Dentists Who Invest Podcast
Official Podcast of the Dentists Who Invest platform. Talking all things investing, money and finance with a dental spin. Have you ever wondered how you can grow your wealth and protect your hard earned money as a Dentist? We've got you covered. Featuring famous guests such as Andrew Craig, Edward Zuckerberg and Benyamin Ahmed we delve deep into EVERY aspect of finance to educate and empower ALL Dentists.
Dentists Who Invest Podcast
Are My Rolex, Garden Office And Mobile Phone Tax Deductible? with Johnny Minford DWI-EP292
Want to understand how to become as tax efficient as possible?
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Ever wondered what truly qualifies as a tax-deductible expense for your dental practice? Join us for an eye-opening episode where we demystify this complex topic with the expertise of Johnny Binford, a seasoned accountant specializing in dental taxation. Gain clarity on whether home offices, luxury items like Rolex watches, or even a duck house in a pond can be claimed as business expenses. Johnny walks us through the "wholly and exclusively" rule in UK tax law, using fascinating real-life examples such as Malala Andromit's unique case on court attire.
Navigate the intricate landscape of dental practice taxation as we dissect the nuances between taxable and tax-deductible expenses. Learn the importance of proportionality when claiming home office deductions and understand the potential pitfalls, including capital gains tax implications. We'll also shed light on a maxillofacial surgeon's failed claims for educational and travel expenses, highlighting the critical need for understanding established tax principles to avoid costly errors.
From common deductions like GDC fees, professional courses, and motor expenses to more unique business-related purchases like art and entertainment, this episode is packed with actionable insights. We discuss the tax benefits of electric cars, the intricacies of claiming mobile phone usage, and the differences in tax advantages between limited companies and sole traders. Finally, get practical advice on optimizing your deductions while staying compliant, ensuring you make informed financial decisions for your dental practice. Don't miss our final segment on how to get in touch with Johnny Binford for personalized advice and consultation.
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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional.
Hey everybody, this is a podcast episode that I should have done a million, billion, trillion years ago, if I'm perfectly honest with everybody, because the number of times that this question pops up in the De Invest Facebook group I have lost count. I've got to be honest with you. What is tax deductible and what isn't tax deductible? Is my home office tax deductible? Is the duck house in my pond in my back garden tax deductible? Is my Rolex tax deductible? Is the duck house in my pond in my back garden tax deductible? Is my Rolex tax deductible? All of this stuff and more is going to be answered in this podcast, which I'm really looking forward to. This is the definitive answer to this question. We're going to be as comprehensive as possible with my good friend, Mr Johnny Mford, expert accountant, specialist accountant to dentist and tax expert. How are you, Johnny?
Johnny:I am well indeed, James, and it's good to see you again.
Dr James:Hey man, likewise, it wasn't so long ago since you were on the podcast when you helpfully joined us for that webinar the other week, and that's what got me thinking. I was like, right, we need to do more tax stuff on the Dentist who Invest podcast, because they just don't do it enough. If I'm honest with you and actually it kind of aligns on it's kind of coincidental, because I was what I have been doing is bringing the podcast back to its roots and doing the majority of the episodes as fine ass stuff from there on, because that's what the viewers tell me, James, we love this stuff. Keep going, keep going, keep going. So it's very much in that spirit and vein that we are going to proceed today. So, Johnny, let's jump straight in with two feet Tax deductible, if we can just start, because I'm just going to give a bit of context here Way back when I started my finance journey, I didn't even fully get what tax deductible meant. So I think that that's a really good place to start, just to bring everybody up to speed.
Johnny:James, that's an excellent place to start, because one of the things that I do if I'm presenting on what is taxable or not. The starting point is as far as the UK legislation is concerned, everything in the world is taxable under UK law, unless there's a particular clause that says it's not taxable. So, for example, if you are a Chinese person living in Hong Kong, never been to the UK, don't earn any money from the UK, then you are exempted from paying UK tax. How good is that? How generous is that. But that's where the UK law comes from. The bad news is the US law, the French law, the German law, the Australian law and the Chinese law all come from the same angle as well. So everything is taxable unless there's a clause that says it's not. The same thing applies to expenses.
