How To Efficiently Extract Wealth From Your Limited Company with David Hossein [CPD Available]

UK Dentists: Collect your verifiable CPD for this episode here >>> https://courses.dentistswhoinvest.com/smart-money-members-club

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Your dental limited company can be brilliant for control and planning, but it can also leave you staring at a growing bank balance you cannot access without a hefty tax hit. We sit down with specialist dental accountant David Hossein to lay out the real-world options for extracting wealth tax efficiently, from the basics (salary, dividends, expenses) to the lesser-known moves that can make a meaningful difference over time. 

We get specific on what HMRC typically accepts, what needs evidence, and what tends to cause trouble. That includes the £100,000 income cliff edge, how employer pension contributions can reduce corporation tax, and the practical checklist of allowable expenses many UK dentists miss. We also dig into the grey areas listeners always ask about: course travel, business meetings, employing family members, directors’ loans, trivial benefits, and why vouchers are not treated as “non-cash” in the way people assume. 

If you are investing through companies or thinking about buying or selling a practice, this matters even more. We explain why property often sits in an SPV, how intercompany loans work, and the “trading company vs investment company” trap that can put Business Asset Disposal Relief (BADR) at risk. For principals, we outline planning ideas around share sales, holding companies, substantial shareholding exemption, and even how surplus cash might be treated on a sale when contracts are drafted correctly. 

If you find this useful, subscribe, share it with a colleague, and leave us a review so more dentists can find smarter, calmer ways to handle tax and build long-term wealth.

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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.

Transcript

Why Cash Feels Trapped

Dr James 0:00

Lots of dentists have money in their limited company, which is effectively stranded there because of tax. And when I say stranded, what I mean is we can get it, but it's just gonna cost us a lot to be able to extract it into our own personal name. And that's why today's podcast is hosted by myself and also Mr. David Hossein, specialist accountant to dentist. We're gonna be discussing all of the methods that are out there that can be used to extract wealth from your limited company. Both the common knowledge methods and also the lesser-known ones that exist out there that are well worth hearing. This stuff is what we need to know to be able to make the most of that money that is trapped in there. As ever, you can claim your CPD for this episode within the official Dentists Who Invest Smart Money Members Club. Smart Money Members Club also includes multiple mini courses and webinar series on finance for dentists, including how to become as tax efficient as possible, as well as understanding investing. All of this content counts as verifiable CPD, and you can download your certificates there and then upon completion of each lesson. In addition to this, we also include a whopping 10% discount on your dental indemnity and a 5% discount on lab bills for dental principals, amongst other perks and discounts for members. Please use the link in the description to claim your verifiable CPD for this episode. Everybody, welcome to this webinar. This evening we're talking tax efficiency and how to efficiently extract your money from your limited company because, well, it's quite often the case that we know that it's almost like held hostage in there in a way because of tax. So anything that's going to be able to help us be able to extract more of that into our own name is going to be a good thing, and that's why I'm joined today by Mr. David Hossine, expert accountant to dentists. David, I'm looking forward to this one. Where should we start?

David 2:01

Hi James, yeah. Uh I'm excited to be here. Um so we we can we can jump in, I suppose. I've got the slides already in.

Dr James 2:10

Let's do that. Let's do that. Bit of housekeeping just before we do that. Tonight is gonna be about an hour-ish in length, about 60 minutes. If anybody has any questions, please feel free to pop them in the chat and we will get to them at the end whenever we come to the QA section, which is gonna be about 35, 40 minutes in. So then what that means is it's a first come, first served basis. Basically, the first questions we see in the chat, we're gonna answer as many as we can up until that R mark that we talked about just a second ago. So, yeah, if everyone's happy, as you said, David, now's the time we can get we can jump straight in, right?

David 2:46

Yeah, let's get started. So do you want me to share the screen?

Dr James 2:53

Yeah, let's do it. Let's do it. You should have permissions, I believe.

David 2:56

Oh, okay. So bit of uh IT knowledge now. Let me see if I can figure this out.

Dr James 3:02

It's all right. Uh zoom right at the bottom. See the button that says share.

David 3:07

Yeah. I've got three I've got three screens, it's just figuring out the right one.

Dr James 3:11

Oh, right, right, right, right.

David 3:12

Gotcha. So let's try again. Um, how's that? Can you see uh how to extract wealth from your limited company? We we certainly can. We're looking good. Super. Okay, so yeah, so if you're here, you obviously have a limited company. Um the question then becomes you know, how are we extracting things in a tax-sufficient way? Um now, second slide there. Can I just check? Can you see that it's moved for you?

Dr James 3:41

Uh it hasn't quite yet, David, actually. Um I've got the wrong screen, that's why.

David 3:46

Let me show you.

Dr James 3:46

No, it's all right. It's all right.

David 3:48

Uh so I'll start again. Uh stop share. Sure. That's the problem with multiple screens. Okay, so we try again. Um how about that? Does it say overview?

Dr James 4:02

Yeah, no, I were cooking.

