=
MediEstates - Capital Allowances Tax Benefit
Capital Allowances Tax Benefit


Capital allowances are the only form of tax relief available to UK taxpayers for their expenditure on commercial property. The items that can be used to reduce taxable profits are usually inherent items of plant and machinery within the fabric of the building. These items are usually taken for granted within the overall purchase price of the property.
After a thorough investigation of the properties tax history, a value is attributed to items of equipment fitted to or within the fabric of the building. These are items that should they be replaced, would normally be written off against tax through your renewal, refurbishment, or capital accounts. What we are looking for are original, or replacement items not already tax utilised.
These items include radiators, heating systems, wires in the walls, switch gear, alarms, toilets, sinks, basins, door furniture and cabling among many other pieces of equipment.

What could this allowance be worth?
The value of these capital allowances is dependent on the type of property and its use. However, a typical project will identify from 10% to 50% of the purchase, or build cost as an allowance. That allowance can be used to reduce income or corporation tax liability and in some cases could lead to a refund of tax paid.

How is this allowance used?
Your accountant could use up to 18% of the total allowances to reduce your tax liability every year.
For example if £100,000 of allowances are found then you could use up to £18,000 in the first year to reduce your taxable profits, which could be worth £7,200.

Could I lose the allowance?
Yes, if you sell your building and have not claimed. Your solicitor during the sale process will now ask if the allowances have been completed and what figure would you like to pass to the new owner. If you have not investigated the allowances, then you could be forced into doing so by the purchaser.

PRACTICE ONE
Practice location
– this practice occupies a twostorey detached property located on a busy main road with a mix of shops and residential properties. There is free street parking around the practice and excellent transport links.

Practice type – this is a three-surgery mixed practice, which has been established for over 40 years. The principal is selling due to other family commitments and would be prepared to stay on for a period of time to facilitate a smooth transition. The practice is being sold as leasehold.

Financials – the gross fee income is shown to be in the region of £400,000 and comprises of 55% NHS-GDS contract and 45% fee per item. The gross has been generated by the principal working full time in the practice and supported by associate two days a week and a hygienist two days a month. This team is complimented by a part time receptionist and three part-time nurses.

Price achieved – a price of £645,000 was achieved, which was significantly in excess of the asking price.

Agent’s comments – this practice generated a lot of interest, so much so we entered into a sealed bids process and with reconstituted profits of 47% you can understand why. The practice has 17 years remaining on the lease, which is a great help when the terms of a bank loan are set against the terms of the lease. We always advise principals thinking of selling to ensure their lease is in order and has as many years available as possible.
PRACTICE TWO
Practice location
– this practice was set up from squat by the current owner in 1998 and is located in a busy town centre within converted commercial premises. The surrounding shops and amenities help drive footfall to the area and there is good public transport links, as well as plentiful free parking nearby.

Practice type – this is a seven surgery, mixed practice with a large NHS contract. The vendor owns the freehold and is looking to create a new lease for an incoming buyer.

Buyer appetite – the practice generated significant interest amongst our priority tier buyers, with 8 viewings arranged.

Financials – the practice holds an NHS Contract of £555,419 generated from 20,056 UDAs; a UDA rate of £27.69. Turnover is £761,283 with the remaining income generated from capitation (c.£45k) and fee per item work. The current principal works alongside four associates and one hygienist with the income generated fairly evenly between them all. There are six qualified dental nurses, one apprentice and one practice manager employed with pay rates reflecting experience.

Reason for sale/incoming purchaser – the current principal was looking to reduce their management responsibilities however they were keen to continue working in the practice as an associate post-sale. This suited the incoming buyer who was purchasing a second practice for investment purposes. The transaction took a year to complete and was delayed by the various complexities of creating the new lease.

Price achieved – £965,000 inclusive of goodwill, equipment, fixtures and fittings. The price achieved was higher than the original marketing price of £945,000 due to multiple offers creating a competitive bidding situation.
PRACTICE THREE
Practice location
– established in 1980, this practice was set up from squat by the current principal and occupies a purpose built two-storey premises within an affluent village. There is significant housing development taking place nearby which may lead to an increased patient list over the coming years.

Practice type – the practice is fully private with three available surgeries, however the surgeries are not fully utilised and this is something that can be addressed post-sale to maximise turnover. The premises are to be taken over on a leasehold basis.

Buyer appetite – the practice attracted over 1,500 web views with full sales information being sent to 185 buyers and multiple purchasers attending viewings.

Financials – the annual turnover of £246,854 is made up of £60,000 capitation alongside the fee per item work, with 80% of the income delivered by the principal and 20% by the hygienist. The practice employs one full-time and two part-time dental nurses who also cover reception duties.