Dr James:Can I just interject Kind of like guilty until proven innocent, that sort of logic.
Johnny:It is completely, completely, and that's a very good place to start. So I'm just going to go through the not specific clauses, because there isn't a clause, believe it or not, that says is my Rolex tax deductible? There is not a clause in the uk tax on. But what I am going to do is I'm going to show you some of the really broad clauses and really broad ideas. Um, I'm going to illustrate those in some, possibly some tax cases as to why certain things are tax deductible, why they are not, so that anybody a dentist sitting there can at least have a view on why something is tax deductible or why it's not.
Johnny:More importantly, why it might be, because you're always better to think I'll remember that that might be tax deductible. I'll bring that to somebody who knows and then we can claim it in on them. The main thing excuse me, the main thing, as James, you just alluded to, is wholly exclusively, necessarily in the course of the business. Now, all of those words are absolutely crucial and each of them has its own meaning, and there are hundreds of tax cases that have gone through the courts to highlight what the meanings of these words will be, because they can mean an awful lot of things to an awful lot of people. But the only thing that will determine whether or not it's tax-deductible or not is the law, and the law as illustrated by those words and the tax cases which illustrate the point, nobody else. So let me take the first couple of those words wholly and exclusively. Those generally go together and it's reasonably clear what they mean. If you've got an expense and you're spending something which is wholly and exclusively for your dental practice or your dental work, then the chances are it's tax deductible. That covers a whole series of things Some people say to me about. Well, I use my mobile phone. Yeah, it's tax deductible because you're using it. Is it fully and exclusively? No, it's not. I'll come back to that in a moment.
Johnny:One of the main tax cases that illustrates us at this point is from the 1980s. We, as young accountants or barristers or whatever, all learn about this case. It's a case called Malala Andromit. Malala was a young advocate barrister. She's now Baroness Malala and she took this case and went to the House of Lords to make a point and she said said I'm a really fun person. I don't wear black clothes. I have to wear these black gowns in court, but they're not me. I never went anywhere else. Are they tax deductible or are they not? And the house of lords held that they were not taxed because they failed on the holy and exclusively test. And this sort of gives you an indication, because those black clothes had two purposes they provided her with warmth and decency as well as being part of her court makeup, and that sort of duality of purpose gives you an idea. That is the starting point of that. Tullian Exclusively, let me throw that back to the telephone, your mobile phone. Is that totally and exclusively the answer?
Johnny:is no, it's so not. Would your car, if you were going from one practice to another practice, be totally and exclusively? No, it's not, because you don't. You use it for other things as well, and these sorts of things, those sorts of things are covered by concessions which HMRC use and provide. And if things are reasonable reasonable is a good word there's often a concession which will apply as long as you're not trying to take the mick. But that wholly and exclusively aspect is something which is a very big thing unless there's a concession involved. The concessions are where the fun bit starts and I think that's something where, again, an advisor looking at the reasonings of things will come into play.
Johnny:Now, malaloo and Drummond is very much within the dental industry, because if you think about your tunics in practice, why would your tunic be tax deductible? Because that also provides warmth and decency in the same way as the barrister Malibu had. And the answer is actually they're probably not tax deductible because they've failed the whole exclusively test, which is why your tunic isn't a tunic. Your tunic is actually protective clothing. So you redefine it something else and it's also why, from the 1980s, 1990s onwards, a lot of practices started providing tunics, because if you, as a dentist, pitch up and buy your tunic, you could possibly run into only exclusively malady and droplet. But if your practice buys it for you, you can't because the practice is providing protective clothing for you, the clinician, and that's one of the reasons why a lot of practices will provide the tunic. Most practices, I think, provide the tunic for their clinicians. The practice is always due by sticking a big badge. Badge on that says Joe Bloggs Dentistry. So it's an advertising, it's a marketing thing as well. And of course, if you're a dentist, you're an associate in practice.