Limited Company Rules For Dentists

David 4:03

Yeah, you're in the right place. Good. All right, so um, it's not that long ago, so it's only 2006 since dentists who were actually allowed to have a limited company. There were concerns about um limited liability and so on, and whether it's appropriate for healthcare professionals to have it, and how that opens the doors to corporate ownership. But we are we are able to trade as dentists as a limited company. Um obvious tax benefit is that it allows you to control the level of income tax you pay on your earnings. So your earnings can be a certain level, but you control what income tax you pay based on what you draw out of the company. That that's a starting point. Um, a bit of a quirk with this is that if you are a dental associate in the NHS, um, you can have a company, but you can't superannuate, which is different for principals who can and they um can have a company and still superannuate insofar as they have a salary and dividends, whereas associates are unfortunately not allowed. So I don't make that rule, but it is important to say. So if anybody listening to thinking about going with a company, you have to know if you're an NHS dentist, you can't have a superannuation going forward. So, okay. So hopefully that's clear to everybody. Uh, next slide. So wealth extract wealth extraction. So a big part of extracting wealth will be minimizing the tax that you pay because the less that goes to HMRC, uh, the more is available for yourself. Um, so using a limited company, whether it's an associate or principal, um, will ultimately accrue a significant amount of cash inside the company, right? Because that's the whole purpose of the company. You're gonna control what you take out, therefore the company will be left with cash. So that's certainly something that should be uh talked through before having a company and have a strategy about well, you know, I'm gonna have this car, so I know what I want to do with it. Um, and we'll talk about some of those kind of options here, not as financial advice, but just more on the tax side of it. So that's that's my remote, if you like. Uh, we'll also discuss uh for associates and principals because they both have different unique problems, I suppose, if you can call it that. Uh so starting with associates, so hiring associates use a limited company, as mentioned, to control the large tax bills that come with that. We often get um associates saying, Look, I've had this tax bill of 90,000 pounds, what on earth is going on? Should I be paying that much? What can I do about it? And conversation is usually, well, you know, you earn money, you you pay income tax on it, but if you can uh if you're not spending all of it and you've got a plan for that money, then yes, a company can help you. Um tends to be that we like to for people to have uh less than £100,000 in terms of their income from the company, because at that point you still keep your personal allowance. If you draw over £100,000 from the company, you will lose the £12, uh 570 tax for your allowance, and on that chunk of your income above £100, you are effectively paying 60% tax, which is not good for um for you to be doing basically, and just controlling that. So keep yourself at 100. Uh, but certainly that the lower you go, the more you save. Um, so you've got your company. Um, we need to think about well, have you claimed all for your expenses that you're allowed to, and any allowances and any basic things that can be done to minimize that. Because again, minimize the tax, that's more in your pocket. Um, investment side, you've got payments into pensions. So this is a big thing again about getting your income below 100,000. And this also applies to associates who are not having companies, um, that you can put money into a pension to bring your income down, again, avoiding that 100,000 plus strap. Um, paying into a pension, you can do that into a private pension for your company. It is fully tax deductible. So that portion of your income that you put into a pension is effectively subject to zero um zero tax, which is really good. Um, and it's an expense. So I want to make that clear that payments into a pension, whilst they are investments, they are also an expense for for your uh tax purposes. Other investment options uh kind of tend to be around putting into a property or stock shares and crypto. The difference with those types of investments is that they are not an expense, and that can be sometimes uh confusing. And we get clients saying, Well, look, I've put 100,000 into crypto, so I've got no profit this year, but it's not an expense, it's an investment. It's only pensions that qualify as a deduction against your income for um corporation tax. So just to make that clear. Um holding of the investments, so it's quite common for properties to be held in a separate company, and that is 10 well, that tends to be driven by the lenders who want to have a charge over a new clean company that is not mixed in with any other activities. Whereas um it's quite okay for an associate who wants to put money into crypto or stocks or shares to hold that um in their associate company. There's no there's no requirement to move it out if it's just stocks, shares, and other investments. It can become a problem if you then have an associate dental company that becomes a practice owning company, which does happen. So, again, talk that through with your account in the barrel. Should I have my investments in a separate company? Um, if you've got aspirations to want to practice, how would that work in terms of um splitting those two things out? Because it is important, and we'll get to that when we look at practice owners in a minute. Okay.

Dr James 9:50

Nice one. By the way, David, I don't know if there's any way to just make the slides just a little teeny bit bigger on the screen. Because if possible, if it's if it's not, it's not.

David 10:01

No, it is, so I must have done the wrong screen. I've done the wrong screen again. Let me let me uh start again.

Dr James 10:05

It's alright. If it's if it's not it, if it's gonna be a big problem, we're we're fine. The main uh value is coming from what you're telling us.

David 10:13

Let me see. I'll tell you what, third time lucky.

Dr James 10:15

Let me let me start again. It's it's alright, it's alright, no biggie. Uh so on, two.

David 10:23

So is that big?

Dr James 10:27

Oh, that is so much better. I'm glad that I asked. Excellent.

