Need a new piece of equipment for your practice? Look for the most tax-efficient way to use your capital allowances
Featured Products Promotional FeaturesPosted by: Dental Design 4th September 2021
If you’re a dental practice owner, principle or associate, you will know that buying a new piece of equipment isn’t always “just” desirable, it’s a necessary business decision.
For example, a purchase of the latest, cutting-edge digital scanner may enable you to work more efficiently and cost-effectively, therefore offering patients a level of convenience and value that your competitors don’t. This in turn could boost growth and profits, with the investment paying for itself – and then some. Or it might be time to buy some new computers or other office equipment.
Who should do the buying?
When equipment is purchased for use in a business, tax relief is given in the form of capital allowances (CAs) and the deduction is calculated in a different way to everyday expenses.
To optimise tax efficiency, this can depend on whether a director of the business bought the equipment, or the company itself did. If a director does the buying, but the equipment will not be used by them for doing their job, they will not be able to claim CAs for the cost. In such cases, the company should do the purchasing, then claim the CAs.
But what if your practice cannot afford to buy X, Y or Z just yet? Well, if a director does have the funds, they have the option of lending or giving the money to the company to make the required purchase.
Scenario B – equipment that the director will use
When a piece of equipment will be used by the director to do their job, there are two ways that CAs can be obtained. The company can buy it, own it, then allow the director to use it. Alternatively, the director can buy it and own it, using money supplied by the company. An important exception is for cars and vans, because a director is not entitled to any CAs for these.
If we use an example of the practice (acting as the company) funding the purchase, the tax advantage will vary, depending on how it provided the monies to the director. There are several ways it could do so. It could pay out a dividend (if the director is also a shareholder in the practice), give the director extra salary to make the purchase, or make the equipment a gift (so it becomes a taxable benefit in kind).
Broadly speaking, though, the tax efficiency will be greater if the practice buys and owns the piece of equipment, then claims CAs. It might also be able to reclaim any VAT paid.
If these rules sound far too complex, that is a common point of view. But you shouldn’t let any confusion be a barrier to claiming CAs, whether it is the company or a director of the practice doing so (which could be you!). You will find clarity when you get advice and guidance from specialist dental accountants who will combine their expertise in tax planning with knowledge of the industry and the unique challenges for running a profitable business in today’s climate. The chartered accountants at Figurit have years of experience with helping their dental clients and will support you to become more tax efficient, and optimise both your business and personal finance.
Investing in your practice shows confidence. When purchasing new equipment, the degree of tax can vary widely, but optimising tax efficiency may be as simple as deciding who will buy it. Confidence in your business plan is crucial in these uncertain times, so don’t leave anything to chance. Get in touch with an expert to ensure you’re taking advantage of the tax reliefs you’re entitled to.
For more information, please visit https://figurit.com
or call Figurit (formerly known as Lansdell & Rose) on 020 7376 9333.