Johnny:What we would always say is to protect your self-employment. This is a different presentation, by the way, but to protect your self-employment you put your own badge on so that you are the dentist, not some random faceless person from that particular practice. But we can see when we start wholly and exclusively. We've come a long way, from Baroness Malaloo and her House of Lords case all the way through the tunics to what actually happens in practice, and that's one of the interesting things about tax drives behaviours. That's one aspect.
Johnny:I'm also going to just talk about the word necessarily, because if you were an employee you would have to have another particular channel to satisfy, so you will have to have an expense which is fully, exclusively and necessary for the practice. Now that necessarily cuts out a lot of things. As an example GDC you have to have the GDC. That fits fully, exclusively, necessarily. Other subscriptions, bda by concession, possibly other things, for other types of magazine subscriptions which are to do with clinic, they are not necessary. They don't stop you doing your employed job. So they would potentially fail and there are a number of things which would fail if you were employed, wholly, exclusively, necessarily, which would be tax deductible if you were self-employed. You've only got to wholly and exclusively. I want to move on just a little bit from that, because there's another part of that phrase, only and exclusively, and we talked about and James, you used the words for the purpose of the business. What the tax law actually means is in the furtherance of the business.
Dr James:In the what of business. Sorry, just furtherance, furtherance of the business In the what.
Johnny:Sorry, furtherance, furtherance of the business. So it's furtherance, not in the course of the business or the purpose of the business, and there is a difference that goes on on that between those two phrases. And that's actually quite nicely highlighted by another tax case, smith's Potatoes. Nothing to do with dentists, they're to do with a potato manufacturer or potato grower. What happened on that was they tried to maneuver things around and they bought, bought some really fancy tax work from a tax advisor to organize their affairs so that they paid less tax than they would have otherwise done. There's no problem at all with that, no problems. However, I went to court and the judge had held on this one that this was not tax deductible, not particular expense, because it wasn't in the furtherance of the business. It was in the course of the business but it wasn't in the furthest of the business. In other words, he'd said that if that expense hadn't existed, the business would have made no more or no less profit. Therefore, the expense which didn't generate profit in itself was not tax deductible. Now, that's a little subtle thing thing, and sometimes in a practice situation where we miss In fact, the judge in that particular case in Smith's Potatoes is Lord Simmons set down a little phrase which has gone down into the tax law and it says that the and it says that the business would have made no more or less profit. It's as if a man's temperature was adjusted just because he bought a thermometer and the fact that buying his thermometer doesn't affect his temperature. And that's an interesting one to go. So the furtherance of the business is an important thing to think of. I just want to move on to what a business is, because again, that's another phrase. As part of that we have to define what the business is. A dental practice would be a dental practice, but it could have other things going on in the building. The building could be owned by the proprietors as a separate thing from the dental practice.
Johnny:The court case the leading one on this happened about 100 years ago. It was in Essex and it was a pub and there was a chap went into the pub. He obviously helped the business profits quite a lot because he couldn't walk out of the pub at the end of the evening. He was so legless after his session there. So what they did was they said right, we'll just carry him upstairs and put in one of the bedrooms upstairs. Let him sleep it off in the middle of the night. For reasons unknown, the chimney breast and the ceiling fell on him. So they got him out, they dusted him off, sent him on his way and tried to the expenses of repairing the room and the ceiling against the pub's profits.
Johnny:The judge completely accepted that the guy clearly had contributed to the pub's profits that night. He clearly was in the premises because he was contributing to the profits. What they said was the act of him sleeping it off just because it was in the building that wasn sell being the business was not to let people sleep it up. So all of that expense was not tax deductible even though he was in the premises. Now, that's a very business of letting out rooms and even if they hadn't charged the guy to let out the room to him, then potentially the expense would have been tax deductible against the letting income for the bedroom, but just because it was in the same building it wasn't tax deductible against the public. That's something that I know I've come across from time to time within practices, because very often the practice will have the building, or it may even be a building next door to a practice which is not used as part of the practice at that point, maybe in the future, but not the state. So that would be something which would be caught in this sort of thing and practice owners would just need to be very careful in that and organise the structure and how it's presented to try and get the best adaptability, as we've seen with tunics. A lot of it is to do with how things are defined. You've got to be reasonable. You don't want to be trying to play the HMRC for monkeys because they are not, but within a reason a lot of this is to do with how things are structured.