Allowable Expenses People Miss

Family Payroll Loans And Perks

David 10:30

Excellent. Thanks. And apologies to everyone. I've got three screens and just yeah, it's not always obvious. No problem. Okay, so uh this kind of slide just is a list of common expenses that we see. It's a PDF that is available, and I will send this, James. You can pass this on afterwards of just look. These are things that you could be incurring that you might not be telling your accountant, and therefore you could be missing out on some tax relief. And again, this applies to limited companies as well as uh sole traders. So if you're an associate with a sole trader, this would still apply to you. Um I'll talk through it because sometimes that you know can be interesting. Um, so starting at the top, protective clothing. So if you've bought scrubs and things that are 100% clothing for work, that is a tax deductible expense, so you can claim uh for that. Um, the cleaning of that is also so if you've got a bag of scrubs and you're sending it to the the cleaner once a month, that's also a business expense and it's tax deductible. Printing, postage, and stationary. Um, if you buy pens, stamps, pads, diaries, we we tend to say you know, you claim about £50 a year just just for that sort of stuff. PSP we call it printing, postage and stationary. Um travel expenses. So as a dentist, you will be traveling for courses, you'll be traveling to see um uh you know business mentors, potentially suppliers. You need to keep a record of that. If you've driven, then it's a case of claiming 45p per mile and just telling your accountant this year I've done a thousand miles or two thousand miles of business travel. Um, the requirement at your side is to keep a diary. You might you might spend your phone, you might have just said something in your diary that says today I would travel to London or to Scotland or wherever. But you can claim for that that is a business expense. So is your phone? We all use our phone for I think I use my phone, majority of my phone is for business work. So I think that would be the same for a lot of a lot of dentists, and we do um ask you to tell us how much of your phone do you use? Is it 50%? Certainly somewhere between 50 to 80. A lot of people will say it's used for business, so that can be claimed as an expense as well. Um, you will be paying for subscriptions, so your GDC subscriptions, um, BDA subscriptions, those are things that should be obvious. Course fees is where it gets a little bit colourful, and we can have a lot of um colourful conversations with the clients about um course fees, and especially if they're overseas. Now, is it an expense? That's the first thing. So if you're going to um for a CPD um to go on a course that relates to the work you're currently doing, that is fully tax deductible. So, what about its location? Does it matter that it's in Dubai, or does it matter that it's in London? No, if it if you go in on a course in Dubai um and it's for the work that you're currently doing, that is still an expense. As is the travel, as are the hotel costs. Um where it gets colourful is the timings involved because HMRC will want to say, well, look, you you travel the day before, you land, sleep, start the course, sleep, come back. And if there's an element of personal enjoyment, um they won't give you the uh the travel in those days, hotels. So we we do tend to get asked that quite a bit about well, what if I stay an extra week or a few days here? And um yeah, that that's the official line with it. So we sometimes get asked, well, look, the course is finished on a Thursday and on a Friday. I'm you know, I want the Friday to myself, and what what can I do? And if you've got an extra day, what why don't you just go and talk to a lab out there or some kind of supplier, and you can tell me that that was that was a business day as well. So just be reasonable. But courses tend to be, especially with overseas travel, a bit bit colourful in terms of what is what is possible. Um, because everybody likes our ladie, don't they? Um legal and professional so should be pretty straightforward. Unfortunately, you know, there are lawyers out there who do make dentists' lives difficult and patients uh are advertised. And if you've got a legal fee you've had to pay to defend yourself, that is fully tax deductible. Um, legal fees that might not be so obvious, and it's worth saying for um as well as education purposes is if you're buying a practice or you've put an offer on a practice and you've had to pay legal fees and you've incurred costs, but it doesn't go through, it falls through for whatever reason you know your your lending pulled out at the last minute or change of circumstances. Legal fees for an aborted purchase are unfortunately not tax deductible. So that's that's the bad news on legal fees. Uh your accountance fees, so your accountant's fees to prepare your tax return and all the phone calls and so on is an expense, so make sure that's included. As is your indemnity insurance, any books and journals, payments to charities, computer expenses. You might have put a laptop that you do work on, that's that's a business expense. As is an iPad, you know, you can be using that for looking at scans and x-rays and so on. Um, use of home, you can claim £302 a year, no questions asked, so mate, so that's done. And any other expense that is 100% business related. So if you paid for it and it was purely to do with dentistry, you can uh claim that as an expense. So those are your common expenses. Um thinking beyond that, um we then get into, I suppose, a bit more thinking on planning. Um, so you have a limited company, you're drawing salary and dividends, um, you're taxed on that. Now yeah, it's it's I mean it's a good question to ask what what what have we got available within the family? Is maybe a spouse at home with the kids, or do they have maybe a lower rate of tax they're paying if they've not got you know a very high-paying job? Um, they can be involved in the business, either as an employee or as a shareholder, uh, potentially both. Um, what's right for you depends on a lot of circumstances, but certainly um one of those two options would would be um you know advisable if they're paying a lower rate of tax, why not uh um involve them? Has to be done correctly, but um obviously talk that through the accountant. I've put on there other family members as well, just because it's something we get asked a lot um about about grandparents. So if you have a limited company, we get asked, well, can I employ my uh grandparents? And the answer is you can give a job to whoever you like, um, is is the answer. Now that sh should you is the question. So I think where it becomes a good idea is if you are supporting your grandparents anyway. So you know you they've raised you and you want to support them in their old age, and they can do work for you. Now, whether that's good work or bad work is between you and them. HMRC can't do a performance review on your parents, but if they can generally be justified to be doing some work, you can employ your grandparents, and and that money that you're giving um to your parents then is an expense for the company. So again, it's it's bringing bringing the tax liabilities lower. Um directors' loans is another method of taking money out, so getting money out of a company to you personally is one of three ways salary, dividends, or loan. Directors' loans have to be paid back, and if they aren't, then they are just converted to a dividend, so not so tax efficient, and that section of 455 taxes is essentially a dividend tax. But where director's loan can be tax sufficient is actually if you are planning to loan money to your company. Um, we often see this where again go into the practice uh acquisition. So dentist has a limited company, has put an offer on a practice, is going to buy, um, but needs to you know get the deposit from his savings account into the company because it's the company buying it. That money that is lent to the company is a loan to the company, and that can be used to offset against any dividends that are taken. So to bring to convert that um convert dividends taken into actually a repayment of the loan and and you know bring the income tax down that way. So loans to the company can be a good idea and bring tax down. So we like that one. Um trivial benefits, you know, not everybody is aware, so it's worth adding on there. You can uh pay £50 non-cash expenses per employee up to £300 per year. So if yourself you have a limited company, you are a director, you're an awesome employee, and perhaps your spouse is also an employee, so between the two of you, you can have £600 of uh um Christmas presents or whatever you want to choose. Uh that's good to know. Uh you can also, on top of that, so not not included in that, you can also host an annual party. So you you know, go out for a nice meal at a cost of £150 per head. Um that's an annual uh allowance there. So that's also good to know.

Dr James 19:52

David, only um £50, uh the £300 per year employee uh still that's divvied up into the £50 non-cash expenses. Does that also apply to directors?

David 20:03

Directors are employees, yes.

Dr James 20:06

Oh, there you go. Okay. Good. Just to bring that one up, wasn't sure.

