Running a dental practice involves navigating a complex landscape of financial management, particularly when it comes to understanding which expenses are allowable for tax purposes.
Properly distinguishing between allowable and disallowable expenses is crucial for optimising tax efficiency and ensuring compliance with tax regulations.
We’ve asked Helen Wilson, Senior Client Manager, for some insights into common expenses and highlight some disallowable expenses.
Common Allowable Expenses
Clinical Supplies and Materials
Dental Consumables
This includes items such as gloves, masks, dental cement, and other materials used directly in patient care.
Laboratory Fees
Dental Labs
Payments to dental laboratories for services like fabricating crowns, bridges, and dentures are allowable expenses.
Staff Salaries and Benefits
Wages, salaries and associate fees
Payments to dental hygienists, associate dentists, receptionists, and other staff are deductible from profits.
Employee Benefits
Contributions to staff pensions, health insurance, and other benefits are allowable. Please be aware that payments for health insurance and other benefits payable for staff may be a benefit in kind for staff, which are subject to income tax and class 1A National Insurance contributions.
Premises Costs
Rent and Utilities
Costs for leasing the dental practice premises and utilities such as electricity, water, and heating are deductible. Business rates are also deductible and if you have a NHS contract, do remember to make a claim for rates reimbursement from the NHS using form SFE(NDR). If the dental practice rateable value is low enough, you may also be eligible for small business rates relief.
Repairs and Maintenance
Expenses incurred in maintaining and repairing the practice premises and equipment are allowable.
Professional Fees and Subscriptions
Professional Indemnity Insurance
Premiums for insurance policies protecting against malpractice claims are deductible. These may be for you and also any indemnity insurance you pay for other staff members.
Professional Memberships
Fees for memberships in professional organisations like the General Dental Council (GDC) and British Dental Association (BDA) are allowable.
Accountancy
Your accountancy and payroll fees for the dental practice can be deducted from your profits.
Office and Administrative Expenses
Stationery and Supplies
Costs for office supplies such as paper, ink, and software are deductible.
Postage and Printing
Expenses for mailing and printing materials are allowable.
Technology expenses
Computer software costs and practice telephone and internet costs are all allowable expenses for the business.
Course fees
Dentist Continued Professional Development (CPD)
Course fees paid that are incurred wholly and exclusively for the purpose of the dentists trade are deductible from profits. As long as the intention is to update current or provide new skills or knowledge in the dentist’s trade, the training fees will be allowable.
Financing costs
Loan and hire purchase interest
Interest paid on finance taken out to buy the practice and equipment used by the practice are allowable against profits. Loan interest on loans received for cash flow or tax repayments may be allowable depending on the balance sheet of the business.
The capital element of the loan repayments is not deductible against profits.
Patient finance
Dental practices that offer patient finance to patients where the practice then pays a fee to the patient finance provider can deduct these costs from their profits.
Common Disallowable Expenses
Personal Expenses
Non-Business Travel
Travel for business activities are allowable. However, costs for travel that is not directly related to business activities are disallowable.
Personal Entertainment
Expenses for personal entertainment or leisure activities are not deductible.
Capital Expenditures
Asset Purchases
The cost of purchasing capital assets such as property or new dental chairs are not immediately deductible from accounting profits. However, new equipment, fixtures and fittings can be claimed through a capital allowance claim and are deductible against your taxable profits.
Fines and Penalties
Regulatory Penalties
Any fines or penalties incurred due to regulatory breaches or late tax payments are disallowable.
Provisions for General Bad Debts
Non-Specific Provisions
General provisions for bad debts are not allowable. Only specific bad debts that have been written off as non-recoverable can be deducted.
Private Use of Business Assets
Mixed-Use Assets
Expenses for assets that are used both personally and professionally must be apportioned, and the personal use portion is disallowable where you operate as a sole trader or a partnership. This can include mobile phones, computer equipment and motor vehicles.
Dentist pension contributions
Pension contributions
Pension contributions paid personally by the dentist into their own pension, such as the NHS pension or a private pension, are not deducted from business profits. Instead, these costs are included on the self-assessment tax return on the tax relief section.
Here to help
For dentists, maintaining financial health is as important as caring for their patients. By understanding the common allowable and disallowable expenses, and leveraging the expertise of a specialist dental accountant, dentists can ensure their practice runs smoothly and compliantly, optimising their financial outcomes.
To speak to one of our Specialist Dental Accountants today, please fill out the form below and our team will be in touch shortly.