Johnny:This thing with the business also has an effect in other parts of dentistry Less now, but maybe 10, 15 years ago, when implants were a new, new thing. Roll the clock back to what I was saying a few moments ago about having an expense which is in the course of the business but not to the furtherance of the business. When you did an implant course, you were still a dentist, so you didn't need the implant course. So if you were employed, for example, the wholly and exclusively would work. Just about the necessarily would not work because you were already a dentist. Because you were already a dentist If you were doing a specialist course like implant. What a lot of us would have done at that stage is to not try and claim the course as tax deductible against your earnings as a general dentist. But you would carry that expense forward and then offset it against the income which came from that business, from that implant business, when it started. So you were distinguishing an implant business from a general dental business.
Johnny:Now these days implants are mainstream, invisal mainstream, so a lot of the stuff is just mainstream. So that sort of thing doesn't really happen as much now. But it's also something that there in the back of the mind is something that may well come into the future, not so much for horses but for other stuff. The business of dentistry may not be the same as the business that goes on in other parts of practice. A lot of the aesthetic stuff may well start to fall into that category and whilst we can define certain things within the tax law, it could potentially be that the new government comes at this from a different angle as well and it starts to redefine some of the things which we call dentistry at the moment. They may well come back and say actually that's not dentistry, that's a different business, that's something else, that's taxability. Now, I'm not going to tell them about that, but we have to bear that in the back of our minds and see what we have.
Dr James:And do you know what? It's so helpful to have a breakdown of what you just said in terms of how that's defined per se and how does that? And I know that this is a very basic question. But just to even make this, just to cover this, just this one little tidbit for the audience, because I know that there's some people out there who might appreciate this If we could even just break it down a little bit further whenever it comes to how that looks, what you've just articulated on our tax statement and I know lots might know this, but for the 20% or 30% who have yet to come across this, it'd be really useful to know Taxable tax deductible have yet to come across this would be really useful to know taxable tax deductible that's defined as we pay it on the gross of our income, not net after taxes. Right, that's purely what it is right. Is there any more to it than that? Because I'm curious to know myself no, there's no more.
Johnny:There's no more to it. So that one thing that I would say that we do, I've mentioned about concessions so that we could have a proportion of the telephone or your vehicle expenses.
Johnny:Another thing that comes into that is a home office. Again, it's a proportion of the expense would be tax deductible, not all of it, but a proportion, and the proportionality is based on usage. With Home Office, for example, there's a certain amount that you can claim, that you can, and it is very, very acceptable with HMRC. Those sorts of amounts, those proportions of sort, are things that have gone through HMRC across the country and have been accepted as being yet thus reasonable. Strangely enough, the figures that they come out with. If you were to do your own calculations, based on the number of hours that the small bedroom is used as an office and the light and heat for those number of hours in proportion to the rest of the house, the rest of the square footage, it comes out to be about the same. And we do have clients who said well, I use that all the time, so I want a tenth or a quarter of the house being tax deductible. No way, no way you'll get away with that, because it's just not reasonable.
Johnny:There's a downside to that, also because, bear in mind, your house is outside the scope of capital gains tax. If you start having your house, for example, and a quarter of it is used as actually as a dental surgery, five days a week. Then there's a proportion of your house which does not rank for that exemption for capital gains tax. You could end up paying capital gains tax in your house when you come to sell it. Believe me, there's not a place you want to be that principal. Private residence is a very handy exemption to have and there are a lot of unexpected consequences, to some extent Because, as James and you and I have said before in the past on many occasions, the taxman isn't stupid. They've gone through all of these things in the past. They've been all the way through the courts for all of these. These are not new and nothing we talk about here has been not talked about in the past. All of these things have been gone through in the past. People have come up with a great idea.
