It has never been more important to have an accountant with experience and specialist dental knowledge, on your side to navigate the complexities of dental business.
Many other accountants, whether chartered or not, simply don’t have the specialist knowledge to deal with issues such as the following:
1. A dentist buying a mixed practice was advised to incorporate the private practice, and keep the NHS contract in his own name. Potentially good advice, but because the structure wasn’t set up properly a VAT problem arose, also the dentists were excluded from the NHS pension scheme
2. A non-specialist accountant advised an NHS associate to incorporate without warning them of the effect on their NHS pension
3. A practice had clawback to pay but the accountant didn’t adjust the taxable profit to reflect the lower earnings – so the dentist had to pay an inflated tax bill as well as the clawback in the same year
4. A dentist wanted to form a partnership with her other half and the non-specialist accountant failed to warn her that to be legal, both partners must be GDC registrants
Many other accountants, whether chartered or not, simply don’t have the specialist knowledge to deal with issues such as the following:
1. A dentist buying a mixed practice was advised to incorporate the private practice, and keep the NHS contract in his own name. Potentially good advice, but because the structure wasn’t set up properly a VAT problem arose, also the dentists were excluded from the NHS pension scheme
2. A non-specialist accountant advised an NHS associate to incorporate without warning them of the effect on their NHS pension
3. A practice had clawback to pay but the accountant didn’t adjust the taxable profit to reflect the lower earnings – so the dentist had to pay an inflated tax bill as well as the clawback in the same year
4. A dentist wanted to form a partnership with her other half and the non-specialist accountant failed to warn her that to be legal, both partners must be GDC registrants
In addition, some dental accountants have access to dental sector ‘benchmarking’ information to help practice owners improve profits, and maximise goodwill values.
Benchmarking
Benchmarking of a dental practice profit and loss account enables practice owners to compare their own practice performance with the results of similar practices, and identify areas for potential profit improvement.
Goodwill benchmarking gives practice owners a rough indication of similar practice goodwill values (the measurement is of goodwill as a percentage of practice gross fee income).
Whilst this approximate measure cannot replace the specific valuation advice which Mediestates provides to clients, it can be a useful regular benchmark for practice owners.
Finally, specialist dental accountants can steer practice owners through the rocky waters of incorporation.
Although tax rules have changed (for the worse!) with regard to incorporations over the last couple of years, this can still be a useful way of saving tax.
Benchmarking
Benchmarking of a dental practice profit and loss account enables practice owners to compare their own practice performance with the results of similar practices, and identify areas for potential profit improvement.
Goodwill benchmarking gives practice owners a rough indication of similar practice goodwill values (the measurement is of goodwill as a percentage of practice gross fee income).
Whilst this approximate measure cannot replace the specific valuation advice which Mediestates provides to clients, it can be a useful regular benchmark for practice owners.
Finally, specialist dental accountants can steer practice owners through the rocky waters of incorporation.
Although tax rules have changed (for the worse!) with regard to incorporations over the last couple of years, this can still be a useful way of saving tax.
However, there are several potential problem areas to plan around, especially for NHS contract holders.
It is relatively easy for non-dental accountants to not be aware of incorporation problems in relation to NHS pensions for both principal/director and associates, and NHS contract breaches.
To make matters worse, where more complicated incorporated structures are used (eg, NHS fees as a sole trade, and private fees through a limited company), VAT problems can arise.
So, tread carefully, and make sure you are advised by an accountant well versed in dental matters, as well as the traditional tax and accounting knowledge any good accountant will have.
It is relatively easy for non-dental accountants to not be aware of incorporation problems in relation to NHS pensions for both principal/director and associates, and NHS contract breaches.
To make matters worse, where more complicated incorporated structures are used (eg, NHS fees as a sole trade, and private fees through a limited company), VAT problems can arise.
So, tread carefully, and make sure you are advised by an accountant well versed in dental matters, as well as the traditional tax and accounting knowledge any good accountant will have.
Practice One
Practice location - established over 40 years ago, this practice was acquired by the current principal in 1993. It is located on a busy high street in a converted residential property and benefits from excellent transport links.
Type of practice - this NHS practice has four surgeries; however, they are currently underutilised. There is also potential to create additional surgeries if required in the future. The practice occupies the premises on a leasehold basis with 10 years remaining on the current lease.
Buyer appetite - marketing material was sent to 1,275 of our buyers which generated significant interest and resulted in 28 viewings of the practice within a seven day period.
Financials - there is a £300,000 NHS contract for the provision of 10,400 UDAs which represents a healthy UDA rate of £28.50. In addition to the NHS contract there is a small amount of private fee per item income, with a total practice turnover of £358,966. An incoming buyer could look to optimise chair time and grow the private side of the business further.
Reason for sale / Incoming purchaser - the outgoing principal was looking for eventual retirement but was happy to continue at the practice on a short-term basis. This suited the incoming purchaser, an investment buyer who owned a small group of dental practices in the locality. The sale took nine months from marketing to completion.
Price achieved - £565,000 inclusive of goodwill, equipment, fixtures and fittings. A handful of offers were received for the practice which helped drive up the sale price in-excess of the marketing price of £525,000.
Practice location - established over 40 years ago, this practice was acquired by the current principal in 1993. It is located on a busy high street in a converted residential property and benefits from excellent transport links.
Type of practice - this NHS practice has four surgeries; however, they are currently underutilised. There is also potential to create additional surgeries if required in the future. The practice occupies the premises on a leasehold basis with 10 years remaining on the current lease.
Buyer appetite - marketing material was sent to 1,275 of our buyers which generated significant interest and resulted in 28 viewings of the practice within a seven day period.