Property Companies And Inheritance Tax

David 20:12

No problem. Yep, good question. Um you you also have business meetings, and um again, let's say you are going to a meeting where you are discussing business, the business of dentistry. Let's say you meet your uh principal for a coffee or for a meal to talk about things, um, that can be paid through the company. It's not an expense in that it won't reduce your corporation tax, but it's better to be paid from company money um that's not been subject to dividend taxes, because money in your pocket you've paid, you know, 33, 39, whatever the rate is that you're paying dividend taxes on. So it's it's better to do things like that through the company. Um so that's good. We've talked about mobile phones and laptops, so I won't say that again. Um cars is a big expense for people, and your company can provide that to you as an expense, that is much better than buying a car through money that has been subject to corporation tax, 25%, and then dividend tax of potentially 33%. So if you are not adverse to an electric car, and some people obviously prefer petrol, but you know, a lot of our clients you know, do you have electric cars? And the answer is always put it for the company, it's uh it's gonna be an expense for you. As is a bicycle. So if like me, you've recently taken up road biking because you like to get out and about, um, your company can buy you a bike, and these things are expensive, sometimes up to tens of thousands of pounds. So if you do like the two wheels, you can also buy yourself it through the company, again, saving corporation tax and dividend taxes. So don't uh don't miss that one if you if you do ride a bike. Um okay, so next slide is on properties. I want to talk a bit about properties because it is very common. We have a lot of dentists who um limited companies and it's a you know everybody loves bricks and mortar, so interproperty. Um so just an overview here. So, I mean what's the benefit? So as a higher rate taxpayer, um there's no tax relief for mortgage interest that was abolished years ago, um, which is really horrible because you can if you buy a property personally, your higher rate taxpayer, you rent it out for a grand, you're paying the bank $800, you know, $900 a month in interest, but you're taxed on the grand. So once you paid the tax, often we have you know situations where people are putting money into the property just to cover its expenses, so that's cash flow negative, not good at all. Uh, that's not the case for companies because companies get the interest as an expense that brings the tax down. Um, that's what it says there. Um, lenders will want a special purpose vehicle, i.e., a separate company for that. Um, they want it clearly separate with a charge that only they have against the company. So, how do we do that? We lend the money from the dental co to the property company, and as long as you have the same director shareholders in both companies, that's fine. There's no tax issues there. Um, and it can be written off in future if uh that's a decision that's made in future without tax consequences. I have put on the consider exit taxes because it is something that people often forget that you might buy a buy to let in the property. Sorry, you might buy a buy to the property in the company, but if I want to buy that from you, I don't want to buy a company. So I'm buying the property from your company, and the money is trapped in the company again, which is fine if you want to invest it, but not fine if you need to take it out as a dividend. So when you're doing your sums, just make sure you've you've thought that bit through that you might have to pay dividend taxes when it comes out. Um however, as I say, so property is very popular, and it can soon um you know some associates who are quite adamant they do not want to be practice owners, and they're very doing very well in property, and it grows and grows and grows, and over time it becomes um a good problem, but a problem for inheritance tax, uh, which is what I want to talk about. Uh so this slide just shows the setup of you know the two companies. Um, yeah, so inheritance tax. I want to talk a bit about inheritance tax because it's becoming a bigger problem for people since in the budget. Now we have pensions also form part of um of people's taxable estates. So inheritance tax is a much bigger problem for people now. There is um work in the background, people trying to get that um pushed back on, but as things stand, pensions are now part of your estate, so people are gonna pay more inheritance tax. Um, there is some planning that can be done um with property companies, in fact, it and any company, but I'm gonna talk about property companies because you tend not to pass on a dental company to children. Um you tend to sell it and then move on in life, but this also applies to any company, um, and that's growth shares. So um what's a growth share? So growth share is a fixed um line in the sand on the value of a company. So the scenario is is this James, you have a property company that at today is worth one million pound, and it's in a fantastic area, and we sit down and you tell me, David, it's worth a million today, but in ten years it's going to be two million, and I've got a problem because the doctors told me I'm not doing so well and I might not have so long to live. Right. But even not in that extreme scenario, we've got to think about inheritance tax because your plan is to hold this long term. So, what growth shares do is we um have a corporate lawyer who drafts articles and a shareholders' agreement to convert that £1 million and to crystallize it into the existing shares, and then we issue a separate class of shares called growth shares, and any increase in value is allocated to those growth shares, and those growth shares are issued to the kids today, so any future value is passed down tax-free because it's not a passing down of um of value, it's an issuing of shares that subsequently grow in value. So I'll say that again. The million pound is put into the existing shares that you keep, but we issue new shares, and any growth is automatically allocated to those which are given to the children, and they're worth a pound today, but in ten years they're worth a million that we know. So there's a million pound passed down tax-free, and that's um a special kind of tax plane there.

Dr James 26:55

And it's that's that's a hack right there. You can that you can allocate all of the growth to those shares that have been distributed. I mean, that's yeah, that's fascinating that you can do that.

David 27:06

Works really well for investments because investments by definition over time go up in value.

Dr James 27:11

Yeah.

David 27:12

Um, and it's more so for investments because practices are the same, most people sell it on the open market. And um, don't pay it's quite rare you pass a practice down like that. So just wanted to uh mention that's a good good tax planning opportunity there.

Dr James 27:27

Presumably that works outside of property with other assets as well, so just maybe not done as frequently.

David 27:32

Correct, yeah. It it's shares, so it's companies, but if you have assets within a company, the same principle applies.

Dr James 27:40

Yeah, interesting.

