
capital expenditure oncommercial assets, so that's
property and also equipment.
Um it's a very, very complextopic, capital allowances.
The legislation which it refersback to is called the Capital
Allowances Act 2001, and it getsamended on a regular basis.
(16:52):
Um HMRC likes to change therules every year or every two
years just to keep everybody ontheir toes.
So there's a requirement tokeep up to date with legislation
to know how to best helppeople.
Um the tax relief is availablefor anybody who pays tax.
People who are who don'tqualify for the relief would be
(17:16):
charities or pension funds oranybody who doesn't pay tax.
So, for example, the publicsector doesn't pay tax, so any
capital investment in the publicsector doesn't qualify for
capital allowances.
Um people say to me, is taxrelief through capital
allowances something that's abit risky?
Uh, the answer is no.
It's not what you might call aJimmy Carr scheme where you have
(17:39):
to go and apologize to people18 months later for getting
involved in some sort of taxwheeze.
Um, this is very, very solidtax planning.
It's actually encouraged byHMRC, um, but you still need to
get it right, otherwise um youdon't maximize your claim, or
there is potential for themunpicking it through an inquiry.
(17:59):
So we specialize in capitalallowances to do with property
purchases and propertyconstruction.
And to be good at this, uh youneed to have a blend of
expertise, which would be uhlegal expertise to do with
contracts, uh, constructionexpertise, quantity surveying
expertise to do with valuingbuildings, accountancy
(18:23):
expertise, and tax expertise.
Um, and if you had on top ofthat uh a kind of expertise of
getting on with people, it'squite a multidimensional type
area that we work in.
Um it's a specialist typefinancial service, it's allied
to some of the work thataccountants do.
So frequently we partner withaccounting firms to do the
(18:48):
specialist work, which they havemaybe started off by doing
someone's sets of accounts.
But should hasten to add thatvery few accountants can do what
we do.
And in fact, um I'm currentlyunpicking a capital allowances
claim that's been done by adental accountant who I shall
not name for obvious reasons,who's completely messed it up,
(19:11):
and now their client ispotentially looking at an
inquiry from HMRC for a massiveoverclaim through lack of
knowledge about actually whatworks in capital allowances.
So bit of a negative comment,but we do see examples where
people try and help to the bestof their ability but stray out
(19:33):
of their sort of comfort zoneand end up needing some rescue
from me.
Dr James (19:38):
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of this podcast.
Chris (21:40):
But these are the kind of areas where you would normally
incur capital expenditure in adental practice.
And the ones I've highlightedin red are the ones where we add
a lot of value.
Um clinical equipment anddiagnostics and pieces of what I
would call loose equipment orfixtures in a building are very,
(22:02):
very easy to claim the taxrelief on.
It's really the building workswhere you require lots and lots
of specialist expertise tomaximize the value of the claim.
And you can see the kind ofareas where we add a lot of
value.
Um in terms of the tax reliefavailable in a building, there's
(22:24):
effectively three sorts of taxrelief which might apply to a
dental practice and in fact haveapplied to dental practices
I've worked with in the past.
Um there are what are calledstructures and buildings
allowances that are to do withthe fabric of a building.
So if you were to build theshell of a building from
scratch, uh you would put up thefoundations, the walls, the
(22:47):
roof, uh, and then that would bethe shell of a building.
Then you might fit it out withfloors, ceilings, partitions.
And this is again the fabricand the shell of a building.
Uh that investment qualifiesfor something called structures
and buildings allowance.
If you then look at theequipment you put into a dental
(23:08):
surgery, which should be chairs,lamps, desks, tables, um, these
are things which are pieces ofloose equipment.
Uh, there's capital ouncesavailable from them, but
generally an accountant wouldknow what to do with them.
Um, there's also items whichare, if you like, built into the
building or buried in thebuilding.
So we're talking aboutelectrics, plumbing, heating and
(23:30):
ventilation, solar equipment,any fitted items, kitchens,
toilets, bathrooms, receptionareas, changing areas, signage,
car.
