Claiming Expenses Against Tax for Dentists

Taxation is always an issue and one of the main reasons for using an accountant. While the same tax rules apply to everyone, there are invariably special factors that apply to certain types of business. This is very much the case with dentists. Knowing what to claim and not claim for are extremely important if problems with HMRC are to be avoided. 

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List of Allowable and Non Allowable Expenses to Claim Against Tax for Dentists

All business expenditure allowable for tax purposes must be ‘incurred wholly and exclusively for the purposes of the trade, profession or vocation’.  

Below you are provided with three lists of expenses.  The first one identifies non-claimable expenses while the second and third list claimable items of expenditure for a practice owner and an associate respectively.

The list of allowable expenses is individual for each practice and Morris Crocker recommends the following procedure for its drafting:

(i) Compile the list of allowable business expenses using the information below
(ii) Confirm the details with the practice manager and principal associates  
(iii) Show the revised list to your accountant for his/her views and advice
(iv) Prepare a final list of items that should be recorded and claimed
(v) Revise the list annually

Items Not Claimable as Allowable Expenses

Capital (these items are dealt with separately for tax purposes)
Alteration, addition or improvement of business premises
Capital sums employed in business or in improving premises
Capital sums withdrawn from business
Depreciation of equipment, vehicles, etc. used in business
Professional fees in connection with purchase of capital assets
Purchase of capital assets (buildings, motor vehicles, equipment, etc)
Training and course fees relating to totally new skills and knowledge

Debts
Deductions for a general reserve for potential bad debts (debts must be specific and quantified).

Entertainment
Business entertainment (including hospitality of any kind) unless for one’s own staff (note: amounts above £150 per employee per annum may be charged to tax as an employment benefit).

Fines
Fines and legal charges incurred in connection with any investigation.
Accountancy expenses incurred in connection with a Revenue investigation unless the discrepancy is only minor.

Interest
Interest if it is above a reasonable commercial rate.
Interest paid to a person not resident in the UK (Special rules apply)
Interest paid to the practice owner or another practice or business also owed by the same owner

Losses
Any loss recoverable under a contract of insurance or indemnity
Any loss not connected with (or arising out of) business activities

Personal
Donations to a political party
Drawings by partner or practice owner
Expenses or payments for domestic or private purposes (exception: incidental overnight expenses are allowable within limits)
Goods for own use or consumption
Mid-day meal taken at work or when engaged in normal business activities
National insurance contributions of practice owner or partner 
Personal life insurance policies of practice owner or partner * 
Personal health insurance of practice owner or partner 
Rent of private residence or domestic part of business premises
Travel between home and work
Accountancy expenses for personal tax (not business) tax affairs including self-assessment
Fee protection insurance

* Some of these may be allowable against your personal tax

Taxes
Capital gains tax, inheritance tax, corporation tax, income tax, etc.
Cost of appeal against assessment to tax
Interest on overdue tax (except on overdue corporation tax)

Claimable Expenses

Advertising and promotion
Advertising
Business gifts (up to £50 in value identifying the practice and not comprising alcohol, tobacco or food)
Direct mail and door-to-door campaigns
Exhibitions
Public Relations
Gifts to government-designated educational establishments

Dental Issues
All staff training courses and training relating to updating existing knowledge
All your own training courses and training relating to updating existing knowledge
Indemnity Insurance and Legal Expenses Insurance 
Journals and books
Laundry
Magazine subscriptions
Membership of Professional Associations
Provision of safety equipment and uniform
Registration Costs
Surgery Insurance
Waste Disposal

Employees
Compensation for loss of a job (note: some payments may be subject to employment taxes
Contributions to Business Support Agencies or Training and Enterprise Councils (TECs)
Employer’s Liability (Compulsory Insurance)
Employer’s share of Class 1 National Insurance contributions
Employee’s incidental overnight expenses
Pensions paid to former employees or their dependants
Statutory redundancy payments
Reimbursement of and insurance against personal liabilities arising from work
Secondment of employee to charity or educational body
Security equipment
Wages and salaries; payments to outworkers and sub-contractors
Welfare services including some staff entertainment

Hire of Assets
Reasonable charges for hiring capital goods (in the case of vehicles allowable only on the proportion of use attributable to business purposes and subject to other limits).