Dr James:it's not somebody somewhere has tried it and can I just jump in one thing on that, because the the number. And listen, I've been there before. I can't say I'm an angel on this front. Something comes to you and you're just like, oh, that sounds like a really good idea. And in that moment of inspiration inverted commas you feel like it's original. But tax isn't anything new, you know. It's literally been around for hundreds of years, if not thousands.
Johnny:So there's a good chance that your bright idea has already been covered which is why it's good to get some input on this and why this podcast is helpful. I'm going to finish with one other case, actually just when you mentioned and this covers a number of things, and this is a number of things where the chat was self-employed in part of the thing, employed in part of the thing. So we have the holy and the exclusively and the necessarily coming into play. This is a very, very recent case, only finished um two years ago, less than two years ago, um, and I will not want to mention chap's name. Yes, I will, because he's a doctor conjar from the south coast, so South Coast, so it's in the public domain. So there we are.
Johnny:And he wanted to be a maximum facial surgeon. So he enrolled in a course in London, travelled up from the South Coast to London. He was too far to go every day, so he rented a very small, modest flat next to the hospital in central London and he'd travel up during the day, travel back to his wife and children at the weekends. So far, so good. Could he claim the course? No, he couldn't, for the reasons that we just talked to before, because he would claim the costs of the course against the income arising from his Max Fax work when he eventually started to do it. So no problem with that.
Johnny:Could he try to claim the travel backwards and forwards? Again, no, he couldn't, because that wasn't wholly and exclusively and necessarily. He could have stayed in London, he didn't need to travel, so you can't claim that. Could he claim the cost of his flat? That's the bit that was started to be quite interesting to the tax law.
Johnny:The answer was no. He couldn't claim a flat either, or it would be tried. He felt it was justifiable because he couldn't actually do the course. He would either have to travel or he'd have to stay in London one or the other. And that highlighted a distinguishing feature of something which again applies to a lot of dentists, particularly a lot of young dentists and associates traveling from one place to another to ask different surgeons. The tax office distinguished that by saying what he was doing wasn't earning money. He was simply putting himself in the position that he could eventually earn money and from that point of view those expenses failed in their tax deductibility and, and if I've understood this correctly, that's because, to further the business, there'd need to be a business in the first place, which there wasn't which there wasn't, but the judge did say which I thought was quite an interesting thing.
Johnny:He said look, if he had actually carried out some max-fax surgery in his little studio flat, then the rent proportionately for the time that his patient was lying on the couch or whatever would have been tax-deductible. But of course, probably the GDC would probably have struck him off at that stage.
Dr James:The courts were fine. The GDC just didn't stick it up. On your sofa in front of the TV, but the taxman was cool with it and that was the main thing. For the record, I'm joking. I know this is going out to the public domain. Definitely joking on that one.
Johnny:We are all joking on that, one To say, I don't think Dr Kunjab was laughing too much at the end of it all. But from our point of view, this is something that highlights some of the things that we've been working with and maybe gives an idea of some of the subtleties within the tax deductibility region, because a lot of people say to you, James, and say to me, is ABC tax deductible? And oftentimes you'd say, well, yeah, a and B in these circumstances would be C. It depends, but there are no hard and fast rules. There are subtleties within here. Oftentimes it's about what the intention is.
Johnny:So, with a lot of these things, look at the evidence and gather the evidence yourself as you are doing these things, if you possibly can take some advice up front, if you possibly can take some advice up front. The last thing, the last thing you want to do, is listen to people in bars, because those weasel words that everybody does it, believe me, those are another three words which do not exist in the tax legislation. Everybody does it is not a catch-all. That's not fair.
Dr James:Well, listen, thank you for that thorough explanation of what is tax deductible and, by extension, what isn't, of course, because that would be very useful to have it clearly laid out for the dentists. And it's now a good time to segue into some of the things that we commonly see in dental practices which are tax deductible. I think that's a really good place to go. And then, how about this? We've got the things.