Lighting, these are all areaswhere there's massive tax relief
available.
But again, you need to knowwhat you're doing to maximize
(23:52):
the claim available for adentist or in fact for anybody.
And the last thing which isless relevant in the dental
world is something called landremediation relief, which is if
you were to buy a piece of landand build something on it and
clean it up, there'd be taxrelief available from the
cleaning up.
(24:13):
Probably more likely if youwere to buy a big old Victorian
building and it had asbestos init for some reason, and you
either remove the asbestos orencapsulated the asbestos to
make it fit for purpose for the21st century, then there's tax
relief available specificallyfor treating that kind of
(24:35):
contaminant in the building.
That encourages people, as Isay, to improve the quality of
the building and the stock ofthe building.
So there are different sorts oftax relief available.
And again, you have to knowwhich things qualify for which
sort of tax relief, and then beable to maximize the value for
(24:55):
one of my clients.
Here's an example of a projectto put things into context,
James.
Again, this is a secondhandproperty.
It's uh either an Edwardian orVictorian type property
somewhere up north.
Let's say it's in Leeds,hypothetically.
So somebody's bought asemi-detached house, which
(25:20):
they're planning to convert intothe surgery on the right hand
side, um, engaged an architectto draw the plans up, um,
engaged a builder to do thebuilding, engaged a designer and
um a decorator to do thedecorating, brought the
equipment, and I think three tofour months later, there was a
(25:45):
fully functioning dentalpractice.
Now, all that expenditurequalifies for quite significant
tax relief.
And if I place this projectinto context, the actual
conversion of the house intosomething which was much more
like a surgery in terms of thewalls, ceilings, and floors was
(26:08):
about £180,000.
The partitions about £20,000.
So around £200,000 was spent onputting this property into the
right kind of configuration tobe a surgery.
Um, in fact, we're just lookingat one in West London right now
where the total expenditure isabout £750.
So this is a bit less than£750, but these days, um, say to
(26:33):
build a squat from scratchcould easily be half a million
pounds, um, maybe up to amillion pounds, depending on the
size of the property and thelevel of fit out specification
that you want to work to.
Again, you can see that this isthis is typical, James, that
there's maybe £50,000 oflighting and electrical systems,
(26:53):
£25,000 of fire alarms, £50,000of air con, plumbing, fitted
work.
So, in total, there's asignificant spend here, and
pretty much all that spendqualifies for tax relief.
Uh, here's a real example froma practice that I just worked
(27:14):
with up in Leeds.
Uh, it this was uh twodifferent uh rooms.
Um £471,000 spent across thetwo rooms to really bring them
up to a different spec.
Of that £471, there was about£1,000 which didn't qualify for
(27:36):
tax relief.
And that was because they hadto do a BAT survey, okay, and
BAT surveys don't qualify forcapital ounces tax relief.
But we actually found £470,000of tax relief in this
expenditure, which split intothose two categories, and those
two categories are reallyimportant, James, because the
(27:59):
ones called plant and machineryallowances can be used in an
accelerated way to reduce yourtax bill and improve your cash
flow.
Whereas the ones calledstructures and buildings
allowances are much, much slowertax relief, and you can use
them at 3% a year.
So it takes 33 and a thirdyears to use up all those
(28:21):
allowances.
Um, consequently, plant andmachinery allowances are the
things which really bringmassive value very, very quickly
in terms of cash flow and taxreduction to a dentist.
And as you can see, of this471, more than 50% was available
(28:42):
to uh Simon, as this dentist iscalled, um to reduce his tax
bill.
In fact, in Simon's case, hehad carried out the work a year
ago, so he'd paid for it and wasmaking quite significant
profits as a dentist.
Uh so working with hisaccountant, we put that tax
(29:06):
relief into a previous tax yearfor him, and it actually ended
up generating him a verysignificant tax refund from
HMRC.
So I've taken Simon's projecthere and given some examples um
based on the figures that Ishowed you on the last slide, uh
(29:28):
the benefit from the claim umif you were a corporation
taxpayer, would vary between£50,000 and £66,000.
