Should dentists trade as Limited Companies?

I get asked fairly regularly by my dental clients whether it is advisable to trade as a limited company. As I'm not an accountant it's not easy for me to give a definitive answer. In fact you should really have a feasibility study done for you by an experienced accountant that specialises in working with dentists.

I've just received a briefing from Humphrey & Co, a firm of accountants based on Eastbourne, which neatly summarises the situation for both Associates & Principals.

Robert McTear writes as follows:

Associates - In our opinion, Associates trading through a limited company could be at risk of attack by H M Revenue & Customs and may therefore find it difficult to benefit from potential tax savings. This is especially true if they are only working at one practice.

Principals - This is a very complex area and depends upon your own individual situation. There are many factors to consider, both tax and non-tax, including the structure of business, ability to transfer the NHS contract, income level, NHS superannuation, increased “red tape” and so on. In our experience the majority of our clients withdraw most of their profits and therefore the potential tax savings are reduced substantially. If you then take into account the additional administration costs of running a company, where available, the benefits of incorporation are diminished even further. If you would like to consider incorporation further your accountant can conduct a feasibility study to examine the tax consequences of you trading through a limited company.

If you want to see how else they might be able to help you, you can visit their site at http://www.humph.co.uk/specialist-dental-accounts.asp