The importance of raising enquiries regarding capital allowances on practice acquisitions.

When looking to buy a dental practice, what the buyer is effectively seeking is the ability to earn his or her own income. Unfortunately, hand in hand with practice ownership come a number of responsibilities, such as an obligation to pay tax.

Whilst a specialist dental accountant will be able to point the buyer in the right direction with advanced tax planning, it is important to keep in mind that when you buy a practice all of the relevant information is obtained from the seller during the transaction. New rules have made this particularly vital when it comes to the possibility of claiming capital allowances for the cost of equipment and fixtures. Capital allowances allow the owner of the practice to claim tax breaks in relation to money that has been laid out for the purchase of plant and machinery at the practice. There is extensive documentation of what can be included within the definition of ‘plant and machinery’. The best way for a buyer to find out what does and doesn’t fall into this classification is to seek the assistance of a specialist dental accountant. However, it will include most essential items, such as the dental chair.

The introduction of the Finance Act 2012 introduced significant new obstacles for a buyer who wishes to claim capital allowances for second-hand fixtures and equipment. The new rules mean that in practices where equipment and fixtures have been installed after April 2012 and a practice seller has already claimed some capital allowances in relation to those items, the buyer of the practice will need to make a disposal value statement in order to receive entitlement for capital allowances on those items. The process of making a disposal value statement can be that either the buyer elects (with the co-operation of the seller) to attribute certain values to the fixtures and equipment or that the buyer has the value of the items set by a tribunal.

As a result of this new complication, it is now extremely important for a buyer to know whether or not any of the fixtures in a practice have been installed since 2012. But not only this, they must also discover whether or not the seller of the practice had been claiming for capital allowances whilst they owned the practice.

The best way of approaching a conundrum such as this is to seek the expert assistance of a specialist dental lawyer, who will have the knowledge and experience to ensure a smooth transaction. A specialist dental lawyer will understand the complexities of such an undertaking and will therefore know to raise enquiries on behalf of the buyer that can then be fed back to the accountant. If the lawyer does not make the necessary enquiries it may make it extremely difficult for the buyer to claim their full entitlement to tax allowances in the future. A knowledgeable dental lawyer will understand the idiosyncrasies of dental law and this unique understanding will benefit their client no end.

The rules associated with capital allowances are likely to change again for expenditure that takes place from April 2014 onwards. The changing of regulations will once again increase the difficulty of claiming capital allowances. With this in mind it is therefore, essential that both appropriate legal and accountancy advice is sought. Navigating such an altering and fragile area of dental law is not something to be approached lightly. The assistance of a skilled and experienced dental lawyer will make all the different, helping the buyer of the practice to make the most of capital allowances.

For more information call John Grant on 0113 8343705  or email jmg@goodmangrant.co.uk

A NASDAL and ASPD MEMBER


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