Uh Simon, as it happened, forsome reason was an
unincorporated business andoperating as a sole
(29:48):
practitioner.
So he was actually on 45%income tax rate and he received
a check for £118,000 from HMRC.
Now bearing in mind he'd spentabout £471, £118,119 is a
massive, massive reductioneffectively in the cost of
(30:11):
carrying out this works.
Um his comment to me was if I'dknown at the beginning I was
going to get £119,000 of taxback from doing this work, um, I
might have borrowed less money.
I might have spent on ratherbetter equipment, which would
(30:32):
have given my practice an evenbetter look and feel.
And I would have really beenable to work out what the proper
return was on my investment inthis building work by taking
everything into account.
It was a fantastic um sort ofbonus to have for him
afterwards, because I'm not sureanybody's going to walk away
(30:55):
from getting £119,000 of cashback from HMRC.
Um but truly, he really wouldhe's really said that if he was
to do this again, uh he wouldlike to know what he was likely
to get in future at thebeginning to help him with his
decision making about how tofund and what specification to
(31:18):
use on his surgery work.
So as you can see from this, umthe figures are quite
substantial, James.
And the tax relief availablefrom this kind of investment is
very, very significant andreally should be taken into
consideration if you're going tomake any investments.
Dr James (31:40):
I think uh one interesting thing to mention as
well, Chris.
If I if I may just jump in atthis point, I know in this
example that this was uh wellthe taxes already paid, you
know, it was in with even, butit was in it was within it was
rather recent, it was within thelast 12 months.
You may have mentioned thistonight, and apologies if I
didn't hear you say this, butthere is no uh they call in
(32:04):
legal terms a statute oflimitations, right?
You know what I mean?
There's no there's no limit interms of when you can claim
these back, providing they wereunclaimed in the first place,
right?
Even if you bought the buildingfrom someone else.
Chris (32:15):
Absolutely right, and you're just you've jumped ahead
of three slides, James.
Dr James (32:19):
So I'll beg your pardon of all the voices.
I wasn't I wasn't sure you weregonna bring it up.
It just it just caught my earlast time.
It was interesting.
Chris (32:27):
I was gonna test you later, so you've actually just
uh so you can adjust there.
All right.
Um again, I I've got three orfour more slides, then we can
take some some questions, James.
Um, I thought people on thecall might be interested to
understand how the tax savingswork.
Um in this case, this is umthese are accurate figures from
(32:53):
the the guy I worked with.
Uh, I think he's got two dentalpractices, so the turnover from
his practice is about 1.2million, which I understand is
pretty good.
Um, and of that he was makingabout 30% trading profit.
Um but he also was within histrading profit um able to
(33:15):
expense £50,000 in terms ofdepreciation.
So his true profit is actually£410,000 of that £1.2 million.
Uh if you were a corporationtaxpayer, uh then your tax bill
would be about £102,000.
Um, but using again an examplefor capital allowances, it's
(33:37):
typical that you might get£100,000 of capital allowances
back.
So the capital allowancesactually are a bit like
depreciation.
Uh in America they're calledtax depreciation.
So your tax due is based onwhat's called your taxable
profit.
The capital allowances thenreduce your taxable profit, and
(34:00):
that reduces the tax you have topay.
So, in this simple example,someone has saved £25,000.
I can't really use Simon'sproper figures here, James,
because they're confidential.
Um, but I can use an examplethat shows, again, this is a
very, very significant financialbenefit for someone who
actually can make a claim.
(34:21):
Um, going on to what you weresaying, James, there are
different scenarios under whichyou can make a claim for tax
relief relating to property.
Uh, very simple scenarios wouldbe if you were buying a
residential property forcommercial proper for commercial
purposes.
So if you were to buy a semi ora detached house, like one of
(34:42):
my clients has done in Glasgowto convert into a surgery, then
that can free up the capitalallowances buried in that
property.