Incorporation For Loan Pressured Principals

Practice Sale Taxes And Valuations

David 27:42

Yeah. Right, so that's associates. Um I've done a slide on incorporation for sole traders, and I think it's important to flag that you know, often people think that you know, if I draw all the money from my business, I it's not right for me to have a company. And in general, that's right, but there is an exception to that, and that is if you're a practice owner with a bank loan. And I probably shouldn't say this, but of all my clients, the ones who are most stressed and under financial pressure are principals who've bought a practice that's not inside limited company because they get hammered on paying the bank back and paying tax on the bank repayments. So whenever I talk to an associate who's buying a practice, I will always try and steer them towards well, can you buy it through a company? Um if it's NHS, you can't. If it's not already incorporated, you can't, because you buy an NHS contract through a partnership mechanism where you join as a partner and the old principal retires or comes off the contract, and a company cannot be a party to an NHS contract. It can be an owner but not a party, so on a sale, you can't do it. But um if you've bought, you know, or if you own a um a practice and it is a sole trader, and you do have a bank loan, you can incorporate it. So, you know, going back to the title, how can you extract effectively extract wealth from them to company or have one in the first place? An example here on screen, I'm not sure if everyone can see this, but this um uh practice is making profits of 283, and on the basis that all pract all profits are used personally, because we've got the loan repayments of 56,000 that are still subject to mouse on it, that's subject to income tax. This um client is still going to save 8.8,000 pounds per year in tax. So incorporation of your sole trader practice is something to think about as a good planning opportunity. Um, it does involve a refinance, so you'd need to get a new loan in the company name. Perhaps that's a good thing because interest rates are coming down now, so you might have a high rate that you could actually benefit from a lower one. Um, but it stops you paying income tax on the part of the profits that you pay to the bank, and it it could well save you tax. So um also it's worth saying the NHS local teams are a lot more happier to not give you a headache now. So they understand the pressure NHS practices are under because you need to get their approval, and they understand that you know the pressures that are on NHS practices, so they they give you less headache these days. It's not guaranteed, but uh yeah, it's worth worth mentioning. Okay. So for principals, the sale of your practice will be probably the most significant financial milestone of your career. Um a dental practice is a very valuable asset. Um the market wasn't great last year, so we had a good year, 2022, for sales. Um corporates were very active, interest rates were low. Um 23, 24, not great. Not great in terms of the offers that we had for clients and deals that actually completed. There were a lot of clients who got offers that were messed about and then they you know fell through for whatever reason. Um, and multiples were pretty consistently low. Um, it's getting more active now. Multiples are better. So last year I would have said 6.5 was about the average for profits in terms of valuations, 7.25 is is uh more consistent now. So people are paying more for dental practices corporates are. Uh and as I say, that's fueled by well, interest rates are coming down, so corporates can buy cheaper, and that has an impact as well. Um, and there are corporates out there who are getting ready for their exit, and that puts a lot of pressure for people to buy and you know be part of the exit of that corporate, which is good. So we are seeing more offers for clients um to sell. So when you're in that situation, whether it's this year or next year, or for the future, you've you've got I suppose two options for you in terms of capital taxes when you sell. Uh, you have BADR, business asset disposal relief, um, which is 14% at the moment, going to 18% in April. Or substantial shareholding exemption if you sell via a holding company, which is zero, which sounds really good. And that can be certainly better than um 18%, but um it's only for a certain scenario if you're going to reinvest the money, and I'll explain in in the following slides, um, which is what it says there. So consider SSA if reinvesting the funds.

Dr James 32:26

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David 34:17

How is this relevant? So if you own your dental practice fire limited company, um you can sell the shares to the buyer and you will potentially pay 14% if that completes before April or 18% thereafter. Um, there are conditions for that. Um, so for the prior two years up to your sell, you have to have been an employee or director and owned more than 5% of a trading company, and that's relevant because when we talk about investing through your company, we have some clients with over a million pounds in crypto because they've just done really well at it, and over a million in property. And if that's all within the dental practice company, is it a trading company anymore or is it an investment company? And if it is an investment company, so 51% more of assets and trading activity, you won't get the 14%, it will be 24%. So for dental practice owners, most likely you'll have your investments outside. That's one strong reason to do it to not jeopardize your business asset disposal relief, uh, to pay a lower rate of tax on sale. Um, but also, if you think about it, if you're selling your practice and your practice company has all this investment, you want to retain that because you've invested for long term. So, how do you take it out? It's complicated. It's better just to have it in a separate company through loans, and then those those loans are dealt with on the sale, it's much easier to deal with it that way. So um, planning uh opportunities around that certainly um shares can be gifted to your spouse, so you get a million pounds of lifetime gains. If the practice is going to make a gain of two million, why not have that split 50-50 with your partner? Um we'll save a lot of tax. Um children, it's possible to make your adult children say 18 plus shareholders. If you know we have some practices that go for four or five million and you need to spread it out a bit further, however, kids are different than your spouse because your spouse, you live with everything shared. Um HMRC, well, if you're giving shares to your children, if you're gifting shares, you've gifted it. A gift is a gift, is a gift, is what they say. So once that money's with the kids, it's theirs, you can't ask them to pay it back. Um they might, you know, quote unquote buy you things, but that's that's out of their good heart, not immediately, certainly. Um so that's that's how that one works. Um and that's how it's structured, dental practice, one company, investments the other, nice and easy on the sale. The dental practice goes, the investment company stays. Next is if you have a very clear plan that I'm gonna sell my practice and I'm gonna get two million pounds and I'm gonna reinvest all of it in this either new business that I've got, I'm very clear on property, and it's gonna be reinvested. Uh, there is something called a substantial shareholding exemption where you put in a holding company like this. So the holding company now owns the dental practice company. You may or may not have a property company in there, but I'll put it in for illustration purposes, and it's the holding company that sells the shares and gets the two million. And if it's owned the shares in the dental practice for more than 12 months, um with a few other conditions, it will pay 0% because there's an exemption for that, which is great, because why pay tax if you don't have to? If you're absolutely clear, you're going to roll it over into new things. We often get asked on holding companies um, should I have when I'm not sure what I'm going to do? So I've got a dental practice, and I've heard you know, somebody's told me to put a property company a holding company in place. And I always say, Well, if you are not clear right now, then don't do it because don't forget you've got 12 months pre-sale. Um, a sales process will take you six months minimum by the time heads of terms are signed, and you'll be talking to buyers for two, three months before that. So you've easily got nine months anyway, um for you know to get through. And pretty close to sale, you'll you'll know what your plans are. So you can put in a holding company towards the end, but if you start with one and you need to take it out, that's complicated and time consuming and expensive. So my kind of default position is don't have one if you don't if you're not 100% clear why you need it, because it can always be added in later.

Dr James 38:47

And David, just to clarify one thing on that, because I was having this conversation recently uh with my accountant, and he was saying that there's if you do a share transfer to a holding company, there's not normally a tax liability for that, is there?

David 39:05

No, there's a process to go through to make sure there's no issues with it called um clearance. So there are tax laws on um transferring of shares, and we we write to HMRC to say we are seeking advanced clearance that this proposed transfer of shares is outside of related uh employment-related securities and and that there's no charge to tax by doing it. And there is one department at HMRC that works really well, and it's this department, Reconstructions. They reply within two weeks, and you can talk to them on email. Every other department is a phone call. Uh, but the Reconstructions department, because it services big multinationals, is actually very well run, and you will usually get a reply within two weeks to say, yep, go ahead, no problems. So it's very quick to put in place as well.

Dr James 39:52

Interesting, because that's just something. I mean, we're taxed for everything, aren't we? You know what it feels like, but that's something that we're not taxed for, which I find interesting.

