How incorporation can still work
Despite the somewhat surprise news in December 2014 regarding the increase in Capital Gains Tax (CGT), which hindered some tax planning around incorporation for doctors and dentists, incorporation is still very much a viable option for many.
Previously, the option to “sell” goodwill from a sole trader or partnership to a new limited company provided a tidy tax efficient way for a director/ shareholder to draw income from their new business entity (the limited company), in exchange for their hard work over the years as a sole trader or partnership, building the patient list.
When CGT was increased this threw a spanner in the works. The feasibility now needs a little more careful consideration, however the sale of goodwill is just one aspect of incorporation.
Most sole traders and partnerships will still benefit from trading as a limited company, especially those with modest living expenses and where both the husband and wife, say, are shareholders.
Doctors and dentists where incorporation would likely not benefit now are those with high personal borrowings who spend everything they earn and more and perhaps those whose spouse is already earning from another employment and paying higher rate tax.
Figurit are incorporation experts for doctors and dentists. If you are a sole trader or partnership we can prepare a bespoke review to ensure it is viable option in advance. Call today.
020 7376 9333
– Reduced tax benefits for new incorporations – what now?
– Incorporation – why it is vital to get it right
– How the 2014 Autumn Statement affects you