And the reason it frees it upis purely because uh residential
property is not commercial,therefore the owner of a
residential property cannotclaim capital allowances, but
(35:04):
when there's a change of useagreed through planning, it
unlocks normally about 25% ofthe price of the property as tax
relief.
The same thing would be true ifyou were buying a property from
a non-taxpaying body, publicsector, charity, SIP, pension
funds, because again, theyfailed the test of having to pay
(35:25):
tax, and therefore buying theproperty unlocks normally again
about 25% of the purchase priceof a property.
And the last scenario would beum if you were to buy a property
from a developer or a builder,then to qualify for capital
allowances, you need to hold aproperty as an asset, and a
builder would normally hold aproperty as trading stock.
(35:46):
So, again, a develop a builderor a developer is disqualified
from making capital allowancesclaims, therefore, the capital
allowances transfer onto theperson who buys the property
from the builder or developer.
So there are scenarios that wesee quite a lot with dentists,
James.
Um there are other scenarios aswell, but going on to what you
(36:08):
were saying, you're absolutelyright.
If you're looking atconstruction type work, um,
fitting out, extending,building, converting,
renovating, there is no statuteof limitations or no time limit
on how far you can go back toanalyze that work to look for
unclaimed capital allowances,which is exactly what you were
(36:32):
saying before.
There is no statute oflimitations.
Um I would say, however, thatanything that's done more than
say 10 or 15 years ago may wellhave been redone, James.
And so um you'd be able tocount the most recent capital
work, but the work done like 20years ago, for example,
(36:55):
effectively would have beendestroyed by the new work, and
HMRC won't let you claim twice.
But anyway, yes, there is notime limit for going back to
look at constructionexpenditure, and we spend a lot
of our time uh trying to, if youlike, value the assets in a
building which have beenconstructed quite a long time
(37:17):
ago.
And that really is everything.
And my summary is that there'smassive tax relief available
from investments in commercialproperty.
Uh, dentists are one of thegroups of people in the country
who invest hugely in commercialproperty um to run their
(37:39):
practices, and then increasinglyto provide the look and feel
and the customer experience, ifyou like, that makes them an
attractive practice.
Um the tax saving is very, verysignificant.
The cash flow impact is very,very significant.
If you do an evaluation beforeyou start a project, it can help
(38:00):
with the financing and it canhelp you maximize the return on
investment.
Um, you need special people tobe able to maximize these claims
or do these assessments with acombination of skills that are
quite unusual to find in oneperson.
And my team, which is acrossthe country, is very good at
(38:21):
doing this work.
Um, we partner with you, weprovide a good service, um, and
we're very, very keen to talk topeople to see if we can help
them unlock some of thispotential tax relief and cash
savings in their property.
So that's it for me, James.
I can't hear you.
Dr James (38:42):
Uh can you hear me now?
Chris (38:44):
Yes, I can.
Dr James (38:45):
Yeah.
I was just saying, thanks forthat, super valuable.
And yeah, it was definitelyeye-opening, I guess, whenever
when you and I initially startedtalking, just how much of a
untapped, I guess, potentialhere there is.
And obviously, we just need toensure that it's done properly,
of course, um, by someone whoactually has expertise in this
(39:09):
area, but there is, I guess, anopportunity on the table, I
think it's fair to say, uh, fordental practices that are out
there.
The the the thing that really,just as you were saying a second
ago, uh, the thing that reallykind of caught my eye, or one of
the things that caught my eye,was that you can't, it can go
back indefinitely, like as itcan be claimed even if it's like
30 years ago or something alongthose lines.
And chances are, and I wantedto ask you on that, actually, in
(39:32):
your experience out of thedental practices that you've
worked with, how many times isthis stuff just like totally
untapped where they just haven'tbeen claimed at all?
Or uh, you know, capitalallowances just weren't even a
thing that have been mentionedto a particular dentist uh via
their accountant or or whatever.
Uh I guess I'd like to knowthat.
(39:53):
And then follow-up, slightfollow-up question.
