Dentists have been warned that they could face more challenges than the average business when the Government brings in Making Tax Digital, as their accounting practices differ from most others.
Making Tax Digital (MTD) will be a new way for businesses to file their tax returns online and HM Revenue & Customs (HMRC) maintains it will modernise the system and help businesses get their tax right with the least administrative burden.
However, the methodology could cause problems for dentists, as the system will hinge on quarterly returns. While any business with a turnover of at least £83,000 will already pay VAT on a quarterly basis and probably prepare monthly annual accounts, dentists do not. Dentists are not registered for VAT and even larger practices tend to do one year-end return instead of monthly accounts.
Therefore, in order to comply with the new system, dentists would either need to train existing staff in the new way of working or hire external people to do the accounts for them.
For this reason, the British Dental Association (BDA) has joined many other professional bodies in calls for the implementation of MTD to be postponed to give dentists time to prepare and to increase the turnover limit of businesses from the proposed £10,000 to the VAT threshold of £83,000. The BDA maintains that because of the ‘unique characteristics of the dental sector’, it would be fairer to do this.
Meanwhile, another concern about the proposals is that MTD would widen the cash basis as a method for calculating profits. While this might seem like a good idea, due to accounting for NHS earnings and the link between these and NHS pension contributions, there could be significant complications with regard to tax and pensions for dentists.