Dr James:Let's have examples of some, uh common ones that principals and associates use. Uh, the obvious ones you just to bring people up to speak in case you're missing any clear opportunities to reduce their tax bill. And then how about some of the not so obvious ones? And then we'll get into some specific examples. Does that sound fun? I just I just, by the way, for everybody listening for contacts, Johnny and I just shoot the breeze on these podcasts. There is no plan per se. The plan is there is no plan, but that came into my head just then when we were talking just there, and I feel like that would be a fun way to proceed, if you do, Johnny.
Johnny:Well, we can have a go. If you've got some ideas, you can sort of throw and say is this tax deductible, is this not tax deductible? Then we can certainly run with it. One question I get asked a lot is about loops. I don't know which part of loops would not be tax deductible, because I've never seen anyone outside a dental clinic wearing loops, to be fair, so I think in any of those, wholly exclusively necessarily, and the furtherance of the business. That ticks every single box for me boom.
Dr James:Well, there you go. That's that one definitively answered. And how about? Because here's the thing, in your I know that we covered this in the last podcast and I know that tax returns are not something that you've done for a while, but in your experience on that front and having those conversations, are there any? What are the biggies? Because here's the thing, Johnny. What we have to remember is some people listening to this podcast today would have never even filled in their tax return and filled any tax deductible things on there. That used to happen to me back in the day. So that's kind of where people are coming at this from. So maybe if you have some obvious ones that everybody should be putting on their their tax returns, that would be an amazing. So GDC has got to be on there, right, Loops have got to be on there.
Johnny:Yeah, it looks they've got to be on there. Any other courses that you do, any other subscriptions that you have. What we always say is look at the fully and exclusively definition and, as you go through the year, make a note, write it down, scan it through Dext or HubDoc or something. However you use this, put it in, give it to your accountant at the end of the year. It's far, far easier for the accountant to throw it out than it is to think about it before that.
Johnny:But from an associate's point of view, if you were an associate, things to not get kept up about is motor expenses. You're not going to get a lot of motor expenses. If you put a lot of motor expenses through your business profit and loss account as an associate, you are waving a big red flag to HMRC because the only bit that is tax deductible for you would be travelling between two places of work, so two clinics. Given that there, as in Dr Kamjar, travelling from your home to your place of work is never tax deductible. So that's something which is often is asked from the steward. He will say a lot about electric cars. Electric cars are good if it's a practice, if it's a limited company. If it's not, you don't get the deduction. The same proportionality works with an electric car as with any other car. That if you're buying an electric car and you're traveling to and from work, one place of work, one clinic, it's still tax deductible. Just because it's an electric car doesn't mean it's tax deductible. So again we have the proportionality which comes into play.
Dr James:So just to recap on that one, only if you're a limited company, not a sole trader, again we have the proportionality which comes into play.
Johnny:So just to recap on that one only if you're a limited company, not a sole trader, does that work. The limited company aspects work. This is an issue that, again, the government at the time brought in. Whether the current government will continue it or not not sure, but if their mind is, everybody in the whole world, so he would have come, which of course we know is a complete nonsense. Um, and the proportionality sometimes you get better to deduction as a sole trader. Sometimes you get better deduction as a company. Bearing in mind, as a sole trader, the chances are you're going to get a deduction of 40%, whereas a limited company gets a deduction of 25%. So there are aspects there.
Johnny:The current government I don't know what they're going to do with electric cars. On the one hand, they could say you know, tesla's had their moment, porsche Taycan has had its day. Maybe they will do away with electric cars, I don't know. On the other hand, they want to be very green. Maybe they'll say, yes, we'll keep electric cars, but a threshold on it. Maybe they'll extend it to non incorporated businesses, which would be a lot more sensible, but I don't know. So cars, I think, are not so good, but courses and so on. That's where we want to be. Subscriptions, that's where we want to be. There are always sort of elements of mobile phone, internet, computers. All of these things are used in business. All of these things will be a proportion, at the very least, which we can bring into play and claim some tax deduction on them. The nature of your business will depend, will determine how much you can claim two places, whether you're a persona or a associate.