Holding Companies And Sale Structuring

David 40:02

Yes, and I think rightly so, because you're not receiving any money. Um, it's different, and we had this with a client recently where they were actually transferring shares. So um dentist A wanted to give his shares in his company to another dentist for shares in their company, so swapping shares between due dental practices, and there was no cash being transferred, but there is a tax charge because there's an exchange of values and there's no exemption for that. So it was a bit um difficult because there was swapping shares without any cash moving, but they had a 14% tax charge, and there's unfortunately nothing we could do on that one. There's not an exemption for that. But whereas a company that you own, as you say, there's no cash moving hands, so why should you pay tax? Okay, uh, so next slide extracting uh cash. So it is that we you know it is quite common we do see clients who have not invested money, they've not put it into stocks or pensions or or property, or they have done and they've got cash left over, and they don't want to take it as a dividend because why would you if you don't need it? Um it's more relevant to principals who are selling the business, and you know, there is a way that says there you convert you can convert cash to capital. So by default, cash is usually taxed as income, but if you uh include it on the sale of your practice and the share purchase contract is worded correctly, that cash can be bought from you by the buyer at capital tax rates of uh 14 or 18 percent, um, which is quite handy. So you don't need to freak out if you've got hundreds of thousands in cash and you're selling your practice, you don't need to take it as a dividend, you can just add it to the gain and be paid at 14, 18%. So that's another another way to deal with excess cash.

Dr James 42:01

Interesting one on um entrepreneurship for VADR, and maybe we're getting a little bit beyond the scope of this presentation, but they seem to, I mean, once upon a time it was 10 million, right? Tax-free, and then 10, and then it was capital gains above that, and now it's like uh one million, isn't it? One million, but you still get taxed, you still you know I get taxed 14% on that one million, or and it will be 18% soon.

David 42:31

Yep, and it was 10 million at one point, I remember those days, and I don't want to sound pompous, but one million today's money is quite different than 10 million 10 years ago. So there's no adjustment for inflation at all there, is there?

Dr James 42:44

Yeah, maybe we're getting beyond the scope of this. What's your what's your personal because obviously with when people set up their dental practice and they're like, yeah, okay, I'm gonna get them a brilliant exit in like 10 years, 15 years. Do you think I know it's hard to comment, but do you think they're gonna keep it in some form or just keep watering it down just out of interest?

David 43:03

I think we've lost a lot of people through that. I think people have gone overseas who don't want to be tax resident because of capital gains tax now. I think we have seen that. It's been quite, you know, in the in the news a lot. Very prominent wealthy people who have moved overseas because they don't want to pay that rate. So I and that's bad for business. That's bad for that's bad for the business of raising taxes. We want people to stay in this country and pay taxes. The more people that pay at a lower rate is better than because the people that will move this will move overseas are the people with the most assets, if you think about it. So I don't think it's good for business.

Dr James 43:41

Yeah, remains to be seen. That one is here for the moment. Um, but when you get into these things like running a business, and you're like, you know, most of the time it's quite a while before you get your your your exit, you know what I mean? And you kind of you get into it with this in mind, and then there's no guarantee that it's gonna be here or it's gonna be watered down. Further still. But yeah, no, I was just interested on your thoughts on that one. We can't no we can't predict the future.

David 44:06

No, and it's politics, isn't it? So what's right and what's politically uh sexy is is two different things, isn't it?

Dr James 44:13

So cool. Just interested to know what you thought. We'll see.

David 44:20

Okay, so yeah, that's it. So I hope that was cool. Sorry, I spoke quite fast there. I think I got a bit excited on my topic.

Live Q&A On Grey Areas

Dr James 44:30

No, I think that was the perfect tempo personally, and I think we actually all owe David a clap up. So I'm gonna start to clap up on everyone else's behalf. I'm sure there's people clapping behind the cameras this evening as well. David, thank you for uh sharing that enlightening as always. And you know what? I said to David before we did this webinar tonight, I was like, right, tell us about all the stuff that we know about just so that we can have a recap and ensure that we're covering all bases. And that that tax deductible, that little that's that slide that you had of all tax deductible expenses, that was a really good one to screenshot, which people might like to do in the recording of this webinar, which we're going to be releasing to the mailing list very soon. So, yeah, recovering the stuff that we know, but we want to ensure we've covered all bases, and also the things that people don't know about as much, which is really interesting. Because actually, whenever we were talking about VADR just a second ago, I think there's lots of people who still don't know about that, and lots of principals as well that that I talk to whenever we bring it up. And it's all it's all just about that. Yes, we were talking about it getting watered down, it's still one of the lowest taxes that there is, and it's one of the incentives that there is for people to go out there and still be entrepreneurs and be principals in this day and age. So, yeah, some interesting stuff, guys. We said that we would do some questions. We've got about 15 minutes for questions. So, what we are now gonna do is rattle through as many of them as you can, and I can see that there's been quite the influx in the chat box, which is cool, which is good to see. So, David, if you're happy, should we just go ahead and get cracking? See how far we get?

David 46:05

Yeah, it's a really good question. Um yeah, so I think the first of them.

Dr James 46:11

Yeah, I'll read how I'll read them out if you want. Uh you can do the thinking. How about that? Yeah, all right, cool. First one for Ryan Stewart. Shout out, Ryan Stewart. Hope you're doing good. Is the buying of lunch coffee? Ryan's thinking of a stomach, respect. Is the buying of lunch last coffee during a normal working day a business expense?

David 46:33

The answers in the question during a normal working day, no. But if you um let's say you wanted to have a catch-up with uh one of the nurses or the practice manager and you you took her out for a costa coffee, um, that would be put on a daily basis, no. It's only if it's because it's it's what's the purpose of it? The purpose of that coffee is to fill your stomach. But if you've had that coffee to have a meeting with somebody, then then you can't do it.

Dr James 46:59

Good. And that's a good example of something that you in the second situation you were talking about just a second ago, when you're taking somebody out for lunch, you can put it through the limited company, but it's not tax deductible, right? But it'll still be cheaper to do it that way.

David 47:10

Correct.

