Doctors are facing many changes around the tax system and rates – and these may have a significant impact on your private practice business. Some of these measures have already been introduced and others are planned for the near future.

BASIS PERIOD REFORM

Basis period reform applies to sole traders and partnerships where their financial accounts are drawn up to a date that is not cotermi­nous with the fiscal year-end, which is 5 April – or 31 March for many in practice.

These year-end dates have often arisen from the commencement of the business or, for older busi­nesses, when the self-assessment tax system was introduced.

Legislation has now been intro­duced so that you have to report your profits to 31 March/5 April 2024, which may be a change to your usual year-end.

You do not officially have to change the date of your accounts, but it is expected that most busi­nesses will, unless you are expect­ing significant differences between accounting years, in which case some planning may be required.

The impact of the change is that it can accelerate income tax due on the profits, as it unwinds the timing difference for the disclo­sure of earnings.

This creates overlap profit, or in other words, you have used the same profits twice on the first period of 1 July 2010 to 5 April 2011.

This can be a benefit if profits are rising, as it builds in a timing dif­ference that you are effectively paying the tax on profits later.

Over the life of your practice, this would naturally unwind with usually a higher tax liability in the final year, often well after the busi­ness has, in fact, ceased.

The basis period reforms basi­cally unwind the timing differ­ence to align the disclosure for tax to the tax year-end. In doing so, the first period that was included twice is deducted from the longer period. More...

The Chancellor, Jeremy Hunt, presented his Autumn Statement on Thursday 17 November 2022.

The announcements have received mixed response, with many professional commentators highlighting that further tax measures and spending cuts may be announced after the 2024 election by whatever government comes to power.

Although headline income tax rates remain unchanged the thresholds at which different rates of tax apply remain unchanged except for the upper tax rate of 45% that will apply from £125,140, previously £150,000, from April 2023.

The term ‘fiscal drag’ has been much used by professional commentators to highlight that although basic and higher rates of tax thresholds have remained unchanged, it will, in a period of increasing wages, bring more individuals into paying higher rates of tax.

For example, the number of people paying 40% or 45% tax has risen from 4.1 million in 2019 to 6.1 million prior to the Autumn Statement and will rise further.     More...

During the lockdown many of you with limited companies may have resorted to withdrawing funds from your company bank accounts over and above any normal salary and/or dividend payment taken in the past. This may have been withdrawn as a loan as opposed to a salary or dividend payment.

Below is a guide to help explain the consequences of taking a ‘loan’ from your company and what is known as the Director’s Loan Account ("DLA").

Although your company is owned and controlled by you, legally and for tax purposes it is a separate legal entity. This is important and it is because of this separate legal status and the control you exert over it that HMRC has safeguards to ensure that the funds held and owned by the company are afforded safeguards.

The Revenue pays particular attention to the DLA.

A DLA can sometimes be referred to as a Directors Current Account ('DCA'). This directors loan/current account represents monies owing to you or monies owing back to the company from you. If you borrow money from your company (instead of say declaring a dividend) then assuming the company didn't already owe the same amount of money to you, then this would show within your company accounts as a directors loan account.

Financial year end

When it comes to the financial year end an account is drawn up internally within the More...

If there is one thing that benefitted from the COVID 19 lockdown it was the environment.

Less cars and other modes of transport made an appreciable impact.

Before lockdown the government had introduced incentives particularly relating to electric cars.

Some of these incentives differed in different parts of the UK, particularly in Scotland where more incentives are available and detailed below.

Electric Cars – 100% Allowances

The government in its drive for a greener environment provided what was known as enhanced capital allowances for electric cars. Cars whereby the CO2 emission is 50g/km or less.

These cars are entitled to 100% writing down allowance in the first year as opposed to 18% each year for non-compliant vehicles.

More...

In our previous private practice post we set out some points for you to consider as the lockdown eases and there is some return to normality. This is available on our website.

Independent Practitioner Today has also kindly published our pointers here.

Towards the end of the article we highlighted some tax planning opportunities and advice that will be set out below and for which further detailed guidance can be provided on a personal basis.

The tax planning will be split between those who practice as individual practitioners or in partnership say with their spouse or partner and those of you that have limited companies.

Sole Practitioner/Partnership

If you have a 31 March or 5 April financial year end then for the year 2020/21 the first part of the year will have seen little or no private practice activity.

The Revenue will allow the 31 July 2020 tax payment (your second payment on account for the tax year 2019/20) to be deferred until 31 January 2021.

More...