NASDAL Sees Normality Returning To Dentistry, While Ross Brooke Advises Incorporation Caution
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- Published: Thursday, 30 September 2021 07:37
- Written by Chris Tapper
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There are signs of ‘normality’ returning to the business of dentistry according to the results of a newly-released survey.
The National Association of Specialist Dental Accountants and Lawyers’ quarterly Goodwill Survey has suggested there are big jumps in the valuations of dental practices and ‘deals completed.’
NASDAL said “In terms of deals done, goodwill as a percentage of fee income in the quarter across all types of practice averaged 144% of gross fees – that was a significant leap from 128% in the quarter to 31st April 2021.”
“NHS practice goodwill bounced back with practice goodwill at 161% of gross fees – up from 146% in the previous period.”
“Private practices goodwill values saw a big increase – up to 133% of gross fees from 110% of gross fees in the previous quarter.”
“Mixed practices reduced slightly with values of 145% of gross fees from 156% of gross fees last time.”
Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, commented, “In my commentary on the last results, I did say that I was surprised to see big drops in goodwill values and that it had not been my subjective experience. As with all statistics, there can be anomalies.”
“It seems that the figures from this latest quarter have borne that out. Why did last quarter’s figures occur? I would be speculating but it could be that there was a backlog of discounted deals that were delayed due to Covid and they all went through in the one quarter.”
“Certainly as we move forward, NASDAL members are reporting that the market is robust and that sale prices are not being reduced and are reaching their full potential.”
The goodwill figures, related to the quarter ending 31st July, are collated from accountants and lawyer members of NASDAL and are offered as a guide to the dental practice sales market.
The goodwill figures are collated from accountant and lawyer members of NASDAL in order to give a useful guide to the practice sales market. These figures relate to the quarter ending 31st July 2021.
Incorporation Caution
Meanwhile, the specialist dental accountants at Ross Brooke Dental have warned dentists to be cautious when considering whether to ‘embrace incorporation.’
Ross Brooke Dental (RBD) says it is 15 years since the law was changed to enable dentists to incorporate.
“At the time, there were plenty of dentists who embraced incorporation in order to reduce their tax liability. Today the benefits are less clear-cut.”
The law firm Else says incorporation “Is a complex area of law and the considerations are vast, ranging from tax implications, valuation of the practice to employment contracts and TUPE (Transfer of Undertakings Protection of Employment Regulations 2006). Also, things can get particularly complex if the practice is an NHS practice.”
RBD has questioned whether there has been an erosion of benefits to practitioners over the 15 years since the law made it possible to incorporate.
Specialist dental accountant Nathan Poole said “Our view has always been that incorporating can be beneficial but will depend on individual circumstances. The dentist needs to know how they will manage a range of factors, outstandingly the limits placed on withdrawals from the business.”
Mr Poole explained that when a dental practice is incorporated, the cost of the goodwill has to be amortised, or off-set over a period of roughly five years.
If the value of the practice is £500k, then a notional charge of £100k has to remain in the business until the goodwill is written off.
RBD says “This reporting requirement is a bitter pill to swallow for the sole trader who has always had full access to all their earnings.”
RBD says that any of its clients who consider incorporation need to carefully weigh up factors which might affect their decision.
Since the process of incorporation is complex, the accountants advise clients on how to extract income from their company and the process involved in the amortisation of goodwill as well as navigating other issues including staff contracts.
Nathan Poole continued “Whether to incorporate may not seem like one of life’s big decisions, but as a dentist, it could be among the most critical choices you will make, and that includes career, marriage and where you live!“
Ross Brooke Dental founder, Linda Giles, agreed.
She said “Any dentist who wanted to incorporate should be given the option of a detailed feasibility study by their accountant. Anything else would be a dereliction of duty.”
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