Dentists Who Invest Podcast

Saving 5 Figures On Tax For Your Dental Practice with Chris Lonergan [CPD Available]

• Dr. James Martin • Season 4 • Episode 418

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Want your next surgery upgrade to pay you back? We dive deep into capital allowances for dental practices and show how renovations, fit-outs, and even property purchases can turn into serious tax savings without schemes or risk. With specialist insight from property tax expert Chris Lonergan, we break down the simple idea that changes everything: move as much spend as possible into fast plant and machinery allowances, and keep the slow structures and buildings bucket to a minimum.

We walk through clear, real-world examples: from a £500k Victorian conversion that produced roughly £490k in allowances, to scenarios where higher-rate income taxpayers receive chunky cheques by carrying claims back. You’ll learn what really qualifies in a clinic setting, including electrical systems, plumbing, ventilation, data, alarms, fitted kitchens, reception, and partitions. We also explain why loose clinical kit is just the start, and how the unseen assets inside your walls often hold the biggest value when properly surveyed and categorised.

Buying a building? The seller’s status matters. Conversions from residential, purchases from non-taxpaying entities like the NHS or charities, and acquisitions from developers can preserve large pools of embedded allowances for you. Leaseholders who fund their own fit-outs can also claim, as allowances follow the spender. We cover the pitfalls too: why most accountants can’t value second-hand buildings or parse interim certificates, how to approach grants, and when a specialist report unlocks PMA you didn’t know you had.

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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. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.

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Dr James:

What's up everybody? Welcome to this live webinar this evening, another webinar on the Dentists Who Invest channel. We are here today to talk about something that doesn't get as much love as it should do, and that is capital balance for demo practices. And why does it not get that much love? I really don't know because it can actually save you quite a lot of cash and money. And a lot of the time it's because our accountants either don't have the time or necessarily the expertise to go through this stuff, particularly whenever we're starting a demo practice, or we have already started one, or in addition to that, if we are upgrading it or expanding it as well. So all of those things we're going to talk about tonight. I'm joined by tech specialist, Mr. Chris Lonergan. We're here to you're most welcome, Chris. It's a pleasure to have you on the Dentists Who Invest platform. We're here today to talk about everything along those lines. Chris, you know what we like to do on the Dentists Who Invest platform? It is tradition because everybody comes here with a specific reason tonight, and that is to learn about the thing that we have broadcast beforehand. So if you're happy, we can do a little high-level intro about yourself and then we can jump straight in. Sure. So a little bit about me.

Chris:

Uh I my main reason to be here, and the thing I enjoy most is helping people save tax bills. I think it's my right and my duty as an uh Englishman to pay as little tax as possible. Things like that, to pay as little tax as possible, and I get a lot of happiness out of people doing that. In terms of technical skills, if you like, I come from the construction sector. I started off building offices, then I went into building power stations. So I've worked in some big kind of infrastructure and ordinary projects. Then I fell into tax and uh have spent the last uh 15 years helping people pay less tax through their investments in commercial property. Along the way, I've helped people save about 25% of three and a half billion pounds.

Dr James:

Holy moly, that is quite the start. 25% of three and a half billion pounds. My my math is still on the night, but I think that works out as a lot.

Chris:

850 million pounds of tax saved over the last uh 12 to 13 years through me and my auspices.

Dr James:

Okay, well, a lot of them we're we're gonna be listening with intent tonight, then I guess.

Chris:

These are big figures, right? Uh not everybody's gonna save 850 million pounds on this.

Dr James:

Disclaimer, disclaimer, okay. Spoiler alert. Yes.

Chris:

Anyway, but yeah, you know, even if it's only going to be um £20,000 or £30,000, it all counts, doesn't it? You know?

Dr James:

That is that is that is quite the whack.

Chris:

I would like to say that £850 million is not like one big project. That's thousands of thousands of small projects which accumulate together to get to the 850 million.

Dr James:

Well, it's the experience as well.

Chris:

How can we just share my thoughts? Yeah.