What proportion of the timehave they been done, but they
could capital allowances havebeen filed for, but they could
have been done much better?
I'm interested to know thesplit on that one.
Is it is it is it rare thatthey're done to a very high
standard?
Is kind of what I'm getting at.
Chris (40:10):
Two questions there that I will unpack, as people now
say.
Um first question (40:14):
I think that maybe the 2080 rule applies
with dentists, James.
That's okay.
Dr James (40:25):
I mean, I'm glad I asked this question.
This is interesting.
Yeah, knowledge.
Okay, Pareto's law, Pareto'slaw, idiot.
Chris (40:33):
It applies in a lot of different situations, doesn't
it?
Dr James (40:36):
Yeah.
Chris (40:37):
Um, I if I look at the last 40 or 50 dentists that I've
spoken to, yeah, I would sayabout 20% of them have been um
made aware of capital allowancesby their accountant.
Okay.
And they will be people whomaybe have got a relatively
(40:57):
large accountant, maybe in thetop 20 or the top 50 in the
country.
Dr James (41:03):
Yeah.
Chris (41:04):
Um, we're certainly if your accountant was one of the
really big ones, like you know,PWC or KPMG or all these really
kind of um household names, thenthey will certainly have looked
at it.
But again, there's not manydental practices where PWC would
be interested in becausethey're just not big enough to
(41:25):
be the kind of client they goafter.
So I would say about 80% ofpeople have uh never heard of
capital allowances, 20% have.
Of the 20% that have, um, Iwould say um about half are
people where their accountantwould refer them to somebody
(41:45):
like me, or in fact to me,because it's a specialist skill.
So they would they would pickup the opportunity if you like,
James, they'd also know that itwas outside of their skill set
and they needed somebody um withdifferent skills to do it, and
then it's probably about 10%who'd have a go, right?
And as I said before, I'mcurrently trying to fix
(42:08):
something where someone's had ago um and made a real Horlicks
of it.
Um so that's my experience ofthe last 40 or 50 dentists that
I've spoken to.
I mean, it's not everybody inthe country, mate, so um you can
only I I can only tell you whatI've come across.
They're the kind of figures Iwould say.
(42:29):
Um, and in terms of the kind ofquality and the value of a
claim, um, I mean, a specialistwill always do a better job than
a general accountant.
Um, it's a very complex area,there's a lot of legislation,
uh, there are a lot of differentchanges that happen.
You've got to know aboutbuilding works and uh how you
(42:52):
can maximize the different typesof allowances.
Very few accountants would havepeople who've got building and
construction experience.
Uh, so we'll always do a betterjob on them.
Um, and even if um somebody wasuh uh an experienced um
property type accountant, we'dprobably do about 20% better
(43:16):
than them anyway, because of thetrips to the trade that you
only pick up from being aspecialist in something.
That's a bit of a ramble,James, but did it answer your
question?
Dr James (43:27):
No, that that is actually the reason why I like
questions like that, becauseeven though the answer is
slightly it's it's it's in thefield knowledge, as in it's from
your experience.
It's always going to be a dickyour finger put it in the air
thing, somewhat, because 50 isnot like the biggest sample
size, right?
But at the same time, it's but50 has still got some validity
(43:49):
though, right?
Like it's not like there's likefive of them, you know.
So it's it kind of gives us alittle bit of an idea as to
what's out there.
So 80% is pretty significant.
And I was wondering anotherthing, Chris, that you said to
me once in in one of ourconversations, um, you were
saying that uh as part of whatyou do or what you'd advocate is
you actually go out to thedental practice and have a look
(44:12):
around to figure out what wherethe capital allowances come
from, which is obviously notsomething that a typical
accountant would do, they wouldjust do it from behind a desk.
What are you looking for iswhat I'm where I'm going with
that.
What are you looking for whenyou do that?
Chris (44:28):
So if I there's two things there, I think, James.
If I draw a distinction betweenme and the accountancy firm.
Sure.