Dr James 47:11

Yeah, cool. Good stuff. Next question from AA uh pseudonym there, I believe. Can you involve children over 17 years of age? And are there any limits on their involvement?

David 47:28

Great question. Yes, you can. Um, they can't be shareholders, and potentially that's you know not a good thing either at that age, but they can be employees, so they can do work. Um obviously you've got national minimum wage to think about, so you know they're an employee, you have to not uh pay them pennies. Um in terms of limitations, I think that HMRC would look at that and say, Well, what work have you given them? Um you wouldn't give them a practice manager's job, you wouldn't give them seek received duties, but they could be doing um social media work for you, um, admin work. And you would tend to say, Well, yep, I've employed my child, giving them work to do, whether they do it well or not, is as I say, HMRC can't performance manage your staff. Some staff are good, some staff are not great. Um, but it should be relevant in terms of their market hourly rate. So if it wasn't your child, would another child be paid that? And what hours are available to that child outside of school? Um, but going back to involving a family member, your child is your family member, you're giving them pocket money, let them earn it. So, yeah, definitely.

Dr James 48:34

Good stuff. Next question from Amanda, Amanda Naylor Is an electric car as an expense only relevant if buying you?

David 48:45

Um no, but and it's only for limited companies, but if it's uh new or secondhand, it's still a um a tax expense. The only difference is a secondhand electric car um isn't a hundred percent expense in the first year, it's eighteen percent per year, so it's a different rate. You you still get the tax frequence over a longer period of time. Um that's if you're buying it, if you're leasing, then it's just whatever you're paying monthly for it, but you can still get it as an expense for the company. Cool.

Dr James 49:17

John Gaddis, can you get the cycle to work scheme, the back purchase, and still claim some motor expenses for between practices, courses, and meetings?

David 49:30

Yes, you can.

Dr James 49:30

Yeah, yeah.

David 49:31

You're not forced to, you know, HMRC can't force you to cycle every day. It rains quite a lot in this country. So one day you might cycle, one day you might go into car.

Dr James 49:41

Seems reasonable. Jeremy Williams, question from Jeremy Williams. Used cars can be claimed, but are claimed at 18% a year for five years? Yeah. Yeah. I think it was a statement more than a question, that one, but yeah, it's accurate. Uh okay. Uh question from ARPS. Do you still need to pay IHT on tax or sorry, sorry, beg your pardon? Do you still need to pay IHT or tax when you sell the practice and you're resident, for instance, in Dubai?

David 50:17

Yeah. Um, I think that one needs a proper look at before yes or no. Um can't can't give you a yes or no or not. I would have to look at it and see how long are you there for, when did you move, what's the um what's your involvement in the company at the point. There's a lot in there. Um so look get get it looked up properly. I couldn't give a yes or no or not.

Dr James 50:38

Seems reasonable. And you know what? It's probably a good point to mention that after this webinar, we are gonna be sending out an email which has an opportunity within it to connect with David. There's gonna be a link in there that you can use if you want to speak to David about anything that we talked about tonight because none of this is really a substitute for good tax advice. David is also available on the Facebook group as well, Mr. David Hossine. So feel free to look him up if you want to ask anything more specific about what we were talking about this evening, specific and relevant to your own personal circumstances. Next question from Simab. Two questions from Simab. What is the maximum amount you can pay grandparents for childcare? Would that be classed as an expense?

David 51:17

Okay, um, childcare is not an expense, but you might pay them for doing other work. So this this is where you you've got to think it through. So you you you want to pay the grandparents because they're helping you out with the kids. You can't say that take your city because that's not a business expense. Or you might be paying them for help with admin and they mine the kids for free, if that makes sense. It's uh it's how it's um packaged up and sold to the tax man, um, and often it's it's a conversation around it looking presentable and reasonable. Um and there's usually a way, there is usually a way we we we do have people to go down that route, but you are employing them and giving them duties that you can kind of show, but they're mining the kids for free as a result of it, and it's it's it's kind of an understanding, uh, if that makes sense. But from HMRC's perspective, you're not paying them to mind your kids, they would not give you that at all. You can't you can't do that.

Dr James 52:13

Fair enough. And second question is for the £150 annual party allowance, does your company bank account or receipt need to show the practic the precise amount of £150 exactly?

David 52:31

I would take a photo of the receipt and just keep it in your phone. It's uh it's better to have it, it's better to have it and not need it than you know, be asked and have an inquiry and be like, look, my bank statement says whatever San Corolla's off as enduring. But it's also like they might want to see the receipt and look, we haven't had this, but I always do it for myself and I tell clients just take a photo because if they ever wanted to see how many starters have you got how many meals per person, and that detail would be on the invoice. So yeah.

Dr James 52:59

Is that £150 per head per employee? Yes, per employees. Okay. That's quite the party, then, right? You can really look after them. And is it just just the one, just one off?

David 53:11

No, no, it's an you could have two events each, £75. So it's just that's the annual uh allowance, doesn't have to be one of them.

Dr James 53:19

Right, I see, fair enough. All right, no problem. Another question. Uh, as a dental associate, can I employ children aged over 18 pounds for my limited company?

David 53:32

Hmm. If they're doing what you can give a job to anybody. Is you know, HMRC can't tell you who to employ and who not to employ. But with it being a family member, they would again look for what are you paying them versus what you would pay Joe Blogs off the street. And if your kids are doing you know your social media and marketing, which you know they do, kids are very good at that. You might give them some money, and uh you you can do that through payroll, is the right way to do it. So absolutely.

Dr James 54:04

Interesting. Next question is coming in how can I access the recording? Recording is going to be available on the podcast, the Dennison Invest Podcast, if you like to listen to it in an audio format. We're also gonna be releasing the full presentation, the full video on the mailing list and the website. So that should be out this Saturday. If not, it'll be very soon next week. So definitely two best places to keep your eye on is the podcast and also the mailing list. And also, another thing that I meant to mention earlier, you do actually get some free CPD uh for attending this webinar tonight. You just have to fill in a short questionnaire that's going to be included as part of that video that we just talked about a second ago. It's gonna be the full whack, it's gonna be the whole 60 minutes, so you might as well claim it if it's there and it's free. So good thing to know. Thank you for that question. Next question from Pratik: What are the ways to be tax efficient with a company when you're salaried and already earning in a higher tax bracket? I've been exploring this and there seems to be minimal ways, mainly SIP contributions.