Dr James:

You're you're quite right, because a lot of dentists, how can they say this, they are they get quite stung when it comes to tax. So certainly I'm sure there'll be a lot of people listening with intent tonight. But anyway, without further ado, if you're happy, Chris, then should we I know you've got a little presentation prepared? Crack on. We can crack on, let's jump straight in. So let's go ahead and do that. Let me share my screen. And this should appear any moment. There it is, right there. Excellent. Okay, cool. So, guys, going to jump into this in just a moment. Please do let us know if you can see this presentation title screen on your side, guys. Just pop a Y in a chat, just help us out on that one so that we know that it's displaying properly. In the meantime, just while everybody's doing that, I just wanted to let everybody know a little bit of housekeeping tonight. There will naturally be lots of questions that come off the back of such a webinar, given that we can, given that there's a lot of stuff to relate to everybody's individual personal circumstances. If anybody has a question, feel free to pop it in the chat. We will get to them towards the conclusion of this presentation. We've got some time allocated for that. And what that means is we can just work through them all uh in a sort of steady fashion. Also, guys, one other thing to point out is that you will get CBD for coming along to this webinar tonight. That is going to be released as part of the new Dennis and Invest CBD platform, which we're going to be talking about very, very, very soon. We're going to be releasing that fully next week. So keep your eye out for that one. 60 minutes of free verifiable CBD ready for this webinar that will be released next week. In the meantime, let's crack on with this capital allowances using taxation to your advantage. Chris, the stage is yours. Thank you very much, James.

Chris:

Really appreciate it. Again, spoiler alert. I was going to call this using taxation as a weapon. Oh, wow. But I figured that'd be a bit too aggressive. Maybe. So this is really all about how do you use taxation and the tax system that we have in this country to your advantage, which either means um making money for your company or making money for you as a private individual or a partnership or a team of people. So it's really all to do with using the tax system to generate cash and generate additional profits for your business. Excellent. So just like to go through that with the guys here. And if you say any questions, please pipe up. Uh, it is a very technical area. I've tried to make it as untechnical as possible, uh, whilst knowing that everyone on this call is going to be really brainy. Because you don't get to be a dentist without being super brainy.

Dr James:

So I'll get it. No, I'll get it. I'll get it. They're all very attacking. Anyway, shall we move on? Yes, feel free. Okay, cool. So I'm just click this for you, and then you should be able to. There you go.

Chris:

So um, sort of subsidiary title is How do you reduce your tax bills and improve your cash flow? Which I know is something that everyone on this call will be interested in doing. Uh, you know, James already. This is me.

Dr James:

Absolutely. Yeah, go for it. Yeah, sorry.

Chris:

So you're probably not going to say much. Uh I'm going to do a bit of talking, not for long. Try to keep it really, really simple.

Dr James:

Yes, cool. Hang on, let me just get this right back up for you there.

Chris:

