An estimated 30,000* individuals, including many NHS dentists with pension benefits valued at more than £1.25m, are likely to benefit from HMRC’s Individual Protection from today (18 August). Dentists with NHS pension ‘added years’, personal pensions and those with deferred benefits can also take advantage of the newly available protection.

By having Individual Protection you are able to set your Lifetime Pension Allowance (LTA) up to a maximum of £1.5m, potentially saving a tax charge of £137,500. HMRC is offering the protection as a lifeline for those affected by the £250,000 reduction to the LTA in April 2014. The application 'window' stretches to April 2017, although those looking to retire before then are advised to take action now.

Jon Drysdale, an independent financial adviser at PFM Dental says: "Dentists retiring within the next 12 months need to deal with this issue immediately or face potentially large penalties. Getting the necessary figures at short notice from NHS Pensions will be a challenge, so seeking specialist advice early on is paramount."

Unlike Fixed Protection 2014, the new Individual Protection allows the continuation of active pension contributions.

To complete your Individual Protection application you will need to apply to NHS Pensions for a valuation of benefits.

For more information contact pfmdental on 0845 241 4480 or visit www.pfmdental.co.uk

*Source: HMRC Tax Information and Impact Notes 'Reducing the pensions tax annual and lifetime allowances'.

_{Many of the 970 dentists who undertook Dental Foundation training in 2014 will move to a self-employed associate job shortly, if not already. Chartered accountant Adam Hemingway at specialist dental accountants PFM Townends and independent financial adviser Jon Drysdale share their top 10 financial tips for dentists embarking on self-employment.}

1. Don’t forget to register with HMRC

It's important to let HMRC know that you're self-employed as soon as possible. If you don't tell them, you may have to pay a penalty. Your accountant will be able to register on your behalf and receive copy correspondence from HMRC. This means you won’t miss important deadlines.

2. Save for tax National Insurance and Student Loan repayments 

It is important to know how much tax to pay and when you need to pay it. Your accountant should calculate this for you. Don’t rely on anecdotal evidence of how much you will need to save. For associates with largely NHS income it should be possible to accurately predict the amount of tax you will need to pay. You should save for this from the start of your new job, even though you may not have to pay any tax or student loan repayments for some time. Remember that you’ll need to set up a direct debit to pay Class 2 National Insurance contributions straight away.

3. Record keeping is important

Being a self-employed associate means you are now running your own business. Keeping accurate records of income and business related expenditure will ensure your accountant advises you on the correct amount of tax to pay and claims the appropriate tax relief where possible. Make sure you retain practice payslips as these contain important information such NHS Pension deductions.

4. Set up a bank account for your new business

You don’t need a ‘business’ bank account but it is advisable to set up a new current account which into which your practice income is paid. Business related expenditure should be taken from this account. This ensures business income and expenditure is separated from the multitude of personal credits and debits.

5. Claim back business expenses against tax

Associates can claim for the cost of some courses and study materials incurred before they started their first job and ongoing training. It is important to provide your accountant with records of any expenditure related to work. A dental accountant will know what claims are acceptable.

6. Check the NHS Pension portal

The annual reconciliation report (ARR) is completed online and this is your opportunity to make sure your pensionable pay is recorded correctly. This will affect your pension at retirement so it is important to get it right. A dental accountant will be able to confirm you have made the correct NHS Pension contributions and deal with any queries relating to the online portal.

7. Use your ISA allowance

A total of £15,000 can be deposited in a cash ISA account in any one tax year. This is a bank account where interest is not subject to income tax. It is a good place to hold the savings you make for your tax liabilities. A cash ISA can be linked online to your current account for easy access. Rates tend to be low.

8. Get your income protection in order

Most associates will expect a stepped increase in their income and subsequently personal expenditure is likely to rise. It is important to protect this income as employer sick pay is no longer available or will be limited. Existing income protection polices may not provide sufficient cover especially if you signed up to a plan in your final year at University. The sooner you do this the less expensive it will be.

9. Save for a house deposit

Most lenders will require a deposit of 10%, although some lenders will allow 5%. Many high-street mortgage lenders won’t lend unless you have at least 2 years self-employed accounts so finding a lender sympathetic to dentists is important. Use a specialist dental financial adviser to source the best mortgage for your requirements.

