inOct

2015

Inside find out about...

healthcare

TheKnowThe 4 phases ofFinancial Advice

Page6

Are you payingMinimum Wage?

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Dentistry

Heidi Marshall

Healthcare Partner

Do youneed awill?

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Part 2 of thedemise of dentalincorporations?

Historically ER allowed aperson to sell their goodwill totheir company and pay tax at areduced rate of 10%. The removalof this lower rate now meansindividuals would most likelyhave to pay tax at the full capitalgains tax rate of 28%.

To add to this, a surprising newtax was birthed at the SummerBudget on 8th July 2015 – the“dividend tax”. This was largelyoverlooked by the national mediawho did not immediatelyunderstand the impact the newtax will have on a particular, buthugely important, sector of thebusiness community, that offamily owned companies. Any

individuals who have a familycompany, where theirremuneration pattern has been topay themselves a combination ofa fairly small salary topped up bydividends, will see a real increasein their personal tax bill. From 6April 2016, there is a new tax thatwill apply solely to dividendincome above £5,000 pa (as£5,000 is given as a freeallowance within which thedividends tax will not apply). Thenew tax will be charged at 7.5%(within a person’s basic rateband), 32.5% (up to the additionalrate threshold of £150k) and38.1% thereafter.

Continued on page 2

In our February 2015 Newsletter, our front pagearticle was “Is it the end of dental incorporations?”.That article was in response to the 2014 AutumnStatement in which the Chancellor announced theabolition of entrepreneurs’ relief (ER) in respect ofthe sale of goodwill to one’s own company.

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Corporate Jargon Buster See page 5

TheKnowin Dentistry

CQC business plans

Continued from front page

For many family businesses this will typicallyresult in each family member (who is beingpaid dividends by their family company)paying an extra £1,500 to £2,000 of tax toHMRC each year.

Frustratingly, the legislation which willunderpin this new tax has not yet been written(or at least, it was not released in the FinanceBill so we are not expecting it now until the2015 Autumn Statement). So no one isprecisely sure how the calculations will work.Just that it will undoubtedly make life moreexpensive for family company owners. In fact,this new dividends tax is estimated to raiseadditional revenue for the Government in theregion of £2 billion per annum – and it is thefamily business which will pay for it.

Since April 2015, a part of the CQCguidance has been enforced whereby a changein business structure allows the CQC torequest a business plan from the principals ofa dental practice. From our experience,

circumstances that can trigger a request for abusiness plan can be an acquisition of apractice, or a change in partners/directors of abusiness.

The request for a business plan is aimed athealthcare (more specifically care homes)rather than dentistry, to help avoid thescenario of a care home going bust andresidents being left on the streets (!).Obviously if a dental practice were to go bust,it would be terrible for the principal and allthose who work there, but patients could becared for by other local practices. As the CQCregulates all sectors of healthcare, itunfortunately means one rule for all.

What is of concern is the lack of consistency inrespect of what the CQC inspectors arerequesting to be included in the business plan.Some are asking for a full 5 year forecast,whereas other inspectors are happy with twoyears of projections. Hopefully a standard willbe agreed whereby all at the CQC request thesame information to be included in thebusiness plan.

Tel: 01768 864466

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www.doddaccountants.co.uk

TheKnowin Dentistry

healthcare

Are you payingyour employees theNational MinimumWage?The NationalMinimum Wage(NMW) bandschanged with effectfrom 1 October 2015and HM Revenue &Customs (HMRC) ishanding out severepenalties foremployers who donot comply withthe law.

NMW is the minimumpay per hour workers arelegally entitled to. It doesn’tmatter how many employeesyou have, you still have topay the minimum wage.

The hourly rate you paydepends on a worker’s ageand if they’re an apprentice.From 1 October 2015 thefollowing rates below apply.

The apprentice rate is forthose aged 16 to 18 and thoseaged 19 or over who are intheir first year. All otherapprentices are entitled to theNMW for their age.

In addition to the NMW, thegovernment recentlyannounced that a NationalLiving Wage of £7.20 an hourwill be introduced in April2016 for those aged 25 andover.

HMRC is determined thateveryone who is entitled tothe NMW will receive it andwhen the new National LivingWage is introduced it will beenforced robustly. Employerswho are not paying the legalminimum wage could findthemselves served with anotice requiring them to payany arrears along with afinancial penalty.

If you have any questions onthe minimum wageentitlement for youremployees please give ourpayroll team a call on 01768864466.

Year Age 21 & Over Age 18 to 20 Under 18 Apprentice Rate

From1 October £6.50 £5.13 £3.79 £2.732014

From1 October £6.70 £5.30 £3.87 £3.302015

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Four phases of Financial Advice See page 6 & 7

TheKnowin Dentistry

Do youneed a will?