Financials - there is a £300,000 NHS contract for the provision of 10,400 UDAs which represents a healthy UDA rate of £28.50. In addition to the NHS contract there is a small amount of private fee per item income, with a total practice turnover of £358,966. An incoming buyer could look to optimise chair time and grow the private side of the business further.
Reason for sale / Incoming purchaser - the outgoing principal was looking for eventual retirement but was happy to continue at the practice on a short-term basis. This suited the incoming purchaser, an investment buyer who owned a small group of dental practices in the locality. The sale took nine months from marketing to completion.
Price achieved - £565,000 inclusive of goodwill, equipment, fixtures and fittings. A handful of offers were received for the practice which helped drive up the sale price in-excess of the marketing price of £525,000.
Practice Two
Practice location - established for nearly a century this expense sharing practice was acquired by the current owner in 2006 and is located in a busy city centre within converted residential premises. The surrounding shops and amenities help drive footfall to the area and there is good public transport links, as well as plentiful parking nearby.
Type of practice - this is a three surgery, fully private leasehold practice. The outgoing principal works in one surgery and has a 50% share in the second surgery which is occupied by a hygienist.
Buyer appetite - we advertised the practice to our general market with over 1,000 buyers reviewing the practice online and full details being sent to 76 individuals, resulting in multiple viewings.
Financials - the practice turnover is £365,000 generated solely from private fee per item work, with the vast majority of income generated by the current principal. Over the last year the vendor has reduced their working week to four days due to health issues. An incoming buyer could look to maximise opening hours, pursuing income growth through specialist treatments as well as the introduction of a capitation scheme.
Reason for sale / Incoming purchaser - the vendor was looking to retire due to health issues and consequently did not wish to stay on at the practice post-sale. This successful purchaser was a first time buyer looking to work within a practice full-time. The transaction took seven months from marketing to completion.
Price achieved - £365,000 inclusive of goodwill, equipment, fixtures and fittings, which was in line with the original asking price level.
Practice location - established for nearly a century this expense sharing practice was acquired by the current owner in 2006 and is located in a busy city centre within converted residential premises. The surrounding shops and amenities help drive footfall to the area and there is good public transport links, as well as plentiful parking nearby.
Type of practice - this is a three surgery, fully private leasehold practice. The outgoing principal works in one surgery and has a 50% share in the second surgery which is occupied by a hygienist.
Buyer appetite - we advertised the practice to our general market with over 1,000 buyers reviewing the practice online and full details being sent to 76 individuals, resulting in multiple viewings.
Financials - the practice turnover is £365,000 generated solely from private fee per item work, with the vast majority of income generated by the current principal. Over the last year the vendor has reduced their working week to four days due to health issues. An incoming buyer could look to maximise opening hours, pursuing income growth through specialist treatments as well as the introduction of a capitation scheme.
Reason for sale / Incoming purchaser - the vendor was looking to retire due to health issues and consequently did not wish to stay on at the practice post-sale. This successful purchaser was a first time buyer looking to work within a practice full-time. The transaction took seven months from marketing to completion.
Price achieved - £365,000 inclusive of goodwill, equipment, fixtures and fittings, which was in line with the original asking price level.
Practice Three
Practice location - this practice was established in the 1980s and purchased as a going concern by the current principal in 1999. It is located within an affluent residential area within purpose built premises and has free car parking on-site. The town centre is just a short drive away.
Type of practice - the practice is mainly private and has two surgeries occupied by the principal and a part-time hygienist. There is no room for physical expansion, however the opening hours are not currently maximised and this is something that could be explored by an incoming buyer. The premises are to be transferred on a leasehold basis.
Buyer appetite - the practice was marketed to our general tier buyers consisting of 4,676 buyers, with 308 individuals receiving full sales information and nine prospective purchasers attending viewings.
Financials - the annual turnover of £368,177 is made up of £15,000 capitation, £35,000 NHS (1,500 UDAs) and £318,177 private fee per item income. The majority of work is completed by the Principal, supported by one full-time dental nurse and one part-time receptionist.
Reason for sale / Incoming purchaser - the current principal was looking to reduce their responsibilities whilst still continuing at the practice post-sale. The successful purchaser was a first time buyer who was able to work at the practice within the second surgery.
Price achieved - £505,000 inclusive of goodwill, equipment, fixtures and fittings. Due to multiple offers being received the sale price rose above the initial marketing price of £474,500.
Practice location - this practice was established in the 1980s and purchased as a going concern by the current principal in 1999. It is located within an affluent residential area within purpose built premises and has free car parking on-site. The town centre is just a short drive away.
Type of practice - the practice is mainly private and has two surgeries occupied by the principal and a part-time hygienist. There is no room for physical expansion, however the opening hours are not currently maximised and this is something that could be explored by an incoming buyer. The premises are to be transferred on a leasehold basis.
Buyer appetite - the practice was marketed to our general tier buyers consisting of 4,676 buyers, with 308 individuals receiving full sales information and nine prospective purchasers attending viewings.
Financials - the annual turnover of £368,177 is made up of £15,000 capitation, £35,000 NHS (1,500 UDAs) and £318,177 private fee per item income. The majority of work is completed by the Principal, supported by one full-time dental nurse and one part-time receptionist.
Reason for sale / Incoming purchaser - the current principal was looking to reduce their responsibilities whilst still continuing at the practice post-sale. The successful purchaser was a first time buyer who was able to work at the practice within the second surgery.
Price achieved - £505,000 inclusive of goodwill, equipment, fixtures and fittings. Due to multiple offers being received the sale price rose above the initial marketing price of £474,500.