10. Use specialist advisers

We have witnessed some serious problems for clients who have been ill-informed by an accountant who isn’t dentally aware. Many times this involves NHS Pension rules for associates, failure to claim business expenses correctly, or a general misunderstanding of the NHS Pension portal. We therefore strongly recommend that you engage a dental accountant who has chartered status and is regulated by the ICAEW. (Institute of Chartered Accountants in England and Wales).

Visit: http://pfmdental.co.uk/sections/view/26/associate | Call  01904 656 083

iPad Mini offer for all new associate dental clients PFM-ipad-advert-August-2013.pdf 

Location, location, location?

Martyn Bradshaw explains why location is important but not everything when it comes to practice values

Our national press love a headline quoting a statistic on the average house price or the average wage. Statistics containing an ‘average’ often make a good story because they divide opinion. However, some should be treated with caution.

Practice values are often subject to similar treatment and while surveys might contain some useful guidelines on the general state of the market, they often fail to uncover the finer points of valuing the goodwill of your dental practice.

There is no doubt that there is a significant variance in the values of practices in the south east of England, the major English cities and more remote locations. The same can be said of Scotland, with practices commanding higher prices if they are in or close to Glasgow, Edinburgh or Aberdeen.

Price hotspots

Hotspots by location tend to be town centres/highly populated areas. This is simply because these areas enjoy a higher concentration of dentists seeking to buy a practice. In these locations the majority of sales are likely to be to dentists wanting to be ‘owner occupiers’ as they are the largest group of interested buyers. Typically these hotspots are (but not restricted to):

• Within the M25, Birmingham and other Midlands cities, Manchester and the north west cities, Bristol, Newcastle and cities in west and south Yorkshire.
• Likewise, the major Scottish cities of Glasgow, Edinburgh and Aberdeen will command higher prices than the less populated areas of Scotland. Interestingly, Scottish practices often enjoy interest from buyers across the UK, largely due to the (non-contract based) nature of NHS income.

When hotspots are less important

Body corporates are as active as ever and are seeking to purchase across the country. Do they pay different values dependent on the areas? Not generally. Their assessment of goodwill value relies on the ‘super profit’ that the practice generates (a multiple of the earnings before interest, tax, depreciation and amortisation – known as EBITDA). This calculates a value, regardless of where the practice is.

It would be wrong to say that location doesn’t influence the price a corporate will pay for your practice. Location becomes important if a corporate has a foothold in a particular area. Running a group of practices in proximity will bring economies of scale, which is a key mantra to the investors behind corporate dentistry. Therefore, the location factor on price in this case is more regional than national.

What impacts on price other than location?

Obviously, the location of a practice isn’t something practice owners can change so if yours is not in a price hotspot, what can you do to increase its value? Most patients will come from the locality – which can sometimes be quite a small area depending on the transport infrastructure and other factors. There are exceptions, but few general dentistry practices find it possible, despite good marketing campaigns, to broaden the area from which patients attend. Offering specialised services (cosmetic dentistry being an obvious one) can, however, be effective in drawing patients from further afield.

The biggest single factor affecting values is probably the basis of the treatment provided. Some practices sell for significantly over the asking price due to the high volume of offers at the closing date for sealed bids. These tend to be NHS practices. The banks see strength in an NHS income stream and will lend readily as such, hence the high number of finance-ready buyers available. An NHS practice in a northern city or even a more remote location is very likely to command a higher price than a private practice in the south east.

While private practice values may be enjoying a value resurgence due to the improving economy, buyers are more likely to pay 'top dollar' for those practices where capitation scheme income is greater than Fee Per Item income. Again, banks are more comfortable lending on this proposition as they perceive the income stream to be more secure.

Turnover is vanity, profit is what matters

To understand how we might break a value assessment down even further, let’s consider two similarly-equipped NHS practices with the same turnover, in the same city, in the same street. One has a consistently higher level of profit than the other due to lower staffing costs or better cost control. I know which would command the higher price.

Martyn Bradshaw is a practice valuer and sales agent with PFM Dental. For further information on PFM Dental visit pfmdental.co.uk

Simon Reynolds, Commercial Director of Patient Plan Direct, highlights recent activities and trends amongst dental plan providers, which provides some interesting food for thought.

The dental plan market has become more competitive in recent years as new plan providers have come to market (including Patient Plan Direct over five years ago now), and each provider looks to differentiate themselves, create a competitive edge, retain business and put their own slant on enabling practices to administer a dental plan for patients.

Furthermore, factors such as the imminent NHS changes, challenges associated with profitability, changes in practice purchase and sales, as well as the importance of cost analysis in the sector have all impacted on whether, and how, practices opt to administer a dental plan for patients.

