Minimising the impact
Value Added Tax (VAT) is increasing by 2.5% from today (4 January 2011). This stands to affect the revenue of every UK dental practice. Why?
Despite the fact that most dental services are largely VAT-exempt, many of the utilities and materials used by dental practices are not. These include things like clinical consumables, marketing, consultancy fees, admin supplies, IT and communication services.
Prudent practice owners have a number of options available to help them save their bottom lines, including:
- Bringing forward any major investments or large purchases before the VAT increase takes effect. However, be aware that the Treasury has introduced safeguards to prevent unscrupulous companies from paying for goods in advance, or pre-dating invoices at the old rate for goods or services that will only be delivered after 4 January 2011.
- Looking to make savings in other areas of your business to compensate for any projected expenditure increases. One very effective way to do this is to consider incorporating your business, thus making your practice more tax efficient.
Corporations were one of the few parties to actually benefit from a tax rate reduction during the recent Emergency Budget. When comparing current income tax rates to that of corporation tax, the sums soon start to add up in your favour.
[First published in Dentistry.co.uk in Jan 2011.]