Five reasons to incorporate your dental business before capital gains tax changes

The run up to the Autumn Budget saw increased market activity in the dental sector, with many sellers looking to avoid the uncertainty of potential changes to capital gains tax and get their deals ‘completed’.

We noticed a marked increase in practice owners looking to incorporate assets prior to any changes being announced. However, the timescales for Care Quality Commission (CQC) applications meant that many requests came too late for pre-budget completion. For many, this was of limited consequence, with changes to capital gains tax for those qualifying for business asset disposal relief being pushed backwards. Increases to this relief rate are now due in both April 2025 and April 2026.

In recent years, the approach taken to the incorporation of the NHS contract has changed, with integrated care boards (ICBs) now taking a more pragmatic approach. For NHS and mixed practices, an approach to your ICB to fully incorporate your NHS contract is now often advisable (depending on your circumstances).

Here, nationally recognised dental practice sale expert Nicola Lomas offers five key reasons why now might be the right time for you to incorporate. 

Types of corporate structure for dental practices

Fully private practices frequently operate with corporate structures — at least, they’ve historically faced fewer limitations in doing so. 

For mixed and fully-NHS practices, we see a real mixed bag when it comes to structuring. Some practices are fully incorporated, while others fully operate within a sole trader or partnership arrangement. These practices could see tax advantages of an incorporation and should consider this with their accountant. 

Many practices operate both, with private elements sitting in the company and the NHS contract held by individuals (but with the possibility of sub-contracting or trusts being in place). For such hybrid practices, it’s now time to question whether a full, clean incorporation may be appropriate. 

Five reasons to incorporate now

If you’re looking to incorporate your dental business before the changes to capital gains tax come into force (now scheduled for April 2025), we’d strongly recommend that this process is started now. 

The reasons for this include:

1. CQC timescales

While policies suggest that a CQC application should be dealt with within eight weeks, this hasn’t been the case for some time. Applications are likely to take months to progress. 

At this stage, we can’t guarantee that a CQC application submitted now will be accepted before the end of March 2024. The assets should not be moved to the company until that company is registered to provide services with the CQC.

2. ICB timescales

While the approach has changed, the timescales in dealing with an application to incorporate vary. Any application needs to be presented internally to the commissioning board, which only meets on certain dates. 

3. Slow landlords

For leased properties, it may be necessary to assign the tenant obligations to the company. Landlords may be slow in dealing with requests.

4. Staff retention

If the engagement of employees will move to the company by law, those concerned should be consulted about the change at the earliest opportunity. 

Associate retention is a key business concern to many and it’s important that your people feel comfortable with any proposed changes to their working terms and conditions. 

5. Year-end targets

For practices providing NHS dentistry, March is an extremely busy month that focuses on hitting Units of Dental Activity (UDA) targets. Those wishing to incorporate may want to consider focusing their energy on these changes sooner rather than later to allow focus on year-end delivery.

Talk to us

Whether or not it’s appropriate for your business to incorporate will depend on your particular circumstances. This will include both tax planning and your long-term plans for the business. 

Our team contains true dental specialists who understand the unique pressures you face. We provide market-leading legal solutions to dental practices across the UK and would ordinarily work with you, your accountant and the ICB to ensure that the proposed structure works for you. 

To find out more, talk to us by giving us a call on 0333 004 4488, sending us an email at hello@brabners.com or completing our contact form below.