Selling your dental practice – the tax implications

Category: Healthcare - Posted On: Aug 28 2019


When the time comes to sell your incorporated dental practice, you will have two options – sell the shares in the company, or sell the assets of your company.

Selling the shares in your company will mean that you sell the whole of your company, including assets, goodwill, liabilities, future liabilities. This means as a seller, you will be free of any future obligations the company has and you will most likely qualify for Entrepreneurs Relief (ER) on the capital gain you make on the sale of the practice.

In order to qualify for ER, meaning any gain made will be taxed at 10% instead of 20%, you need to meet certain criteria:

  • You need to be a trading company
  • You need to hold at least 5% of the equity of the company
  • You must be an officer of the company.

For most dental practices, these criteria would most likely be met, so ER would be available.

The benefit of selling the shares of the company means there is continuity of business for the purchaser – meaning no TUPE for employees, no re-negotiation of NHS contracts and no issues transferring assets into a new name, which may upset third parties. However, a buyer may not want to buy your past – requiring a lot of due diligence work.

Selling the assets of the company is different. You would still own the company, but sell the goodwill, equipment, property etc. creating a gain on sale within the company, on which corporation tax would be charged, currently at 19%. A second tax charge would arise when you withdrew the cash/reserves from the company in the form of income tax.

Selling the assets, as opposed to the shares, sounds more costly in terms of tax, but there are other considerations.

Perhaps you would prefer to keep the property and instead rent it out to the new owner. This would make the sale cheaper, and potentially more attractive. This is easily done with an asset sale, but more complicated with a share sale, as the property would need to be transferred out of the company prior to the sale. Bear in mind, if you kept the property out of the sale, it wouldn’t qualify for ER if sold further down the road.

As with all things tax related, each case is different. You will need to discuss your current, and future intentions with your accountant before making any decisions to ensure you are making the best use of tax reliefs.

If you’d like to talk to our team about any aspect of selling a dental practice or would like us to assist you in the process, please contact Louise Grant at louise.grant@eqaccountants.co.uk or Anna Coff at anna.coff@eqaccountants.co.uk.