David 55:09

So I think if you're saying that you're salaried and you don't have a company, is that is that what the I think that's what the back maybe if I read it out again, what are the ways to be tax efficient with a company when you're salaried and already earning a higher tax bracket?

Dr James 55:26

Yeah, there's kind of a I think so. From what I gather, you're saying that you're employed.

David 55:34

Oh, he's put a comment. I'm I am salaried, but also have a company for other purposes.

Dr James 55:38

So oh, right, that makes sense then. Okay.

David 55:42

It's the same principle. Have the money that you can go into the company and um don't draw it. That won't that'll mean you won't pay income tax on it. And then all the things we talked about apply to that company then.

Dr James 55:53

Fair enough. Hopefully that clears things up. Pratique, let us know if we've got that situation right just there, and that that that that helps. Uh yeah, I don't think there is too many exotic ways beyond what we said this evening. Is there, David?

David 56:05

No, and anything exotic, um, have double checked because exotic things have a way of uh causing future exotic problems for you. Seems reasonable.

Dr James 56:14

John Gallis, what is the benefit to a practice bar? Hang on, let me just see this question right here. A practice bar to buy cash in the business, is there a limit to this?

David 56:26

There's no benefit because you pay it out to the seller. Um, and there the the question, is there a limit? It's a great question because it's potentially a problem for the seller, not for the buyer. Because if um you know all the deals that I've done, you you know that cash is paid out to the seller, so you don't get it, and why would you? Because you have to then finance that acquisition with interest and so on. So you don't want to inherit a lot of cash. Um, is there a limit to it potentially for the seller if they've got three million in cash? Again, going back to is it a trading company or an investment company? But it's an issue for the seller, not the buyer, so you you'd be okay with that.

Dr James 57:02

Thank you for that one. Question from Davik Patel: Can your dental company loan money to your property investment company if the directors and shareholders are not the same? Dental equal husband and wife, property equal husband with third party person? If not, is there a way to do it and what are the implications and things to consider?

David 57:25

It is possible. So the question is: can you loan it? Yes, you can. You can loan money to any company. Um the the the kind of where I say there's no tax problems where it's common control and ownership is where you are gonna write that loan off, but where you were doing it with a third party, I will assume that you want that loan repaid in future, which is fine. It's only if you're gonna write the loan off for you know if one business is being sold or you just don't want to repay it for whatever reason, but when there's a third party involved, a loan is a loan. That's a loan, there's absolutely fine to do that. Uh any considerations, have it all in writing, a proper written agreement, um, preferably drafted by a lawyer, because you know, that's good business practice.

Dr James 58:10

The writing off thing that you mentioned just a second ago, I mean, surely it can't be as simple as you have the dental company, you lend a whole load of money over, invest it in properties, and then you don't have to pay a penny back. Is there some sort of penalty there?

David 58:24

No, there's no penalty, but there does have to be a director's board meeting, a resolution to approve the write-off amounts signed, dated. Um the buyers of the practice would, their lawyers would want to see a copy of that um documentation. And we we prepare those, so it's um it's possible to do. It's not it's not much work, but you do have to have the paperwork, it has to be properly minuted, board meeting dates and so on, signatures.

Dr James 58:50

Because that seems like a little bit of a hack right there. That seems like a a way that it's possible to get money very tax efficiently across another company and then invest it.

David 59:00

Yeah, it it is. And HMRC say that you can't set out with that intention. So you can because a loan is a loan, so you make a loan with the intention of it being repaid, but it it's very common that circumstances transpire that the company receiving the loan has invested it, it can't repay it without liquidating the assets, and the directors have agreed not to recover it. But it's you can't set out with that intention formally, but it's it's very common.

Dr James 59:32

And it's enough to be by way of by way of an explainer as to why you're doing that, it's enough to be able to say I've bought all these properties and I can't conveniently liquidate them. Absolutely, and that's fine, even though even though even though on the balance sheet there is enough money there, right?

David 59:48

Yes, but it's not liquid, is it?

Dr James 59:54

Really? Right, wow, okay, interesting. There we go. Glad you asked that question, Debbie. Yeah, that's a really interesting point there. Anyway, um, okay, coming up to the final whistle. No, I think we've got time for one more, and that's from Ryan Stewart again. Trivial benefits. Can I buy six 50-point Amazon vouchers? You can, right? You can as long as it's not cash, isn't it?

David 1:00:20

Vouchers are cash.

Dr James 1:00:21

Oh, are they? Oh, never mind. Uh without these being redeemed, single 300-pound transaction. Ryan, why do I get the impression you're gonna rush off after this webinar and do exactly this? Uh, you've you've thought this through. Uh deemed a single 300-pound transaction, 600 pound if I go mad for the wife, and and who is my secretary to? Okay. Uh, or do they need to be spread out throughout the course of the year, basically, is what Ryan's asking.

David 1:00:50

Ryan sounds really fun. Um yeah, it is it's limited to 50 pounds per transaction, and it can't be vouchers. Vouchers are cash, basically.

Dr James 1:01:00

So right. But then the second part of that, I guess, what Ryan is getting at is if you do them all in one evening, like a little flurry, three uh six fifty pound vouchers, that's okay. Or six, not sorry, not vouchers, six fifty-pound expenses.

David 1:01:13

Yes. 300 pound of wine that's 50 pounds each in one transaction. Yeah, as long as it's you know, I think the key is a transaction, I would have it as one bank payment, two bank payments, three bank payments. Like just do them separately, don't just buy six bottles of wine for 50 pounds each, because that could be seen as one purchase. Just have it as separate payments. Nice. All in the same day, yep, go mad, as you say.

Dr James 1:01:37

And then am I right in saying, okay, no, no, that's fine. Yeah, that makes sense. Because you could, yeah, you could have it's it's basically purchases, right? You can have multiple items in each purchase, but the purchase can't exceed 50 points. Yeah, is another way of saying that.