Dr James:There are all sorts of aspects which which can colour, flavour what you claimed thank you so much, and now might be a good time to segue into specific examples. Uh, as crazy and wacky as they do get sometimes, but we, we want to put these ones to bed, don't we? On this podcast, we've got a brilliant opportunity. Let's do that. Okay, go for it. Sonny, is my rolex tax deductible? I don't own a rolex, but if I did buy a rolex, is that tax deductible? Because I've heard people.
Johnny:I've had people ask me that before I'm not sure which part of the holy, exclusively necessarily, and the furtherance of the business. Which of those elements capture the romance? So the short answer is no. This comes comes down to the Smith's potatoes. If you buy a Rolex because you want to tell the time whilst your chair's on, that's one of those things which isn't generating profit for you. It's an expense that is simply there in the course of the business rather than the furtherance of the business. It would also fail on the Malaloo, baroness Malaloo's clothing thing because, again, it's not fully and necessarily just for that business, not for anything. So I can't see where that would be to cast the document. They will undoubtedly be people who will be trying it will catch them in no way.
Dr James:Well, listen, a definitive answer just there for anybody who was thinking about that, on any listeners of the podcast. Thank you for clearing that one up, can.
Johnny:I just do just one one more onto this here. Actually that, that, uh, I I do have some clients, interestingly, who you have a practice or have the the ability to put their own things in their own surgery, possibly a long-term associate, something like that. What some of someone will do is they will use their practice income and it's tax deductible. I would suggest to buy paintings to put on the walls. Now you could spend $999 buying a poster and putting that above the chair, or you could spend 999 buying a really nice piece of art within the practice.
Johnny:I would suggest that perhaps the art element would start to rank for capital lines, so for tax deductibility from that, if that piece of art, through your choice and your capability as seeing the artist, went up in value. Again, that's a business asset which is going up in value. It would be interesting to see if you then sold it, whether or not the business released it with a buy or not. But that is something that I have seen in the past and I have had a situation where a MRC would say yes, just because the picture it fits, the building it fits, the space would be an element of tax deduction.
Dr James:There we go. Really good to know, and you know what. That actually wasn't one I was planning on asking about today, but I'm really glad that you brought it up because that'll be of use to people who are listening, particularly those with potential retained profits in the business who want to purchase something that, if you get it right obviously not all art appreciates. If you get the right piece, piece it's going to appreciate it's an invest and you know it's literally hanging on your wall not doing anything appreciating. If you get the right piece and if it is tax deductible conversation half of your accountant.
Dr James:Okay, rolex's, we've done, art we've done. How about? Oh, I'm like a kid in a candy shop here. There's so many ones people come to, come, you know, ask about. On the denison invest forum, well, we've definitely covered home offices, that's for sure. And with the home office, what you were saying is it's not that, it's not, it's just that you have to be aware of the long-term ramifications and also the a few ins and outs that you said just then there is a home office, there's no.
Johnny:No, no problems at all with that. The way to get a home office more tax deductible would be to have it as a separate part of the building. So I've seen home offices being almost like quite a big fancy shed in the garden with desk, chair and so on and so forth in it. That would make it sort of because you've got a specific thing just accidentally there. But I think just having awareness of when you sell the house, that's a business model, not something else.
Dr James:How about meals out with staff and how about entertaining guests and potential business partners and prospects?
Johnny:Entertaining has been done away with for many years now Advertising for either customers or suppliers. So that's not there. If you are doing something which is outside the office hours with suppliers, there's an element that you can try and get if it's reasonable Technically. I don't think it is tax deductible. The idea with the staff side, I mean that is a good thing, but of course that's not entertaining, that's team building. So I'm sorry you didn't recognize that subtlety in the definition and there are a certain element that you can get so much a year per head of staff, per member of staff and I am trying desperately to remember how much it is. It could be £150 per member of staff per year and that is tax deductible because that is part of what you do.