If you have sufficient assets inheritancetax may also be a concern and you may liketo arrange your affairs so that the Revenuegets the smallest amount possible. A will isoften part of this planning.If you do not have a will your assets will bedistributed according to intestacy rules andso may not pass to who you would like ormay even pass to the state.An old or out of date will could be more of aproblem than no will at all so even existingwills need to be reviewed. Tax law changesregularly and many people have not updatedtheir wills since October 2007, when itbecame possible for husband and wife totransfer the unused amount of their nil rateband to each other. This could potentiallycost £130,000 in inheritance tax. This is justone example of changes that have happenedrelatively recently. Not to mention the newmain residence nil rate band introduced inthe summer budget this year. Ignoring this

change could see a further £140,000 wastedin tax.If any of the following apply, a review of yourwill is advised:

1. Your will is over 5 years old.2. It includes a “survivorship clause” (for example “if she survives me by at least 28 days”).

3. You have married or divorced since the will was made.

4. You have had children since the will was made.

5. You have changed your views about the gifts in your will or yourfuneral arrangements.

6. Your children (or grandchildren) have turned 18 or will do so soon.

7. Your intended beneficiaries have entered into new relationships and you are concerned about future divorceor bankruptcy.

8. You have had an inheritance or expect one soon.

9. You have made significant gifts or been given significant gifts.

10. You have left your property to someone other than your spouse or children.

We would suggest you contact your solicitorfor a review if any of the above apply.

Anyone who has assets and wants to know who will get thoseassets after they die needs a will to set out their wishes. Theycan also be used to set out funeral wishes so that your familydoes not have to worry whether or not they are doing whatyou want.

Tel: 01768 864466

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www.doddaccountants.co.uk

TheKnowin Dentistry

healthcare

Corporatejargon buster

If you trade through alimited company the mostimportant thing to do is establishwhat you are selling. Is it anasset sale or a share sale? Thismight seem straight forward butyou would be amazed at howmany people are not aware of thedifference. If it is a share salethen the offer price is not thesame as the final price. This isbecause there will be a finalpayment/repayment based on theassets and liabilities (collectivelyknown as the net assets) withinthe business at the date of sale.For example debtors, creditors,cash at bank.An analogy of this is buying asecond hand commercialphotocopier. The photocopierrepresents the ‘goodwill’ of yourdental practice. In addition tothe actual copier, there may be,say, an ink toner cartridge that ishalf full. This has a value, andwill be agreed at the point of offerand included in the offer price.Once the change in ownership ofthe copier (or practice) hascompleted, there may have been anew ink toner cartridge installedand therefore the level of ink maybe different to the amount thatwas in it at the point of offer.There will need to be anadjustment to the considerationpaid – an ink toner cartridge thatis more than half full (or a largernet asset value in the case of apractice) at completion wouldmean a further payment from the

buyer to the seller, and vice-versa.You should appoint a goodsolicitor with specialistknowledge of the dental industry.This is vitally important whenthere are NHS contracts involved. You should also speak to youraccountant BEFORE the salegoes ahead so we can advise youon the most tax efficient way tostructure the deal. Tax planningtiming is of the upmostimportance, particularly when anobjective should be to utiliseEntrepreneurs Relief. So theearlier your accountant isinvolved, the better.

Jargon buster:

EBITDA - Earnings beforeinterest, tax, depreciation andamortisation.

Deferred consideration/earnout period – This relates to theperiod in which the seller stayson at the practice as an associateafter the sale. The buyer willnormally set targets (in terms ofturnover/profitability) which theseller must help achieve. Failingto meet these objectives willresult in the deferredconsideration not being paid. Itis therefore imperative that anytargets agreed in relation todeferred consideration arerealistic and achievable.

Debtor days – the averagenumber of days to receive money

from debtors. This can be agood indicator of the efficiencyof the practice in respect ofcredit control.

Goodwill – the excessconsideration paid over andabove the fair value ofidentifiable net assets of thebusiness.

GP – Gross Profit. Turnoverless direct costs (materials,laboratory fees, payments toassociates, hygienists,therapists).

NP – Net Profit. This is thegross profit figure less all otherexpenses of the practice.

NDA – Non- DisclosureAgreement. A confidentialitycovenant regarding (but notlimited to) the finances of thetarget practice, normally signedby the prospective buyer.Although bilateral non-disclosure agreements do exist(whereby both parties agree tonot disclose informationregarding the other party).

Heads of terms – A set ofagreed principles, to establishthe basis of the deal in broadterms.

SPA – Sale and PurchaseAgreement. This is thenegotiated contract containingall information pertinent to thesale of the business.

Whatever your view on the corporatesmoving into the dental market its a factthat corporate buy outs are on theincrease. Regardless of which corporateis looking to acquire your practice thejargon is the same.

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Find out more about Nathan See page 8

TheKnowin Dentistry

Phase 1: Age 20-30

Ironically, and not least because of theexcellent provision of healthcare services byNHS professionals, the Office of NationalStatistics currently reckons that the averageperson is going to live well into their eighties.So in this age band, this means there’s another50-60 years to go! You may have a job workingin the NHS on either an employed or selfemployed basis, or you may be working purelywithin the private sector. Saving or makingcontributions to any kind of pension schemecan seem daunting but you need to startthinking and formulating a financial strategyas early as possible.