Um, firstly, uh, if you were toif you were to buy a property,
for example, from a builder, uh,let's say you bought a property
for half a million pounds,yeah?
Dr James (44:47):
Yeah.
Chris (44:47):
Uh what you would normally get is a receipt from
the builder going to James, Dr.
James Martin, one property,£500,000, yeah?
Dr James (44:56):
Yeah.
Chris (44:58):
And you'd pay that bill.
Um if I was to say to you, whatis the inherent value of the
electrical systems inside thatbuilding, you'd go, I have no
idea, Chris, because all I'vegot is an invoice that says one
building, £500,000.
Um, so you need to you need tosurvey a property to effectively
(45:20):
do a reconstruction of how muchthe various items inside that
side that building would havecost to build the building,
right?
So you need to send a surveyorin, the surveyor would be a
quantity surveyor, they would beable to value the electrical
systems, the plumbing, and allthe items in a building, um,
which again, an accountantcannot do.
(45:42):
They're also not allowed to dobecause for an accountant to
make capital analysis claims,they need information to the
level of quality which eitherACCA or ICAW or their governing
body would require for them tobe covered on their professional
indemnity insurance.
But because we're surveyors, wehave different skills and we
(46:07):
have a way of working with HMRCthat recognizes the fact that
we're builders rather thanaccountants.
So we can go into places whereaccountants cannot go.
Right?
That's a good point, I think,for me to make.
Okay.
(46:37):
So if you work just off costsand diagrams, you're going to
miss things because you have toyou're not working off reality,
you're working off theory.
Um, and then if we go into abuilding looking for allowances,
um we will establish the valueof electrical systems, plumbing
(46:59):
systems, carpets, uh tiles, uhpartitions, uh, lighting,
heating, uh H VAC.
If I'm repeating myself, I'msorry here, James, but really
everything that goes into abuilding is effectively
allowable for tax relief.
So we look for everything umsignage, CCTV, fire alarms,
(47:26):
external lighting, even gates,um and back doors and stairwells
and lifts and elevators, allthese things are part of our job
when we go looking for really.
They're part of what you wouldcall energy efficiency type
(48:08):
systems.
Dr James (48:10):
Sure.
Yeah, yeah, yeah.
No, just curious.
Were you were you finishedthere?
Because there's a few morequestions.
There's another question that'sjust popped up in the chat.
Okay.
Sure.
Okay, cool.
Let's have a look at that then.
Uh, next question in the chatis from uh Minakshi.
Uh shout out to Minakshi.
Uh, if the construction work isdone from a SIP, uh as a money
(48:33):
in a SIP as property uh belongsto SIP, does capital allowances
still apply?
Chris (48:40):
Unfortunately not, James.
Dr James (48:43):
Oh, really?
Chris (48:44):
Okay, so that's right there.
A SIP is obviously a financialwrapper which uh doesn't pay any
tax.
So effectively, if you spendmoney on a property from within
a SIP, then um the allowancesare held in limbo, I suppose is
(49:07):
the best way of putting it.
Um if you were to sell theproperty from the SIP to
somebody else, then theallowances would become unlocked
and they'd go over to theperson who buys the property
from you.
Um it's just I mean, you know,it works both ways.
If you buy a property from aSIP, you unlock the allowances.
Dr James (49:29):
Yeah.
Chris (49:29):
Um if you put the property into a SIP, I mean
that's another point actually.
If you've got anybody that youknow who's thinking of putting a
property into a SIP, then it'dbe a good idea to get the
capital allowances from theproperty before you put it into
the SIP, so you can use thecapital allowances against
either your income tax or yourcorporation tax.
(49:50):
Um, because I say the SIPdoesn't pay tax, so it has no
real use for tax relief.
Dr James (49:59):
Yeah, 100%.
That's actually a brilliantquestion.
That's actually a really goodquestion.
Chris (50:03):
Um sorry about that.
I wish it was different, butit's not.
And again, there are quite afew um financial decisions to be
made here.