Johnny:Again, this is a staffing thing and it can't just be a business owner and his or her spouse. You've got to have it broadened to everybody. Again, it's one of these things if it's reasonable and you play in the game, the tax rules are the game to play. It's it's a reasonable thing to do, then it's it's. It's possibly where it is. But the, the, that's the word I'm looking for, the, the, what's?
Johnny:the word I'm looking for, the taking people out for meals and so on is not bad. It's not something that you want to say is a bias. Christmas, of course, is a separate thing. Again, christmas is expected or at some other time of the year which, if Christmas isn't the religious festival which we're there, then at another time of year, then that's obviously deductible as well. That would be expected.
Dr James:Makes sense and do you know what? There's loads you could choose from here, and maybe that's a good reason why any of the listeners of the podcast might like to pick things up with you after this podcast, Johnny, because there's you could. We could probably make a pod. We probably make about five podcasts on various things that are tax deductible, and maybe uh, that's a podcast idea for another day, but certainly not today because we've already covered enough ground. One more thing mobile phones. How do they fit in and how do they work? Is it like 50, 50 tax deductible, 50 not, or 100, or no one seems to know. There seems to be a lot of information out there, I know you covered it, but I just wanted to cover it with specificity right now.
Johnny:I would say certainly 50, without any question. If you've got a mobile phone for home, mobile phone for work, then you can get 100% of the mobile phone for work Mobile phones.
Johnny:If you've just got one, I would start at 50%. But if you've got a phone for example I've got a mobile phone which is a folding it opens up so I can see Excel out, so I can see Excel documents, I can see stuff on the screen, so it's always like a mini tablet. That sort of thing, I would say, is more and more tax deductible and it depends how many days you work. If you work two days a week, you're going to get less tax deduction. If you work five days a week, you're going to get less tax deduction than if you work five days a week. And again, each place is just slightly different.
Dr James:That's what you use your phone for.
Dr James:Well, listen, Johnny. I want to thank you so much for that podcast today. I think now we are coming up to about the 40, 50-minute mark and we've covered a lot of ground, so that was a very, very, very valuable one for the listeners and for me, I must say, as well. It's just to clear some of those definitions up, because it's something we come up against continuously as dentists and we want to just stay on the right side of the law, for sure, but at the same time also ensure we're being tax efficient. So there's kind of like a little bit of a balance. So this is the thing, because you can just not expense everything out of safety, but then your tax bill is freaking crazy. Do you know what I mean?
Johnny:you know absolutely. You're absolutely right, James, and none of us feel any better for paying any tax um from that. So but it's, it's knowing where you are. But what I would say is what we've said in the past take good advice, Because what I've sought to show today is there are a lot of subtleties within the tax system With all of these tax cases. We've gone through three or four tax cases. There are hundreds and hundreds and hundreds over 100 years, 150 years, all of which have distinguishing mark in what's happening in tax legislation. So there's a lot more subtleties in this than just that's tax-deductible. That's not. It doesn't work like that. It's not as straightforward. And lastly, don't listen to people in bars.
Dr James:Solid advice, Solid advice right there, Unless they're talking about football or I don't know something else. Privileged and fun. Go to the bars, have fun, guys. Just not tax advice. That's not what bars are for. Anyway, Johnny, listen. Absolute pleasure to have you back on the Dentists Who Invest podcast. If anybody listening today wants to speak to you on a one-to-one basis, how would they be best off doing that?
Johnny:that would be absolutely fine. Um, I'm a commercial director of a firm called D. Uh, my mobile number is well, I'll give you my email address. Just email me and I'll call you back. So it's Johnny J-O-H-N-N-Y dot Minford and @djh. co. uk. Johnny. minford@ djh. co. uk.
Dr James:Finder Bar, and also worth mentioning that Johnny is on the Facebook group as well. Johnny Minford, feel free to search him in the member section should you want to get in touch. As I say, Johnny, it's been wonderful to have you back. Another value-packed episode. I'm looking forward to the next one. In the meantime, I hope you have an absolutely smashing week and we'll speak again very soon. Stay well, everyone.