There you go. Okay, so firstly, a little bit about my company. Uh, and as I say, whenever I do a presentation, I'm not gonna sit here and read the slides. Everybody on this call can read and write and write prescriptions, presumably. Um, but as a company, Bonner Brook is really fast growing. We've been going for about eight or nine years. Uh, we offer a range of services, we're with reducing tax bills, and uh we've grown. We've grown nationally, we've grown uh geographically, about 75 people right now, and probably 80 people next week, and 100 come the end of the year. We're growing really fast. Um, my team works in the property taxation sector. We do have other services which complement or do. And I have a big experience, uh big interest in working with dental and also medical practices, which share some similarities in terms of the capital expenditure, type of people involved in it, kind of money they make, the way they sell the company. So then big, big, big similarities there. Um, when it comes down to property, I have a lot of clients who either buy, build, convert, renovate, extend, and fit out surgeries and clinics. You know, you may have been involved in that yourself when you were in your previous life, so to speak. And these should all be things that resonate with people. So, in a nutshell, we help people who buy, build, convert, renovate, extend, and fit out surgeries to take advantage of tax legislation to generate free cash and reduce their tax buns. That's what we do. So, if you would like to move on to the next slide. Excellent. Yeah. Um, running a practice, I guess, is no different to running another business. That uh you've got what's going on in the market, uh, you have operational challenges, people day-to-day organizing things, uh, clearly a lot of regulation compliance flying around. That's somebody else's world. Uh, my main benefit I can bring to a dental practice or a dentist is around financing and cash flow and tax and investment. So it's how can you unlock cash? How can you improve your financing? How can you reduce your tax bill? How can you use free cash to invest in building the practice or taking more money out of it yourself to give yourself a bigger pay or bigger salary every year? So if we just move on, I've got something to say about financing and cash flow. Um, I just wrote down some things here which I hope everybody will recognise as kind of themes that are going on right now in the industry. Um they happen to everybody. I mean, we have the budget tomorrow, and arguably some of these things will be even worse. Uh come this time tomorrow afternoon. You know, for example, who'd have thought that adding 2% to the national insurance bill would put pressures on the level of employment in this country? You know, that could get worse tomorrow. Um, so I as I say, anything which we can do to free up free cash and help people run businesses has got to be beneficial. Um, so whatever I do is all to do with these five things. Yeah. And as I say, these are all operational costs, margins, cash flow, general business matters. The question is, how can you leverage investment in commercial property to help you with these things? Okay, and if we can move swiftly on, I'll explain a little bit extra. Um, the way you can leverage tax is by accessing underutilized tax reliefs. I mean, you mentioned at the beginning that capital allowance is not a particularly well-known tax relief. Um, it's a very, very simple and very, very benign tax relief. It's just not really well, very well known. Part of the reason being that it's a very specialist area. And if I draw a sort of medical uh analogy, most accountants are like a general practitioner, a doctor general practitioner, um, and they know what they know, um, but they can quite easily get out of their depth, at which point they need a specialist to come in, a consultant or some kind of specialist practitioner who can do things which are outside of their scope. So, what we do is a very specialist area. Very few general practice accountants would understand what we do. Um, by the same token, they wouldn't have the right skills to do what we do. Because my job involves a knowledge of construction, a knowledge of quantity surveying. And for those of you who don't know what quantity surveying is, it's like an accountant but less less interesting. Uh, it's basically a man who counts bricks uh and mortar and calculates the cost of building buildings. Um, so a knowledge of construction, quantity surveying, law, tax, and accountancy is required to be a really good capital ounces specialist. You don't find that combination in that many people. Yeah, it's quite the mixed bag. It is a real mixed bag, quite hard to find people, uh, quite hard to train them, but when you've got them, as you can tell from the figures I put out before, they leverage an awful lot of value for their clients. But the bottom line is that people pay too much tax around their investments in buildings. And as I said at the beginning, uh there are some tax reliefs available to help you address that situation, and me and my team are the people to drag them out for uh for our clients. So moving on to the main event, what are capital allowances? Um, and again, I'm not gonna read everything out. The Treasury and HMRC clearly want to generate tax receipts. It's their main purpose in life, apart from harassing people, is to generate tax reliefs. So for every pound spent in capital expenditure on buildings, there's around 45p in tax take. Um people say that uh HMRC and the Treasury are nice people, you know, given tax reliefs, but in reality, it's good business for them. If we invest in the building sector, it generates a lot of business in the supply chain, generates a lot of other business, generates tax receipts. So one of the things the revenue want to do is encourage people to spend capex on buildings, um, but capital expenditure, um, by the nature of being capital as opposed to revenue expenditure, which is PL or day-to-day expenses, cannot be deducted from taxable profits. The mechanism for getting tax relief on capital expenditure is through things called capital allowances. Okay. Okay. So to get to capital allowances, I can explain what they're a little bit more detail later. I have a very, very simple um set of numbers that show you how capital allowances work in reality. Yeah. This is like accountancy, you know, 101. This is not account. So we want people to break it down and make it really simple. Really simple stuff. So, really, capital allowances are tax relief on commercial assets. Uh, those assets may be buildings, and I have a list now of the kind of things which will qualify for capital allowances tax relief. Nice. Um, the relief is available to anybody who is registered to pay UK tax. So that can be income tax or it can be corporation tax. It's not available to people who pay tax, or the island don't pay UK tax. Um, it's available for any profits which are repatriated back into the UK. So I did a claim last year for a guy who had some properties in New Zealand. Yeah, but because the money was coming back into the UK, he was paying UK tax, he could claim tax relief on some properties in New Zealand. Nice. Yeah, I didn't go to New Zealand to do the survey on the property. That was kind of out of kilter for us, but yeah, it worked. Could have been a tax-deductible trip right there. It could have been a very tax-deductible trip and also a very long trip for me. Um the key thing about Capital House is it's really solid tax planning. It's not, as I call it, a Jimmy Car scheme where you know you end up in the newspapers because you've done something really dodgy and your reputation gets trashed or tarnished. It's something that's um not tax evasion. Uh, for those of you who do any tax planning or have come across tax planning, uh you do need to, um, with tax schemes as they're called, you need to um advise the HMRC in advance that you've created this tax scheme. That doesn't apply here. This is straight out of um national government legislation. And as I say, it's not tax evasion, it's a really simple it's not simple to do. I don't want to give the game away here. It's not simple to do, but it's certainly not risky. Um, a decent accountant, as I say here, can claim capital ounces on capital equipment and loose items. So desks, tables, lamps, probably chairs, these kind of things in your context are easily claimable because they're articles where you normally have a receipt. It's very easy for an accountant to work out the depreciation and also the capital ounces relating to those items. Where it gets trickier is with building work.

