A taxing question? – Dentistry Magazine

Published in the Dentistry Magazine 03.06.10 www.dentistry.co.uk

Unless you have been stranded abroad due to the ash cloud, with no access to a television or the internet, you will have noticed that the colour of the political landscape in the UK has changed from Red to Green (the colour you get when you mix blue and yellow!).

The new Con-Dem coalition has released details of the Policy agreement between the two parties with a few surprises but also some policies which were expected.  The Emergency Budget due to be announced before the end of June was well expected by the market and, whilst it is certain to contain a number of interesting and potentially savage cuts, this article focuses on the inevitable change to Capital Gains Tax (‘CGT’).

As a general rule, you have to pay CGT at a rate of 18 per cent if you sell your dental practice or your shares in a Dental Body Corporate for more than you paid for it.  The disposal of part or all of a dental practice would attract CGT.  Entrepreneurs Relief can be sought by those who are entitled to it and this Relief has the effect of reducing the CGT rate to 10% on gains of up to £2,000,000.

It is widely thought by leading economists that the rate of CGT will be increased to at least the same levels as was seen under John Major’s Government.  This means that we could see the rate of CGT increase by more than 100% to at least 40% and maybe even 50%.  There has also been no commentary on whether the Con-Dem Government will leave Entrepreneurs Relief untouched.

As an example, let us assume that the rate of CGT is increased to 40% and Entrepreneurs Relief remains untouched.  If an individual made a £3,000,000 gain on the sale of his practice then the difference under the current CGT regime and the new one, once the personal allowance has been taken into account, will be more than £215,000.

The key issue will be when any change takes effect.  CGT is an annual tax, typically running from April 6 to April 5 and has never been changed mid tax year, although anything is possible.

As with any form of business planning, tax should never be the main reason for doing anything but should be one of a number of considerations that are at the forefront of your mind.  Whilst we are not suggesting that you go out and start disposing of your dental practice or Dental Body Corporate, if you are considering selling your business or are currently in the midst of a sale process then you may want to consider bringing your sale plans forward or encourage your lawyers to complete as soon as possible.