All this activity has sparked certain changes and movements in the plan market, some of which Simon explores below.

Plan providers are reducing their fees to retain business

“It’s no secret that Patient Plan Direct is a price-led proposition. Our competitive fee structure is significantly less costly than other plan providers and practices look to transfer the administration of their dental plan to us from other providers to make significant cost savings, whilst still benefiting from a great service,” explains Simon.

“More and more often I come across scenarios where, after a practice informs their existing plan provider that they intend to transfer to Patient Plan Direct, a new “special deal” is quickly fabricated by the practice’s existing plan provider in a desperate attempt to retain the practice’s custom. These deals usually take the form of significant fee reductions representing huge cost savings.”

“This begs the question as to what value these plan providers place on their service and why the threat of transferring should be the catalyst that warrants sudden special attention or significant fee reductions? Why should only practices looking to move away benefit from a “special deal”, and why has the practice had to pay the higher fees until now?”

Simon goes on to explain: “These deals have been offered on numerous occasions from many of the major plan providers. I would encourage any practice that administers its dental plan through a plan provider to ask for a fee reduction or “special deal” that other practices have been receiving. Why should your practice pay more whilst it remains loyal? Alternatively, you could explore Patient Plan Direct’s transparent and honest approach to administering your practice’s dental plan.”

The Hoover versus the vacuum cleaner

“Some plan providers profess that patients ask specifically for their plan brand, but do they really, or do they simply ask for the brand that they associate with the service they require and the benefits of the service concept?” asks Simon.

Simon goes on to say, “This weekend you may decide to “Hoover” your living room and use a vacuum cleaner to get the job done. Whilst you may refer to vacuuming your living room as “Hoovering”, you are simply referring to the common brand associated with the functionality you require. It is, in fact, vacuum technology that you require. The particular brand, “Hoover” or the term “Hoovering”, has nothing to do with your core requirement. Moreover, the brand “Hoover” may not necessarily be the best brand to meet this requirement.

“Relating this to dental plans, if a patient asks for a specific plan brand, they are more than likely looking to take advantage of  the core principles and benefits of a dental plan rather than anything associated with a third party brand that has no impact on the actual dentistry delivered. Don’t assume you need to pay inflated fees to offer a particular plan brand and promote a third party brand. It is the core principles of a dental plan a patient desires, not a particular plan brand.”

Transferring provider to increase value

Finally, Simon explains why some practices opt to transfer plan provider in order to achieve a greater practice valuation. “It is common knowledge that a practice with a capitation or maintenance plan in place generally achieves a greater valuation than a fee-per-item private practice. Why? Because the reassurance of recurring income provides both lenders and potential buyers with greater confidence of the businesses’ long-term sustainability.”

“If there is a way of making the practice’s dental plan more profitable then this further increases the practice’s value. Take, for example, a practice with 600–1,000 patients on plan. By transferring the administration of its dental plan to Patient Plan Direct from one of the major plan providers, this practice would stand to save between £4,500 and £15,000 per annum which directly increases the bottom line.”

“Using the EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) valuation method, a practice’s profit is generally multiplied by four or five times. Therefore, a cost saving and representative increase in profitability of £4,500 to £15,000 can increase the value of a practice by £22,500 to £75,000. No wonder dentists are exploring plan provider transfers as part of their exit and retirement strategy.”

Simon Reynolds is the commercial director of Patient Plan Direct, the UK’s fastest growing dental plan provider. To discover an approach to dental plans that makes sense and cuts costs contact Patient Plan Direct.

Tel: 0844 848 6888

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Mob: 0754 070 6323

Visit: www.patientplandirect.co.uk

PFM Dental and Patient Plan Direct, proud sponsors of GDPUK, have come together to create a new blog area on GDPUK: Professional Services for Dentists

The area will provide expert opinion and advice in key areas relating to professional services within dentistry including:  Practice valuations, Business management and operations, Financial, Accountancy and Legal. Guest bloggers are experts in their field with one thing in common – they all work exclusively with dentists. The blog represents an excellent all-you-need-to-know source to keep you ahead of the field in non-clinical matters.

PFM Dental are one of the leading specialists providers to dentists within the UK providing: a dental sales agency, practice valuations, independent financial advice and chartered accountancy services.

Patient Plan Direct is the fastest growing, most cost effective and flexible plan provider in the market - Experts in plan launches and plan transfers.