Dr James:

Okay.

Chris:

Yeah? Because how do you work out the value of the electrical wiring in a building? How do you work out the value of the plumbing? Now, these are all embedded items in the walls. It's much more difficult to work out and value these kinds of systems than it would be to value a table. Okay. So our specialism using that skill set I mentioned before is to drag out as many capital ounces as possible from two things property purchases and also construction expenditure on uh refurbishment, building, extension, etc., of um commercial properties of which a dental surgery is one. So that's what they are. As I mentioned, everybody should recognise these kind of things, James. You know, these are the kind of things which you would invest on as a dental practice. Yeah. I'm sure you've all either got these or bought these or sold them or used them in the past. Yeah. The ones in red are the ones where we add an awful lot of value. So on furniture and fixtures and building works and fitting out of buildings, um, and in particular on energy efficiency upgrades, things like cars, dental vans can be treated quite easily by an accountant because they're loose items. Yeah.

Dr James:

Yeah. And are they fully tax deductible, these these items here that are aren't outside of red, or is it well, they are fully tax deductible using these things called capital allowances.

Chris:

I see, right. But they're not fully tax deductible in the year when you buy them. For example, if you if you spend several thousand pounds buying a dental chair, that's a piece of capital expenditure. Uh-huh. You cannot just write that several thousand pounds off against your income for one year. Yes. On the basis that it's a long-term asset that you use for maybe five, ten, fifteen years. Understood. Um, and you're not allowed to write off that cost in one year. See, that's interesting, right there.

Dr James:

And that's the kind of I get it's like CapEx and OpEx.

Chris:

OpEx, yeah.

Dr James:

Right. Yeah. So anything that is CapEx, it's capital allowance thing for it, and it works in a slightly different way. Okay, fine. Yeah.

Chris:

It's it's a little bit like depreciation. Capital allowance is a little bit like depreciation. Um, but yeah, you need to split things between CapEx and OpEx. OpEx is an an expense to the business, so that reduces your profit in the year when you incur the OPEX. CapEx is on capital equipment, and there's a different accountancy treatment, if you like, on the tax relief available on Capital Expense Channel.

Dr James:

Nice. I love little factoys like that. Very cool. But anyway, you were you were in full swing there. I sense we were just about to talk about these red things.

Chris:

I was just going to say that uh just to re-in to re-emphasize that our specialism is working on buildings. The things which are in black, a normal accountant should be able to do from you.

Dr James:

Yes.

Chris:

And if I may be cheeky, if your accountant doesn't know how to do the capital allowances for these kind of things, you should get yourself another accountant.

Dr James:

Yeah. Oh, I don't I don't think that's too out there to say. Yeah, I think a lot of people are on board with that. Yeah, absolutely.

Chris:

Um, I know these are very, very uh standard things to to work on. So, in terms of capital allowances, there are three types of tax relief. Um, you have what is called plant and machinery allowances, uh, which are things like electrical systems, wiring systems, plumbing systems, anything which is integrated into the building or embeds in the building, which could include things like kitchens, bathrooms, um, anything fitted, changing rooms, uh, these are the kind of things which are termed plant and machinery. Um, for us in 2025, um a hinge is technically speaking plant and machinery, yeah. But for us, a hinge and a door is not a very sophisticated item. Yeah, but couple ounces go back to the 17th century. Oh wow. So at that time a hinge was you know the pinnacle of top gear of technology.

Dr James:

Yeah, there we go. There we go.

