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Dentists and VAT

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what is the income for a dentist for VAT Registration purposes?

a self employed associate dentist is with another accountant at present, and the dentists figures are as follows:

Gross receipts/fees £120,000

less lab fees £ 8,000

equals £112,000

less expenses 50 % share to cover rent /staff coats / materials

net amount recieved £56,000

less associates expenses cpd cost etc £5,000

net income £51,000

What is the relevant turnover for VAT registration purposes?

The other accountant seems to be indicating that it is £ 56,000, the net amount after deduction of lab fees and 50% share of expenses. is this correct?  

Thanks

 

Replies (18)

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Scooby
By gainsborough
27th Feb 2020 22:23

VAT threshold is based on value of taxable supplies, not profit, but have you taken into account that part of the gross receipts/fees may be VAT exempt dental services?

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Replying to gainsborough:
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By frankie3
27th Feb 2020 22:31

Gainsborough, Yes, I have taken that in to account, but my understanding was that even though there are vat exempt services, the fact that the turnover exceeds the VAT threshold, then the dentist should be registered?

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Replying to frankie3:
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By Duhamel
27th Feb 2020 23:00

Your understanding is not correct if the only supplies are exempt.

https://www.gov.uk/vat-registration/calculate-turnover

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Replying to frankie3:
RLI
By lionofludesch
28th Feb 2020 09:39

frankie3 wrote:

Gainsborough, Yes, I have taken that in to account, but my understanding was that even though there are vat exempt services, the fact that the turnover exceeds the VAT threshold, then the dentist should be registered?

Afraid that's utter nonsense.

What would be the point of a trader with 100% exempt outputs filling in a nil VAT return every quarter ?

Now - does he sell toothbrushes and how much input tax does he pay ?

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Scooby
By gainsborough
28th Feb 2020 08:36

Yes, just count taxable and zero rated supplies when measuring turnover for VAT purposes.

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By John Stone
28th Feb 2020 09:29

Surely general dental services supplied by an associate are VAT exempt? So the debate between frankie and his predecessor regarding the client's turnover for VAT registration purposes is almost certainly irrelevant? (These are questions rather than statements of fact)

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Replying to John Stone:
Scooby
By gainsborough
28th Feb 2020 10:25

I agree John (unless a large part of the services are cosmetic - e.g. tooth whitening).

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Replying to gainsborough:
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By SWAccountant
28th Feb 2020 10:55

Even cosmetic dentistry is probably exempt. See the recent Skin Rich case.

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Replying to SWAccountant:
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By Royjackson
14th Apr 2021 14:55

I saw your reply to this and wondered on what basis you reached the conclusion cosmetic dentistry is probably exempt, especially in light of the Skin Rich case?

I had a read of this case and it was not immediately apparent to me, maybe you can highlight relevance etc. thanks

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By frankie3
28th Feb 2020 12:40

Ok, thank you all for your replies.
The confusing part of this is that the dentist in question provided the following link :
https://www.sectorsdonut.co.uk/sectors/healthcare/dentist/vat

which states:

"Dentists are not required to register for VAT in respect of their supply of exempt dental services, but must register if the value of their taxable supplies exceeds the current VAT registration threshold. They can register voluntarily if they make some taxable supplies so that they can recover some input tax, subject to the partial exemption rules."

The person in question was adamant that he was required to register, which threw me initially, so he appears to be confused by thinking that exempt services are taxable!

So as a follow on from my initial post, the previous accountant was treating the net income figure above £ 56, 000 as the gross income figure on the income tax return, and ignoring the actual gross services figure and the lab fees and 50% share deducted to cover the principals overheads etc.

The associate dentist actually only received the net figure £56,000 in to his bank account. He did not receive the £ 120,000 and then make payment back to the principal to cover lab fees / 50% share. Is the other accountant correct?

This is relevant I believe, because the correct exempt figure would still need to be included in box 6. The reason why I say this is because the dentist has some farm income, cattle sales etc.

Any further thoughts? Again thanks for replies to date

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Replying to frankie3:
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By Matrix
28th Feb 2020 12:44

Box 6 of what?

You are right, it sounds like the previous accountant didn’t know what they were doing. If you are also unsure then no harm in saying so or getting additional advice. I don’t do doctors or dentists myself.

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Replying to Matrix:
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By frankie3
28th Feb 2020 12:47

box 6 of the VAT return

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Replying to Matrix:
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By frankie3
28th Feb 2020 12:47

box 6 of the VAT return

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Replying to Matrix:
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By frankie3
28th Feb 2020 12:48

box 6 of the VAT return

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Replying to frankie3:
RLI
By lionofludesch
28th Feb 2020 13:03

frankie3 wrote:

"Dentists are not required to register for VAT in respect of their supply of exempt dental services, but must register if the value of their taxable supplies exceeds the current VAT registration threshold. They can register voluntarily if they make some taxable supplies so that they can recover some input tax, subject to the partial exemption rules."

The person in question was adamant that he was required to register, which threw me initially, so he appears to be confused by thinking that exempt services are taxable!

I think we're all agreed that exempt supplies are not taxable. From a VAT perspective.

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Replying to frankie3:
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By SWAccountant
28th Feb 2020 13:07

Your dentist's turnover is £120k. The rest is costs, making a Gross Profit of £56k.

Your dentist is actually providing services direct to their patients, with the practice providing payment collection facilities.

For the arrangement to be anything else suggests that the dentist is actually providing labour services to the practice, which is a taxable supply.

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By frankie3
09th Mar 2020 15:51

Does anyone have anything different to add to that of SWaccountant below re the turnover query? Thanks

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Replying to frankie3:
RLI
By lionofludesch
09th Mar 2020 16:26

Not without some details of the contract.

You need to establish whether your client is trading with the patients on his own account and making a contribution towards the surgery costs

or

is providing his services to the practice (as opposed to the patients).

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