Interest on
Hire purchase of goods bought for business use
Money borrowed for business purposes
Mortgage or loan to buy property for business use or to be let commercially

Overheads
Insurance of premises
Light, heat, etc.
Rates: general, water
Rent
Telephone, fax including mobile phone
Cost of calls (but not rent) made from home telephone
Any office use of your home

Office Administration
Agency fees for permanent and temporary staff
Books and publications
Postage 
Printing and stationary
Some software and computer costs

Professional fees and charges
Accountancy expenses of an HMRC investigation (where any discrepancy is minor and no interest or penalties are involved and no adjustment made to a previous year)
Annual accountancy fees
Bank charges on your business accounts
Debt collection
Insurance against loss of profits, public liability, theft, etc
Legal fees (except where connected with acquisition of capital assets)
Registration of trademark, expense of taking out a patent
Subscriptions to trade associations, journals and professional bodies

Repairs and maintenance
Decoration of premises
Laundry, cleaning
Repairs and maintenance of plant and machinery
Repairs and maintenance of premises
Replacement of small tools, overalls, etc.
Servicing business equipment

Trading activities
Delivery charges, carriage, packaging
Discounts allowed to customers
Goods or material for re-sale
Material used for purposes of trade and business
Royalties paid to patent or copyright holders

Travel
Running costs, insurance and maintenance of business vehicles
Running costs, insurance and maintenance of private car so far as it is used for business (note: different rules apply to limited companies)
Subsistence and hotel bills when away from home on business
Travel expenses when on business trips in the UK or overseas

VAT
If not registered (therefore unable to reclaim) - Input tax
Also input tax that is non-reclaimable against VAT (e.g. cars)

Expenses Claimable by an Associate

An associate who is self-employed can obviously claim similarly and should be encouraged to do so. This would assist in the authentication of a genuine self-employed status of the associate in the eyes of a continually vigilant HMRC.  However, there must be no element of double claiming. 

For example the practice owner claims all equipment, materials or other items paid for by the practice. If the associate meets a percentage of the costs and pays for those directly, then he or she is entitled to claim that percentage while the practice owner claims the balance. Items of expenditure that are wholly purchased by the associate are wholly claimed by the associate and will include items such as indemnity insurance, membership of professional bodies, journals, etc. It is better to clearly set out the arrangements and confirm them with the practice owner’s and the associate’s accountants rather than breaking HMRC rules. Remember that HMRC take a particularly dim view of double claiming: i.e. where more than one dentist claim the same item of expenditure.

In an expense-sharing agreement, expenditure items are claimed in the same proportion as laid down in the agreement itself.

An associate might therefore claim the following expenses assuming that advertising, employee and main surgery costs are met by the practice:

Dental Issues
Indemnity Insurance and Legal Expenses Insurance 
Journals and books
Laundry
Magazine subscriptions
Membership of Professional Associations
Provision of safety equipment and uniform
Refresher Training 
Registration Costs

Employees
Any staff directly employed by the associate e.g.: to carry out office work, type letters, etc

Hire of Assets
Reasonable charges for hiring capital goods (in the case of vehicles allowable only on the proportion of use attributable to business purposes and subject to the vehicles CO2 omissions in the case of a car.

Interest on
Hire purchase of goods bought for business use
Money borrowed for business purposes
Mortgage or loan to buy property for business use or to be let commercially

Overheads
Telephone, fax including mobile phone
Cost of calls (but not rent) made from home telephone for business purposes
Any office use at home

Office Administration
Books and publications
Postage 
Printing and stationary
Some software and computer costs

Professional fees and charges
Annually recurring accountancy fees
Bank charges on business accounts
Debt collection
Insurance against loss of profits, public liability, theft, etc
Legal fees (except where connected with acquisition of capital assets)
Registration of trademark, expense of taking out a patent
Subscriptions to trade associations, journals and professional bodies
Accountancy expenses of a Revenue investigation (where any discrepancy is minor and no interest or penalties are involved and no adjustment made to a previous year)

Repairs and maintenance
Replacement of small instruments or tools, overalls, etc
Servicing of associate’s own equipment

Travel
Running costs, insurance and maintenance of business vehicles
Running costs, insurance and maintenance of private car so far as it is used for business (note: different rules apply to limited companies)
Subsistence and hotel bills when away from home on business
Travel expenses when on business trips in the UK or overseas

VAT
If not registered (therefore unable to reclaim) - Input tax
Also input tax that is non-reclaimable against VAT (e.g. cars)

Personal pension contributions / charitable donations
Although not generally included as a cost of a business, contributions and donations do attract tax relief and are particularly attractive to higher rate tax payers. The claim is made through a tax return.



This module is written in general terms and is believed to be based on the relevant legislation, regulations and best practice guidance. This module is indicative only and is intended as a guide for you to review and take particular professional advice to suit your circumstances. Morris Crocker do not accept any liability for any loss or claim that may arise from reliance on information this module contains.

 

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REF: MC/NL/1.2