Chris:

And the legislature hasn't changed in all that time. Wow. Um, and I'll give you a case in point. If you're to install a door in a building, um a door may cost something like 300 pounds to purchase and install. Um some of the cost of that door is plant and machinery, and it's probably around £100. And that would be the hinges, locks, locking mechanisms, any door closers. They're all pieces of equipment and machinery. Yeah, they fall into the planter machinery category. The door itself is a structural item, and it falls into a different category of capital allowances called structures and buildings. Yeah. Now, what an accountant does is an accountant looks at a door, and I know this is a bit esoteric, guys, but an accountant looks at a door and sees £300 of quite slow tax relief. Yes, I see £100 of fast tax relief and £200 of slow tax relief. So I can effectively move some of the cost of a door into much more attractive and much faster tax relief because I have the skills to do that, which an accountant cannot. And you may think £100 for a door doesn't make a lot of difference, but if you can imagine having a hotel, for example, where you have 180 bedrooms and three doors in each bedroom, yes, yeah, and the rest, all of a sudden you've got 600 to 800 doors times 100 pounds time, makes a big difference. Absolutely. Yeah, and a lot of the eight and a half, 850 million pounds that I've saved over the years for people has been on locks and doors. Three doors.

Dr James:

Enclothes and mechanisms on doors. There we go. There's a freebie for you guys.

Chris:

A lot of doors, James. Um, anyway, that there are three types of cattle allowances. One is called plant and machinery. Um, as I say, these are kind of moving type items, and the tax relief on those can be used quite quickly. Uh, the other structure and buildings, which is the shell or the fabric of a building. So if anybody buys a uh surgery from or a clinic from a builder, they would normally buy in a fairly rough state in a shell, and then they'd normally have to put the electrics in and fit it out. Um, the shell of a building, which is the foundations, the walls, partitions, roof, doors, windows, uh, they're all called structured and building items. You still get tax relief on them, it's just a bit slower than on planter machinery. Uh, the last, and as you can see, I've I've kind of tried to show a surgery here, so you can see that. That's pretty good. Here we've got various elements of a plan of a surgery. Uh, these are the halls. These are the more interesting things from a tax perspective. And clearly, we have a chair here with some uh lighting equipment. Yes. Yeah. They also qualify for plants and machinery, but they're loose items, which accountants should be able to see themselves. So I would focus on things integral to the building, the building itself. Uh, I can also get involved in what's called land remediation relief. So if you were to buy a building that had, say, asbestos in it, and you wanted to get rid of or encapsulate the asbestos to make the building more safe, there's tax relief from doing that sort of work. Clear, and also if you were to buy, which is unlikely in your world, if you were to buy um, if you were to build a building on a piece of brownfield land, which had either radon or underground structures in it or something like that, then again there's tax relief for doing that kind of work. It's a bit unlikely given your world, but still worth chucking into the mix. Who knows? Okay, so that's what they are. Plant and machinery and structures and buildings allowance, or PMA and SBA, are the big ones in my industry. Um, getting a bit closer to reality then rather than theory, this is a real project. Yeah? Yes. As you can see, this is uh either a Victorian or Edwardian house, um, which was a residential property that somebody wanted to turn into a nice surgery with all of the uh look and feel that you need these days to attract um customers, yes, or guests, or patients. I don't know which is the right word anymore.

Dr James:

Yeah, there's a there's a bit of contention amongst dentists about that one as well, but I think the the the the usual terminology is just patients stick to that, yeah.

Chris:

Okay, so this is a kind of before and after situation. That's obviously not the same room, um that's the inside of the building, but this is the kind of project which somebody would go and uh pay for. Yeah. This kind of project that you guys may see. So we've got a kind of before and after situation here. Um in this case, these are the kind of costs which were incurred. So as you can see, I guess these are real figures, so um not things I've made up, these are actual costs that somebody incurred on this building.

Dr James:

And maybe if perhaps you're gonna do this, and some people will be listening to this on the podcast, maybe we can read some of these either as well, perhaps you're coming on to it.

Chris:

Sure.

Dr James:

Yeah.