I mean, I've I know somedentists, James, who um buy a
property in a SIP and then theyuse the income and the profits
from their trade, the dentaltrade, to pay for any fit-out
(50:27):
work.
Um, it can be more taxefficient to pay for the fit-out
work and any equipment fromyour trading company rather than
from the SIP.
But there are we're going intokind of, I mean, I'm having to
talk about these areas, but it'sslightly more advanced
financial planning to work outwhether you should pay for the
(50:47):
um the works or buy the buildingin a SIP or in your trading
business.
If it was me, I guess I wouldtry and pay for things out of my
trading business because thetax benefit from my trading
business is going to be moresignificant than out of my SIP.
Um, but I mean there are otherthings you need to take into
(51:09):
consideration as well.
Um, but if if anybody wants totalk about the options they've
got for where which kind ofwhere they pay for the work,
then again, we're quite happy tohave that chat and maybe give
some advice on where to pay forit from.
Dr James (51:27):
Sure.
Sounds good.
And actually worth mentioningas well that for the people on
the webinar who want who wish tospeak to Chris, we will be
sending out a link that you canuse to uh connect with Chris at
the end of the webinar viaemail.
And then also in addition tothat, obviously Chris's details
are in front of you right thereas well for your for your
benefit.
Chris, I had, you know what,we're coming up to the hour
(51:49):
mark, and I like to keep thesethings, you know, Einstein said
a great thing.
Every everything should be asyou shouldn't you should make
things as simple as possible,but not any simpler.
And I love that quote, okay?
And what I'm I love that quotebecause it's like, okay, we want
to simplify stuff, but we wantto do it justice at the same
time, you know.
And I think we've done a reallywell-rounded job of
(52:09):
representing capital allowancesand what you guys do this
evening.
I had one more fun thing justto wrap up on actually providing
anybody else doesn't have anyquestions.
I remember last time you weretelling me about all the little
niche things out there.
Because what you want to do,where possible, now correct me
if I'm wrong, you're the experton this, you've got the
structures and buildingsallowance, and you've got the
plant machinery.
Yeah.
Yeah.
Yes.
(52:29):
And where possible, you want tomake a distinction, you want to
get as many things as possibleto be the plant machinery uh
allowances because they give youimmediate tax relief rather
than spread over exactly howmany years.
And one example of that that Ireally like that you came up
with, you were like, it's veryimportant to get an itemized
bill or an itemized invoice foryour dental practice, and it has
(52:52):
to be itemized in reallygranular detail.
And one example you give was itwas about the doors in the
dental practice, right?
I know this sounds so niche,and everybody's rolling their
eyes, like, what the hell?
This is gonna be really boring.
But it I I found it reallyinteresting, uh, I guess.
And you were saying that if youitemize the doors and the
hinges separately, the doors arebuildings allowance, but the
(53:15):
hinges are plant machinery justbecause they're tech they're
technically a little hinge,right?
So it's a machinery, they are apiece of plant and machinery.
Yeah, yeah, yeah, yeah.
And that was it.
Have I got that right?
Have I remembered thatcorrectly?
Yes, you have.
Okay.
Chris (53:33):
You have that plant and machinery is a very, very wide
concept, right?
Um, plant and machineryallowances were invented in the
17th century, right?
Dr James (53:48):
Yes.
Chris (53:49):
And and at the time a hinge was, you know, the height
of technology, probably.
So I mean, nothing's changedsince then, but you but you're
right.
To put your example intoslightly um more graphic
context, if you were to buy adoor and and if you were to buy
and hang a door in a dentalpractice, it might cost you 300
(54:12):
quid.
If I'm an accountant, I look atthat door and I see 300 quid of
structures and buildingsallowance, which is a very slow
tax relief that writes down over33 years.
If I look at it as a capitalallowances person, I go, well,
the door locking mechanism ismechanical, that's plantar
(54:35):
machinery.
The the closing mechanism atthe top is plantar machinery,
um, the hinges are plantermachinery, the cutting of the
holes in the doors to put thesethings in is planter machinery.