Think about your key financial issues rightnow; what about that deposit for a house?

What happens if for any reason I couldn’twork? What shall I do about a pension?

Consulting an IFA at an early age can help youfocus on the key issues that can affect yourfinancial future and teach you all you need toknow about savings and protecting yourlifestyle.

The younger you start the process, the better.

Phase 2: Age 30-45

Mortgage – tick; hitched – tick; kids – tick.Life’s sorted, isn’t it? Why would I need anIFA?

Well now the time has come when you need tostart thinking about preserving not only yourlifestyle, but also that of those that aredependent on you.

I work with clients of all ages, and it’s fascinating to see the differing attitudes tomoney throughout each of the age groups. A common factor amongst clients at the startof their professional careers is that they do not think they need the services of an IFA.I beg to differ. And here’s why...

So you think you’re too young to need theadvice of an Independent Financial Adviser(IFA). Dodd Wealthcare’s Nathan Glaisterbegs to differ. Read on for more top tips onhow to get the best out of your money…

Four phases of Finan

Tel: 01768 864466

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www.doddaccountants.co.uk

TheKnowin Dentistry

healthcare

Protection insurance has had a bad press, butit’s not about selling what you don’t need – it’sabout needing to protect what you’ve got.

And you really need to look at your pensionposition. The NHS pension contributions canseem massive when you’re juggling amortgage and bringing up the kids – but isthere really a better alternative? And if youdon’t have a pension, isn’t it about time thatyou started thinking about it? What are thecosts and what are the options. And have youprotected your family’s needs by making theappropriate elections to make sure yourpension is paid to those who most need it ifyou weren’t around?

Once again, your IFA can be on hand toanswer these sorts of questions.

Phase 3: Age 45-55

Your kids have flown the nest, perhaps they’ve goneto Uni, and your thoughts may turn to downsizingthe house.

But what are the options. How do you balance yourfinancial needs with those of your family? Can Ireally start to think about reducing my workloadand what would the effects be on my pension?

An IFA is an expert in analysing thosemonetary needs. It’s not all about products orpie charts from investment companies. It’smore like “how many holidays do you takeeach year?” or “how much money do you send

to the kids each month?”. IFAs are really verynice people – and they understand that it’severy bit as much about what you spendrather than just talking about how much youinvest.

Phase 4: Age 55+

This is the biggie and where consulting an IFAshould generally be considered a “must”rather than a “maybe”.

I defy anyone in this age group not to thinkabout the “R” word (retirement), closelyfollowed by the “P” word (pension), and maybeon a bad day, even the “D” word (noexplanation needed).

Whilst if you’re in the NHS scheme, you won’tbe able to blow your entire pension on a veryfast sports car, you still have choices to makewhen you come to retire in terms of pensionversus a bigger lump sum. So whatever youwant to do with your money, either blow it allor pass it on to someone else, it’s unlikely thatyou’ll want to give it away to the tax man, soyou really need to speak to an IFA at this pointin your financial life.

I find the different phases of any financial lifeabsolutely fascinating and I can’t wait forDodd Wealthcare to be talking to as manyDodd Healthcare clients as possible in the verynear future.

Contact Nathan on 01228 530913 or email nathan@doddwealthcare.co.uk

Find out more about Nathan on page 8.

Dodd Wealthcare Limited is an appointed representative ofInvestAcc Limited which is authorised and regulated by theFinancial Conduct Authority.

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This newsletter is designed as an informative guide for clientsand their advisors. The articles cannot deal with any particularpoint in depth and they should not be used as a substitute forfull professional advice. Accordingly, no responsibility for anyloss or damage can be accepted by Dodd & Co Limited as aresult of any person or organisation acting upon materialcontained in this newsletter.

Meet The Team: Nathan Glaister

Place of birth: Born and bred in the Cityof Carlisle.How long have you been an IFA? 18 yearsnow, time flies. In another life I was aTelecommunications Engineer - I detested it,so I was useless!Outline your job in a short paragraph.Helping clients, their families and theirbusinesses meet their financial planningobjectives no matter what eventualitypresents itself.What’s the best thing about being an IFA?Having diverse clients and circumstances todeal with. No client or situation is the sameand that makes my job really interesting. What’s the most common question you getasked by dentists? When was the last timeyou flossed Mr Glaister? All jokes aside, a lotof dentists approach me forassistance/guidance in respect of paying intoa personal pension in addition to their NHSpension, without falling foul of the AnnualAllowance and Lifetime Allowance limits. Give us a top tip for dentists? Don't relyupon your business as your sole retirementplanning vehicle, the tax benefits andflexibility of proper pension planning shouldnot be ignored.If a film was made of your life, who wouldplay the part of you? Some bald bloke,Jason Statham maybe?Any hobbies/interests? Usually the gym if Iget time in the evenings or weekends.

Dodd Wealthcare’s IFA