Chris:

So of well, there's 200, 250, 325, uh, there's about 500,000 pounds of expenditure here, which I guess, from my experience, is probably uh um medium to slightly bigger than medium expenditure on a refurbishment. Yeah. Yeah. I see refurbishments down to well, I see them down to five fifty grand, for example, that that tends to be more like a cosmetic touch-up of a building. Understood. Um, I see a lot between about 200 and 800,000 pounds. This is kind of in the middle. And for that 500,000, there's about 180, which was on the fabric of the building, which, as I said, qualifies for this kind of structures and buildings uh allowance. About 20,000 pounds on partitions. Yes. Yeah. And then we get into more interesting areas. Um, clearly, you have lighting and electrical systems. There's 50,000 pounds spent on lighting and systems here. Fire alarms, security and safety, 25,000 pounds. Air conditioning ventilation. Uh, this is general air conditioning ventilation. It's not the kind of air conditioning ventilation, the specialist air conditioning ventilation you would have around your chair, for example. Yes. Just generally getting the right um environment for your patients to feel comfortable being in the clinic. About £30,000 on plumbing, hot and cold water supply, £90,000 on kitchens, bathrooms, um, changing areas, um, £25,000 on the reception area. Then on top of that, there was £30,000 spent on the architect, um, the project manager. So, all in all, there's £500,000 of expenditure here. And the good news is there's almost £500,000 of tax relief available. No. Yes. About 95 to 97% of this £500,000 is available if your claim for capital ounces is done the right way. Wow. So there's a small amount of it that's lost. Yes. Okay, um that's just how it is. I could bore you forever on what it's lost on, but these are really small amounts of money. So let's say there's £500,000 of expenditure here and around £490,000 of tax relief, which falls into those two buckets, if you like. I see. And if I go into a bit more detail, um, this is again a real project, it's not the same project. This is a project I did uh a couple of weeks ago. Um, £471,000 of cost in building work. Um, in this case, the planter machinery was worth £264,000, and um the structure and buildings were £206. So you can see there's only a thousand pounds left, lost if you like, out of £471, which is less than a quarter of one percent. So 99.4% qualified here. So this generated £470,000 of tax relief for my client. Now my client was an unincorporated dentist, he was sole practitioner. Yes. Yeah, which I think is perhaps getting a bit more unusual these days.

Dr James:

Soul, yeah, soul trader, was he NHS?

Chris:

Uh bit of both.

Dr James:

Bit of both, yeah. It's interesting. And okay, well, anyway, not I'm not I'm not gonna steal the show. I've got a lot of questions on that front as well, because you're that is that is quite unusual. But anyway, yes.

Chris:

And so um rather than talk about HIN, what I've done here is I've illustrated the likely benefit to people given different setups. So if you pay corporation tax, yes, the lowest rate is 19%, and currently, maybe until tomorrow, the highest rate is 25%.

Dr James:

Yeah, and just to qualify that actually, we're recording this podcast on the 25th of November 2025. So this could all change tomorrow, but if anything, it's probably gonna get worse. I think it will all change tomorrow. Yeah. And it's and it's not gonna get better. It's not gonna be absolutely so we should enjoy it while we can, James.

Chris:

It's gonna be more. These are the good tax the good old days. So I've just done some illustrations here. At at the low end, um the tax benefit, this is the cat the cash saved, would be around um 89,000 pounds. So in this case, you spend 471, you get 89,000 pounds of hour saved. Um the difference between plant and machinery allowances, machinery allowances in one year. So the cash flow can be experienced in one year alone, which is really attractive. So there's £50,000 of cash flow available. And if you think if you're if you're spending 471, this is you know, over 10% of your investment can come back to you in. Year one. This kind of makes investments a lot more palatable, a lot more attractive. SBAs are, as I said before, a slow form of tax relief. So they write down, which is the accountancy term, you can use them at 3% a year.

Dr James:

Nice. So a big part of your wizardry is converting the SBAs to PMAs where possible.

Chris:

Right. And advising people how to use their PMAs as fast as possible.

Dr James:

Yes, yes, yes, yes, yes, yes, yes.

Chris:

So it's kind of how do you move from the slow lane into the fast lane? Yeah, and how do you get as much benefit from being in the fast lane as possible by taking the right route? So that's what we do. And these are just some examples. At the low end of corporation tax, you can see the figures here. Um at the top end, the allowances are the same. The benefit is obviously bigger because you'd be paying more tax at a higher rate. My client was a 45% income taxpayer. Yeah? So you can see the numbers here yourself. He had a check for £118,000 land on his desk from HMRC. Wow. Which again, out of a £470,000 spend, is around what's that, around 20, 25%. So you've got 25% of the money back in cash. Now again, that's something I can advise people on. Um there are certain circumstances where you can um take the tax relief back a year, and if you can take the tax relief back a year and you've paid your tax, then you get a check from the revenue that gives you the money back. So he was really happy, as you can imagine.

