NHS Dentists - Are You Incorporated?

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NHS Dentists: Are You Incorporated?

Recent changes that affect you

Are you a dentist trading as a limited company for your NHS contracts? Are you the owner of an incorporated dental practice?

If you answered yes to either question, you need to read on.

Performers (Associates)

NHS Dentists Are You Incorporated? From 7th November 2011, any performers (associates) who are trading as limited companies for their NHS contracts will not be eligible for superannuation.

New NHS Guidance Notes state that whilst providers may incorporate and enjoy continued superannuation, performers cannot.

How this affects performers individually will depend on their NHS pay, private fees and age to retirement, balanced with the potential tax savings.

Providers (Principals)

At the moment, dental providers (principals) are able to incorporate, taking a reduced salary and dividends whilst continuing to enjoy the full benefits of superannuation on their NHS contracts.

That’s all about to change.

From April 2012, providers’ superannuation will be capped at the level of salary and dividends taken from the limited company based on the income declared on the ARR report form due by the end of May 2012, relating to the year 1st April 2011 to 31st March 2012.

Here’s an example

Mr Tooth has a net NHS superannuable pay of £120,000.

He has incorporated as Tooth Limited, pays himself a salary of £5,000 per annum and takes dividends of £40,000. He also takes £20,000 as a return of his director’s loan (goodwill).

From April 2012, only his salary and dividends will be NHS superannuable. His director’s loan does not count as income so only £45,000 will count towards his NHS pension.

So what?

Clearly, if you are an incorporated dentist associate or principal, there are decisions you now need to make.

How the NHS Guidance Notes’ changes directly affect you and what action(s) you need to take will depend on your individual circumstances.

To discuss the implications and your options, we recommend you speak to your financial adviser.

Article by Raj Passi
Independent Financial Adviser at Legal & Medical Investments
January 2012