Is your business structure in order?

When a dentist starts a dental practice or restructures an existing dental practice, you’d think there would be an industry standard when it comes to what type of entity should be formed and how it should be taxed. But there are many nuances and considerations that well respected tax and legal professionals differ on when it comes to these matters. Therefore, rather than provide a detailed review of each and every entity and tax choice that a dental practice can have, this article focuses on and summarises the practical options.

The most common forms of business are sole trader, partnership, limited liability partnership (LLP) and limited company. Legal and taxation considerations will be the main focus when selecting a business structure, however, each will have its own particular benefits and its own set of drawbacks.

The decision of which trading structure to adopt might be the result of weighing up the pros and cons of each choice and then seeing which of them fits best with your objectives, style and aspirations of your dental business.

The kind of business entity chosen at the start-up stage does not prohibit changing the structure at a later date, but there maybe tax consequences that could be avoided if the optimum structure was executed at the outset.

Although legal and taxation factors tend to be high on the list of considerations, NHS Dentists have an added consideration when deciding on their business entity – the NHS Trust that oversees the dental practice in question may only allow your practice to operate through certain structures.

You will be aware that the new NHS Scotland Dental Practice Inspections regime asks practices how they are set up, whether they operate as Principal/sole trader, limited company, limited liability partnership, traditional expense sharing partnership, body corporate or other.

Similarly, the GP234 – declaration of NHS earnings for the reimbursement of practice rental costs, which was revised slightly in December 2016, asks for the designated contractor to declare whether they are the practice owner (sole trader), partner in a partnership or a director of a body corporate (limited company).

NHS Scotland is also changing the way patient lists are registered. As it stands principals and associates register their own patient lists with NHS Scotland, however, moving forward this is likely to change so the patients are listed by practice.

This is a clear indication that NHS Scotland is looking for more information and transparency about the way dentists are structuring their business affairs.

You may ask yourself why does NHS Scotland want to know this information – but it may be to ensure all your business affairs are in order and adhere to the legal and taxation regulations.

Could this be the start of a dentist amnesty?

It is imperative that all dentists have ensured their business structure is in line with their intentions and understand the consequences if there are pitfalls anywhere in their overall arrangement.

EQ Healthcare have advised many dental professionals on the most appropriate and tax efficient structure for their practice. For further information, a second opinion or to get our advice on what we would recommend, please get in touch with Louise Grant on 01382 312100 or email louise.grant@eqaccountants.co.uk.