Dr James:

So, in other words, even if you've already spent the money because the project was like a year ago, you can still backtrack these claims.

Chris:

You can still backtrack it.

Dr James:

Yeah.

Chris:

You can still backtrack it. And I don't know, he he bought me a beer. So I think it was a bit kind of cheap. I I I got him under 18k, he bought me a beer. He was from Yorkshire though, so I see.

Dr James:

That's how you know someone really likes you when they're from Yorkshire, right there. You got a beer. Two beers and we'd have got married, I think.

Chris:

Anyway, there's some examples for the kind of figures that come back. Like I was saying, the figures are substantial. Yes. The most important thing is they're free catch-up and they make investments look a lot more attractive. Um, now, in terms of how it works, this is as technical as it gets. Um, this is an example of a sort of um reasonably large practice where the turnover of the practice is 1.2 million. This is across NHS and private and everything they do, right? Um, I've assumed that there's a 30% trading profit, um, which I think is again reasonable. Um, and that there's £50,000 of depreciation um because of spending on the building, spending on equipment, spending on cars and other things which depreciate. Um, your taxable profit is defined as your trading profit plus depreciation. So despite having a 360k trading profit here, when you add back the depreciation, it becomes 410,000 pounds and that's the amount that you have to pay your tax on. Yeah. So a lot of people get confused between trading profit and taxable profit. Uh if you're in a if you were say a very capital-intensive building uh business like a smelter or a big manufacturing plant, um, your depreciation would be huge.

Dr James:

Yes.

Chris:

You know, you may have £100 million worth of equipment, yes, and you're gonna be having £10 million of depreciation charge every year. So that may reduce your profits, but when you add it back, it kind of bumps them right up again. Understood. Now, originally this business would have paid about £102,000 of corporation tax at £25, because at this level of trading profits, they're gonna be paying 25% tax. So the capital allowances available in that year were £100,000 because of how I helped this person, which reduced their £410,000 of taxable profits into £310, which reduced their tax bill from £102,000 to £77,500. So, you know, the tax saving was around £25,000. Nice. So my services helped things move from slow lane to fast lane and helped reduce the tax bill, and the benefit in that year was £25,000 in cash.

Dr James:

Amazing. So in other words, you can also reduce their tax bills going forwards as well, prospectively. Because is it fair to say that a lot of these things are not being correctly labelled as the SBBA? Is it what's the SBA SBA?

Chris:

