After closing a dental practice or finishing as an associate, a dentist, as required by the GDC, must maintain Professional Indemnity Insurance (PII) coverage for a certain period to protect against potential claims arising from past treatments. The duration for which PII insurance is required can vary.
If your policy was a claims-made policy, you must ensure that you secure appropriate ‘run-off’ cover. This will enable patients to be compensated against events that occurred while you were still practising under a previous policy, including when some years have passed.
According to HMRC’s Business Income Manual (paragraph 90100), these expenses, although incurred after trading ceases, can still be offset against any income recived by claiming a tax deduction on a tax return for each year a run-off premiums are paid.
Suppose you are not expecting to file a tax return each year after finishing as a dentist. A solution to this challenge of filing a tax return to claim your run-off PII is to account for the future cost of PII premiums in the final accounts, covering all the run-off years. Ideally, the insurance broker should pay these premiums before you cease to practice.
By accruing these expenses within the final accounts, it’s possible to obtain the tax in full on ceasing to practice rather than waiting to claim the tax relief in the run-off years.
