I often get asked about the types of expenses you can claim for when running a business. I have been asked all sorts of questions from can I claim for my dog? to can I claim for my wedding? Interestingly, the dog was allowable, but the wedding wasn’t.
If you have been self-employed for a few years, you have probably had discussions (or fights?!) with your accountant about your expenses. You know you’re allowed your golf club fees as a genuine business expense, but your accountant will see this expense differently. Remember, an expense does not have to be for exclusive business use or vice versa to qualify. Tax is complex and never simple. You might feel hard done by when your accountant tells you NO to claiming for your new £300 glasses acquired for use exclusively when working with your patients, and surprised when they say yes to a £50 purchase for lingerie that can be classed as a company directors’ trivial benefit. It’s crazy, but true.
The expenses you can claim get update with every chancellor budget speech and the new legislation each finance act brings. Discussing regularly with your accountant about your accounting for expenditure is the best advice I can give any dentist.
In this guide to Associate Dentist Expenses, I will detail the costs that can be claimed as an associate dentist and some of the intricacies of the tax system. I’ll cover the differences between the expenses a limited company and self-employed assosiate dentists can claim for.
A top earning self-employed associate dentist could be paying tax at a top rate of 47%. Buy, understanding and claiming as many expenses as is legally possible in your accounts significant year on year tax savings can be made.
Every dentist should be claiming for their GDC registration fees, indemnity insurances, lab fees, accountancy and accountancy software fees. Interestingly, the cost of preparing a director’s tax return isn’t allowed as a tax deduction.
Administration costs for stationary, printing, dentistry books, dentistry magazines, small dentistry equipment and protective clothing such as goggles should all be claimed for by both self-employed and limited company director dentists.
IT costs for computers, tablets, smartphones used in the business can all be claimed.
Home working claims are very difficult to justify for dentists. There are modest deductions available if you’re homeworking for certain number of hours and a modest £4 a week allowance if you’re a director carrying out duties at home. To get any significant tax relief on your home running costs, a dentist would need to be performing significant duties at home.
Dentists trading as a limited company are able to provide the directors with a number of employment-related benefits tax free. These benefits will not be available to self-employed dentist. The benefits can include bicycles, mobile phones, staff parties, certain life insurance premiums (know as relevant life insurance), pensions and pensions advice.
Finance costs of interest on loans are unlikely to be incurred, but if you do use finance to purchase a business asset these can be deducted. Bank charges can also be claimed on bank accounts. There is a nice £500 interest deduction you can claim if you are self-employed and using the cash scheme on any borrowing even if it’s for your home. Remember tax isn’t simple.
In my opinion, the most misunderstood expense of associate dentists is travel. The point to remember is any travel between your home and your regular surgery will be classed as commuting and commuting is not allowed as a tax deduction.
If you travel to visit a laboratory, bank manager, accountant, attend training, visit a patient or make a journey between practices for team meetings, it is the costs of these journeys can be claimed. These none commute journeys can be started from your home or practice.
Locum dentists have different rules for their travel costs. A locum will be at a temporary location for work and being at a temporary place of work means you have a greater tax advantage than being at a permanent workplace. Working at a temporary location allows all travel costs including food, drinks, parking, tolls, all transport and accommodation to be claimed as a business expense.
If you’re an associate dentist who operates at multiple locations for multiple practices, you might consider these locations as temporary and not permanent places of work. The following examples help explain the differences between a temporary and permanent place of work.
Example – Associate with multiple permanent places of work
Darren is a dentist and lives in Plymouth. He is an associate dentist at a practice in Plymouth every Monday and Friday. He also works in a different practice in Exeter from Tuesday to Thursday. Darren has two different permanent places of work, one in Plymouth and one in Exeter. Darren has spoken to his accountant and knows any travel to a permanent work location is a commuting journey and not allowed as a tax deduction. There is no tax relief for any of Darren’s journeys from his home to Plymouth or Exeter. It is Darren’s choice where he lives and works. Like the employees of the practices, the costs of getting Darren to his permanent places work must be paid by him.
Example – Associate sent to a temporary place of work
Darren’s Plymouth practice have asked him to work in their Exeter practice to cover a temporary 12-month maternity absence. Darren is keen to help and negotiates extra pay to cover his increased travelling time and costs. Darren knows from his accountant that he can claim all the travel costs to a temporary work location for the first 2 years. Darren now claims his Monday and Friday travel costs between Plymouth and Exeter as a cost of his business.
Darren is now working in Exeter 3 days a week with no tax relief on his travel, and 2 days in Torquay as a temporary associate with tax relief on his travel from Plymouth
Parking at work expenses often forgotten
One often overlooked item of expense is the cost of car parking at a place of work. If you are a company director, it will be possible to claim for the cost of parking at or near your workplace. This can be paid for by your limited company without any personal tax implications. This expense is not available to the self-employed, unless assosiated with a temparory place of work.
You have two options with your vehicles. 1) Rent them to your business for an agreed mileage rate. 2) Claim a deduction for the actual running costs. Claiming the actual running costs is where the greatest difference lies between operating as self-employed or as a Limited company and is covered in a separate article.
Unless you are working as a locum its unlikely you will have any significant business mileage to claim. However, when you do, the simplest option is for your business to pay you a mileage rate:car or van for 45p a mile, motorcycle 24p a mile or bicycle for 20p a mile. This is a tax deductible expense for your business. You will need to keep a diary of your journeys with the date, reason, location visited, and the number of miles travelled.
Your second option is to have the business own a vehicle and pay for all the running costs of fuel, insurance, tax etc. This will increase the amount of paper work you will need to track to prepare your accounts. If you are self-employed you will need to apportion you motoring expenses between business and none business use. If you are driving 10,000 miles a year and 1,000 of those miles are for business, then 10% of your motoring costs are allowed as a tax deduction.
If you are a company director, you will not need to apportion between business and non-business mileage. You will need to pay what is known as a benefit in kind. Benefits in kind often result in more personal tax to pay and are generally not recommended. Electric cars can often be very tax efficient if owned by a company – see our article here.
An area that often causes confusion are the costs associated with training. Once qualified as a dentist, the expenditure on your continued professional development (CPD) is deductible for tax. The costs of dentistry CPD courses, travel and subsistence (the costs of keeping you there) and learning materials can all be part of a valid claim. We see a number of international dentists undertaking CPD overseas as the costs are often cheaper. Like the UK courses, these overseas courses, travel and subsistence (food & accommodation) are tax deductible. If the purposes of the travel for the course has a dual purpose to visit friends and family, the subsistence costs wouldn’t qualify for tax relief.
There is a grey area around training for new qualifications, particularly once a dentist has qualified. The initial cost of training a dentist to become qualified is not deductible against income, as the tax office consider this to be capital expenditure. When a qualified dentist attains new qualifications, such as a master’s degree in cosmetic dentistry, HMRC may well challenge the costs of obtaining that masters qualification as ‘capital’. They could disallow the expenditure on the basis that the training is for acquiring new skills and knowledge rather than updating existing skills and knowledge.
My advice is to keep detailed records of all expenses and discuss with your accountant at the first opportunity what can be included in your accounts. It’s worth remembering that the tax laws constantly change. What may be disqualified one year could be included another year and vice versa. We have produced a detailed checklist for dentists to download and check you’re not missing out on valuable expenses that you’re incurring but not yet claiming.
PS: it was a working dog used in the hunting of rodents on a farm.