Yeah. Yeah, there's a lot of incorrect labelling going on here. Right, I see. I've got some horror stories about things I've picked up from accountants where they've done some things which you'd have to think twice about and manage to correct. Understood. But yeah, I mean ultimately it's a simple, it's a simple proposition. Excuse me. If you spend money on your building, I can help you generate that, I can help you reduce your tax bill and increase your cash flow by some quite significant amount of money. Um so just picking up what you're saying, James, um, the scenarios which I come across, there's some really simple scenarios. Um, if you were to buy, like my client did in the uh diagram in the pictures I showed you, if you were to buy a residential property and convert it for commercial purposes, then um there's a big capital allowances uh claim available to you. Reason being that capital allowances only apply to commercial property, and a residential property is not a commercial property, so anything embedded in that residential property and was unable to be claimed against by the seller, and so automatically transfers to the buyer. So you buy a residential property, you get a nice bump in tax saving. Okay, that's worth knowing. Um the other thing that's worth knowing is if you buy a property from a non-taxpaying entity, which would be NHS, DWP, public sector, charity, pension fund, or a CIP. Yes. Again, these are not taxpaying entities, they're not allowed to claim capital allowances because they don't pay tax. So whenever you buy something from a non-paying taxpaying business, normally between 10 and 30% of the price you pay becomes available to you in capital allowances, which again is a substantial figure. I mean, I I had a client uh about 15 months ago, they bought a big garage from the um Department of Work and Pensions, and there was a million pounds of tax relief which they could claim from buying that building. Yeah, they paid five million pounds to rent, but 20% of that five million pounds they got back. Yes, which obviously made a big difference to spending five million pounds on a building. Um the last thing that's really worth noting is if you buy a property from a developer or a builder, capital allowances are only available on investments. Yeah, whether it's a leasehold investment or a freehold investment, they're only available on uh investments. And because a developer or builder holds a property as an item for sale, trading stock, they're not allowed to claim capital allowances. So if you buy a ready-made building from Builder, there's normally around 25 to 30 percent of the price you pay for that building available to you as tax relief. So it's not just refurbishments, it's not just construction, it's also buying things. Um, there are some more complex scenarios as well, um, which is to do with buying properties, where my guys have to do a form of due diligence to kind of work out whether a claim is available to a client. Um gets a bit technical, probably worth just saying that um if anybody you come across um has bought a building over the years, it's worth running it by somebody like me just to make sure that there are no angles left to claim capital allowances. Okay, so it's not just things that are happening now, uh it can be properties you're buying now, it can be a property you bought in the last two years, it can be a property with different kinds of time uh stamps on it, and the history of the property is very, very important to establish the claim. But I was talking to an accountant today, um, his specialism is property, and he agreed with me that the most beneficial form of tax relief from investment in commercial property is capital allowances. These are stonking big figures, you know. You're talking about 10, up to 65% of the um money you invest on a commercial property. In fact, up to 95%, as you can see, can be claimed back in tax relief. So we're not talking about one or two percent, we're talking about substantial figures that are game changers, if you like, in terms of making investments. There's some different scenarios um with construction claims, which are things like refurbishments, etc., um they can be made by landlords and tenants, so owners and occupiers. You can be a leaseholder and make a capital ounces plane um on the expenditure for fitting out a building. Um the expenditure follows the person who spends the money. So the only time where um you may run into a bit of a sticky patch is if you were to get an NHS grant for some of the work you did on your property. If you were to get an NHS grant, it would just mean that you couldn't claim the allowances on the grant. But again, I could advise you on how best to apply for and use the money from the grant to maximize the tax relief on the money you spend out of your own pocket. It's a bit of interesting, interesting uh workaround, so to speak. Yeah. Um, so going back to accountants, one of the big problems that accountants have um is firstly, they cannot value a second-hand building. You need to be a surveyor to value the assets inside a second-hand building. So accountants just can't do that. There's no competition between me and accountants, they just can't do it. Um, accountants sometimes can look at construction expenditure. Um one of the big problems they have is that they're not specialists. That's the first thing. And the second is quite often the labour costs of construction work, which are eligible for capital allowances, are not very well described by the construction company you're working with. So, for example, if you were to work on, say, that project I showed you, that was a project which lasted about six months. Yeah. That refurbishment lasted about six months to spend the £471,000. Um there was an architect, there was a building company, the building company issued an invoice every month called an interim certificate, which they expect to be paid for. Um, and that interim certificate said to building work. £100,000. So, you know, I can work out of that £100,000 what was on doors and windows and ceilings and electrical systems. My cow and can't do that. They could only work it out if every single piece of expenditure was itemized. So it would say two putting in one plug on the left-hand side of a room, 30 quid. They need to go into that level of granularity to be able to do it. I don't. That's a USP for what me and my like do. Interesting. Make sense? Make sense. Um, so other thing to be aware of with spending your own money on buildings is you can go as far back as you like. There's no time limit on how far you can go back and review um capital expenditure on building work on a building. The only considerations I get are that if you spent money, say, 20 years ago, um, the cost 20 years ago is much lower than it would be right now. Okay. Because obviously the cost of building work has gone up massively over the last 20 years. Um, the other issue would be that in the last 20 years, you may have replaced the things which you put in 20 years ago. And if you destroy the things or you take out the things which you spend money on, then clearly HMRC is not going to let you claim on something which no longer exists. So the act of replacing something with something else kind of destroys the capital ounces claim. But anyway, you know, it's a bit of a summary. Massive amounts of tax reef available for capital investments on commercial property falls into several categories. Uh, we're experts at dragging it out, uh, maximising the size of claims, and going into areas where your accountant cannot go because they don't have the skills or the PI cover to do this kind of work, and quite often um stay away from it because it's a risky area for them. And obviously, being accountants, they can't do things which are outside of their skill set, otherwise, they break their um professional body regulations and get in a lot of trouble. So that's it. There we are. That's me. Quick bristle step through through capital allowances. I said we're a growing company, a very strong team, uh, now got three locations, and uh continue to grow very, very fast. Just want to be here to try and save people money and help them pay less tax.

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Dr. James Martin

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