Reason for sale/incoming purchaser– the current principal was planning to retire but they were open to options with regards continuing at the practice post-sale. The successful purchaser was a first time buyer looking to work in the practice full-time. The under-occupation of the three surgeries meant that both the vendor and the buyer could work in the practice simultaneously ensuring a smooth transition and the continuity of income moving forward. The transaction took 6.5 months to complete.

Price achieved – £240,000 inclusive of goodwill, equipment, fixtures and fittings.
Posted by: Dean Barker on 01 Sep 2016

General Buyer Terms 

This agreement is in relation to MediEstates Limited whose registered office is at 1st Floor, Pacific House, Stanier Way, Wyvern Business Park, Derby, DE21 6BF acting for and on behalf of our clients ("the Vendors"); and yourself (Buyer's Name) in relation for an introduction to a prospective sale of a business as a going concern. By registering through this agreement I agree to all terms set out below:

  1. Definitions
    In this Agreement the following terms and phrases shall have the following meaning unless the context otherwise requires:

    Business
    Dental Practice business providing dental care. This business is under the MediEstates Ltd sale terms.
    Confidential Information
    Means the actual Vendors identity and all confidential information in respect of the Business, including, but not limited to, any ideas, business methods, prices, accounts, finance, marketing, research, development, manpower plans, processes, market opportunities, intentions, design rights, product information, customer lists or details, employees’ details, trade secrets, computer systems and software, and other matters connected with the products or services manufactured, marketed, provided or obtained by the Vendor, and information concerning the Vendor’s relationships with actual or potential clients or customers and the needs and requirements of such clients’ or customers’ operations.
  2. Obligation of Confidentiality
    The Prospective Purchaser agrees to treat as confidential, information supplied by or on behalf of the Vendor in connection with the sale of the Business.
  3. Exclusions
    The obligation of confidentiality set out in clause 2 does not apply to:
    1. any information received from a third party who was legally free at the time of disclosure to disclose it;
    2. any information which was already lawfully in the Prospective Purchaser’s possession prior to receiving it from MediEstates Ltd on behalf of the Vendor; and
    3. any information which is in its entirety already in the public domain.
  4. Duties of Prospective Purchaser
    1. The Prospective Purchaser shall take such a reasonable security measures to protect the Confidential Information and trade secrets.
    2. The Prospective Purchaser shall not, without the prior written consent of the Vendor, permit any of the Confidential Information:
      1. to be disclosed, other than in confidence to its legal or professional advisors;
      2. to be copied or reproduced;
      3. to be commercially exploited in any way;
      4. to be used for any purpose other than in connection with the prospective purchase of the Business;
      5. MediEstates is registered under the Data Protection Act 1998. Upon Signing this agreement you agree to follow the legal obligations of this act to protect the details of the information supplied to you, with it no to be passed outside of the control of you the prospective purchaser.
    3. The Prospective Purchaser agrees to keep a record of Confidential Information received.
    4. The Prospective Purchaser will return to MediEstates or the Vendor all documents containing Confidential Information and all copies of those documents on demand at any time which are in its possession or under its control, and for this purpose the term “documents” includes computer discs and all other materials capable of storing data and information. The Prospective Purchaser agrees that such documents remain the property of the MediEstates on behalf of the Vendor.
    5. The Prospective Purchaser must not jeopardise or re-direct the sale under any circumstances.
    6. The Prospective Purchaser must not contact the Local Area Team or CCG regarding any practice sale, by any means of media unless written permission is granted from the Vendor.
    7. To carry out own due diligence on practice purchases and accepts that any information MediEstates has supplied is information provided by the vendor and is not responsible for its accuracy or completeness.
  5. This Agreement
    The existence of this Agreement and its terms are confidential and neither MediEstates nor the Purchaser may disclose anything about this Agreement or its subject matter or implementation to any person other than in confidence to their legal or professional advisers.
  6. Duties of Prospective Purchaser
    When buying Dental practices, finance is normally needed. Our organisation operated over more than one of the MediHoldings brand, by completing this from you agree that the information can be shared to our other organisations to avoid the need to register independently and provide the best possible service.

    MediEstates will refer you to the specialist dental lending team and MediFinancial who will contact the necessary banks, whom have preferential healthcare lending rates in some cases, to ascertain which funding is available to you.
    By signing this agreement you do not have to use any of the banks MediFinancial contact, it is just another service which we provide.
  7. Deposit for Dental Practice
    If you are interested in putting forward a formal offer in for a practice, once the offer is accepted there will be a deposit required to secure the practice sale which is dependant of the practice size. This deposit is held in a client account and will be returned to the buyer on completion of the practice sale. You the buyer, will be required to sign a deposit schedule which will cover the buyer and the seller in the event that the practice sale does not proceed.
  8. Changes to this Agreement
    Any changes made to this agreement must be authorised and signed by one of MediEstates Ltd Directors.
Your shortlist contents will be included in this contact submission