So there's probably um ahundred pounds or 120 pounds of
(54:57):
planter machinery in that door,which as you say can be moved
from the kind of slow lane intothe fast lane.
Um, so yeah, I I find thatquite fascinating as well,
James.
What also I find fascinating isthat if you I worked on a
hotel, for example, um the hotelwas on quite a noisy street and
(55:22):
so the hotel company um spenthundreds of thousands of pounds
on special acoustic curtains toreduce the noise pollution in
the rooms.
Um and because those thosecurtains have a um a sort of
(55:44):
function rather than just beingcurtains, those curtains
qualified as platter machineryas opposed to normal curtains,
which are normally structuresand buildings.
I had another client which wasa big wedding venue up in
Northumberland, and it was aGreek-themed wedding venue.
They spent half a millionpounds on some plastering,
(56:08):
nymphs and fawns and all thiskind of stuff.
Um and we argued successfullythat that plastering created the
ambience for the wedding venue,which had a Greek theme.
And so, again, half a millionpounds was moved from plastering
into um something with afunctional purpose, which was
creating the look and feel andthe ambience for that venue.
(56:32):
Another example was an airconditioning system.
Um, if you uh build a room witha false ceiling, and you can
argue that the false ceiling ispart of the airflow in a
building, then again the fullthe ceiling becomes a functional
item as opposed to a ceiling.
So you can move the ceilingfrom structures into plants and
(56:55):
machinery.
Carpets, um, if you were to buysome carpets for your practice
and you were to buy carpetsquares and stick them down,
they're plant and machinery.
But if you were to buy a fittedcarpet and fit it, then it's
structures.
So there are lots and lots oflittle mad things here, uh,
James.
(57:16):
Um other aspect would be if youwere to buy um, say you were to
have a room and or x-ray roomor x-ray area and lead line the
walls, then again, the lead inthe walls becomes something that
has a function, which isobviously stop the x-rays uh
(57:36):
permeating out into the rest ofthe building.
So the lead in the walls wouldagain become plants and
machinery as opposed tostructural item.
I mean, as you can see, I'm notit's a bit mad.
Um, it's our life, so we liveit.
It's a bit mad, but you'reabsolutely right.
There are some things where yousit there and scratch your head
and go, that really oughtn't bea piece of plant and machinery.
(57:59):
Um, but it is, right?
Um there we are.
Dr James (58:04):
I think we could probably make a webinar all
about those, right?
I bet about those mad things.
I bet there's thousands ofthem.
By the way, I did see someonewrite on the screen, how can I
ask a question?
They were trying to communicatewith us.
Did you notice that?
Was it doodled?
Someone doodled on the screen.
They were it was like they weretrying to communicate to it uh
to a extraterrestrial, maybeyeah, like like a Ouija board or
(58:28):
something, you know what Imean?
Freak me out a little bit.
But um whoever that person was,feel free to jump on camera.
If you can't, there's a chatbutton at the bottom.
Okay, you can chip hit the chatbutton and type your question
in.
But if you can't figure thatout, feel free to jump on.
Uh just unmute yourself and aska question.
(58:49):
We've probably got time formaybe one more.
Um, there's a question in thechat, I'll answer that.
And to the person who was justuh doodling just then, trying to
communicate with us, if you'dlike to jump on, feel free to do
it just for just before we wrapup.
Or maybe it was John, I'm notsure because I see John's asked
the question here.
Okay, so question from JohnJohn Odney Odney, beg your
(59:13):
pardon.
Uh, I think that's from nine.
Uh, can these be claimed in aleased property question?
Chris (59:19):
100%.
Capital allowances belong tothe person who spends the money,
James.
So whether you are aleaseholder or a freeholder, if
you've spent the money, then theallowances belong to you.
The only caveat would be ifyour landlord made a
contribution to your costs fromdoing the building work, then
(59:43):
that portion of the buildingwork or the allowances from that
portion would belong to thelandlord purely because they
follow the person who's umfunded the works.
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