In this article we shall explore the topical areas in the dental world, following the release of the Statement of Financial Entitlements.
There have been a number of amendments to the financial entitlements of NHS dentists in the latest Statement of Financial Entitlements. The GDS/PDS contract values have been uplifted by 1.14%, with the uplift being back-dated to 1 April 2017.
In respect of Foundation Dentists (FDs):
The increases announced in the SFE are effective from 1 April, so practices with an FD will need to backdate the increase for previous months.
An FD’s gross pay is £2,613 per month (£31,356 per annum), on which superannuation at 9.3% is deducted. Tax and national insurance is deducted from this, leaving the FD with a monthly net pay of £1,856.
Gross Pay £2,613
Superannuation @ 9.3% (£243)
National Insurance (£232)
Income Tax (£282)
Net Pay £1,856
The training practice receives reimbursements for the FD’s gross salary and employer’s national insurance contributions relating to the FD. In addition, the trainer receives a monthly grant of £785 and the practice receives a monthly amount of £5,347 to cover service costs.
Don’t forget that the service cost is not superannuable, but the training grant is.
With record numbers of dentists filling for bankruptcy in America, 2017 could have been the year that saw goodwill values tumble here in the UK...
Despite large corporates ceasing to be acquisitive, there is still a flurry of activity in respect of practice sales/purchases. The market appears set to remain the same throughout 2018 too.
The market seems to be remaining particularly active due to confidence. Dentists are more willing to make the leap from being an associate to a practice owner and banks/private lenders are still comfortable lending for practice purchases, with low interest rates available from banks with specialist healthcare departments/managers. In essence, the market is still being viewed as low risk and high return.
Despite market confidence from high-performing practices, there are practices out there that under-perform. It is therefore important that clients make the correct buying decision and as an adviser you work well with other professionals to identify any potential issues as soon as they arise.
A specialist selling agent will assist clients to seek out their perfect practice, but for the majority of clients, the location, type and size of practice will be the main determining factors. The price of a practice is simply a function of these variables (amongst other considerations too).
It is important to ensure that clients know what they are buying. Whilst we are all comfortable as advisers with the difference between buying assets and buying shares, it is important that clients understand the difference and the risks associated with each option.
You can then assist by evaluating the accounting records of the practice and assessing its potential profitability. It will also be necessary to liaise with a specialist dental lawyer on the tax implications of the sales purchase agreement.
There are many banks in the UK that can access and offer special, low-rate lending terms to professionals in the healthcare sector. These lenders often require 2-3 year forecasts, and on occasion request a business plan to support the figures. With high goodwill values, the level of borrowings can be significant and it is important to ensure that clients don’t enter into agreements that they can’t meet.
Once the lending has been approved and the purchase has completed, the role of the adviser is not over. The client will be consumed with running the practice, so it is important to help them stay focused and ensure it performs in line with the forecasts prepared.
In March 2018, Westminster Health Forum will host a seminar to discuss the next steps for dentistry and oral health. This will also look at priorities for the full introduction of a dental contract in 2018, together with the practicalities for the wider implementation of the prototypes.
There will be sessions delivered by prominent figures in the dental industry and the seminar will be an opportunity to assess the next steps in dentistry health for England.
Tax Manager - Dodd & Co Chartered Accountants