Six Essential Points to Consider When Incorporating Your Dental Practice
Key contact: Jon Lawley
Author: Daniela Dimitrova
Our Acuity Law Corporate Dental experts outline the most important factors to plan for when incorporating your dental practice.
Since the 2006 reforms to The Dentists Act, dentists have been able to incorporate their dental practices and trade as a limited company – enjoying potential tax benefits as a result. However, if you are thinking of incorporating your dental practice, there are six key areas to consider.
- Do you provide NHS treatment?
If you are currently delivering NHS treatment as an individual or partnership under an NHS Contract, it is important to understand that there is no automatic right to transfer your NHS Contract to a new limited company. You will need to submit an incorporation application to the relevant bodies of the NHS and your prospects of success will be largely dependent on the quality of your application.
- CQC (Care Quality Commission) Registration
The new entity will become the provider of dental services, and so you will need to register the limited company with the CQC. You will also need to register yourself (or someone else involved with the dental practice and the limited company) as the Registered Manager and Nominated Individual. Finally, you will also need to submit an application to cancel your existing CQC registration. The CQC application process can take many months to conclude – and so it is important to start this process as early as possible.
- Transfer of Assets
When you incorporate your dental practice, you are essentially selling all the assets of the dental practice to your new limited company. It is vital that this sale is documented in a comprehensive agreement that sets out which assets are to be transferred, the price and method of payment (such as a director’s loan or bank re-finance), and the date that this took place. You may need to produce evidence of the incorporation in the future, and it is therefore vital that this is well documented and has been prepared with the help of your accountant and legal adviser.
The employment of your current workforce will transfer to the limited company under the TUPE Regulations, and so you must discharge all your obligations under these regulations in respect of the transfer. You should also ensure that any self-employed clinicians sign new terms of engagement with the limited company. Failure to do so could have catastrophic implications for yourself and the clinicians, not only in respect of any dispute that could arise in the future, but also by creating barriers for your clinicians to validly claim their superannuation pension payments.
The property element of the incorporation will depend on the current set-up and how you wish to be organised afterwards. For example, if you currently lease the premises then you may wish to assign the lease to the limited company – and you will probably require the landlord’s consent to do so. Alternatively, if you own the freehold, you may decide to either transfer the freehold to the limited company or grant a lease of the premises to your limited company and receive a rent income. You may even wish to hold the property via a separate limited company and grant a lease of the premises to the trading company. Your accountant will be able to advise on what is most tax efficient for you and your legal adviser will assist with any structure that you choose.
You may have an outstanding loan with a lender that is secured against the property (and other assets). This means that before you can transfer the property you will be required to settle the outstanding loan or obtain the bank’s consent to the transfer or grant of a new lease. The bank’s consent to relinquish its security may also come in the form of a transfer of the loan facility to the limited company, or a re-finance of the outstanding loan with the limited company becoming the new borrower. Your accountant should be able to advise the best course of action and it is recommended that you liaise with the bank early on to avoid any potential delays to your incorporation.
With so many variables at play, it is crucial that you seek professional advice when you are considering altering the structure of your business. By engaging an experienced dental lawyer, you can identify the pitfalls and stumbling blocks and determine whether it is the right option for you and your business.
Contact Acuity Law today for an initial consultation to discuss your individual needs for incorporating your dental practice.