Dr James, 0s:

Welcome everybody to this webinar where we are doing part number two of the extremely, extremely extremely popular how UK general principles can become as tax efficient as possible. And this is topical because of course we're coming up to the end of financial year deadline, which is April the 6th. So a lot of this stuff when we implement it over the next two weeks, well, it'll be active for this tax year. That's not to say that we can't ever do it. There's always going to be some value in learning these sorts of things, but certainly the sooner we can implement it, the sooner we can benefit from it. Well, let's just say there is uh there's there's there's there's there's it's it's it's it's encouraging or there's an incentive there uh is what I'm getting at. This webinar is aimed primarily at dental principles. You can use a lot of the stuff that we're talking about in your dental practice. However, if you are also planning on becoming a principal at some point, well, that of course applies to you. As ever, you can claim your CPD for this episode within the official dentists who invest Smart Money Members Club. Smart Money Members Club also includes multiple mini courses and webinar series on finance for dentists, including how to become as tax efficient as possible, as well as understanding investing. All of this content counts as verifiable CPD, and you can download your certificates there and then upon completion of each lesson. In addition to this, we also include a whopping 10% discount on your dental indemnity and a 5% discount on lab bills for dental principals, amongst other perks and discounts for members. Please use the link in the description to claim your verifiable CPD for this episode. I'm very pleased to introduce or reintroduce, should I say, Mr. Chris Lonergan this evening. Chris, how are you?

Chris, 1m 36s:

How are you?

Dr James, 1m 39s:

I'm good, mate. I'm good, mate. I'm I'm doing well. A lot of fun stuff uh and new stuff at Dennis and Vest, so it's definitely keeping me busy, uh, which is which is fun. I can't quite believe it's the end of March already, but here we are. But Chris, maybe what it could be good to do, just to kick things off, because we want to get down to business SAP really uh and start talking about the matter at hand. Uh maybe what it could be good to do is a little bit of a reintroduction as to yourself for the benefit of the audience.

Chris, 2m 4s:

No problem, James. Before we start, can I just say it's a bit of a shame we're not here together in uh in purpose, in person.

Dr James, 2m 14s:

Um we've got we've got the Victoria line to thank for that this evening, but we we thought on our feet. We thought on our feet, didn't we? Because we we're both we're both able to still have the interview. I've just found somewhere that we could uh we could conduct this interview, we find somewhere on the fly, but anyway, it is what it is.

Chris, 2m 31s:

It is what it is, and uh obviously if we have any tech issues as we go along, James, and we need to recommit another time, then that's fine by me, right? But we'll just crack on, and uh this is like round two of a heavyweight boxing match between you and me, mate.

Dr James, 2m 46s:

Uh you make it sound arduous, it was it is it was fun, Chris. It was fun, and it will be fun. It will be fun.

Chris, 2m 55s:

But the most important thing, James, is that I think um from the the last webinar, there are 15 or 20 people that we're still talking to, you and me, who are looking to get value out of the conversation that we had. So it hasn't just been like a theoretical academic exercise, we're actually delivering some value to some of your your guys and to people who've now become clients and uh friends of mine too. So that's the most important thing I would say. Um I have some slides uh which we can run through just to give a little bit of a frame to this webinar. Um but very, very briefly, I'm a guy who spent about 30 years in construction, engineering, and tax and accountancy. Uh my interest in life is helping people pay less tax, be very blunt about it, whether it's income tax or corporation tax. My role in life is to help people pay less tax legally. Uh, my big interest is in property. And as you said earlier, um a dental practice clearly needs a property from which to operate, and a group will need more than one premises, and it's a big investment to um say fit out or buy, um, particularly if you were to go into a squat, for example, and have to completely fit out the squat from scratch. It can cost a lot of money. Um, and again, my interest in working with dentists, dental principals, and other people is to just make sure they are using tax as a weapon, if you like, to improve the cash flow in the business, uh, reduce the cost of a capital project, and also reduce their tax bill. Now, have you gone, James?

Dr James, 4m 54s:

No, so that's no still here, it's just the camera going in and out a little bit, but we're good to go.

Chris, 4m 58s:

That's that's what it's all about. You know, we had some good banter last time, uh bit of QA. Um, I have got uh fair amount of technical ability, but I find these webinars work best when it's just a chat. We'll go through some examples, talk about some of the issues which are facing uh dentists at the moment, uh, and how we might be able to help them. And then obviously, very happy to field any questions from you or from anybody in the group, uh, either live or afterwards.

Dr James, 5m 29s:

Sure. And just a little bit of housekeeping before we jump into that presentation. As I was saying earlier, guys, this uh webinar is all about uh us sharing and benefiting from Chris's knowledge and experience in these areas that we're talking about. What Chris was talking about just a second ago. There will be some CPD available for this webinar, 60 minutes to be precise, that's for smart money members, club members. Uh details in that to be announced at the end of the webinar. And as I was saying just a second ago, as Chris was saying just a second ago, there will be the opportunity to ask questions, specific questions to your staff and your tax circumstances and your dental practice. All we ask is that we hold all questions to right at the end of the webinar. If you want, you can pop them in the chat in the meantime, and we will get to them whenever the webinar concludes or whenever Chris is wrapping up the presentation part of the webinar. Chris, over to you. Okay.

Chris, 6m 19s:

Now you have to help me a bit here, James. Is this is this where I share my screen?

Dr James, 6m 23s:

Yeah, go for it. So, yeah, if you want to jump straight into your presentation, that sounds good. So basically, if you're happy, there's a little button at the bottom that says share screen. So if you hit that, yeah, something's happening.

Chris, 6m 35s:

So can you tell me when you can see it okay yourself?

Dr James, 6m 37s:

We're in. We're in, yeah. Looks good.

Chris, 6m 40s:

We're in. Cool. Thank you very much, James. And um, what I didn't say earlier, and I should have done, is really like to thank you again for organizing this and giving us the chance to speak to some of the people in your network and in your group, right? So that's really, really very, very good of you. Um so I want to talk today about using taxation to your advantage within a dental practice, either to improve your cash flow, in turn improve the return on investment you have as a practitioner, um, and to save your tax bill, reduce your tax liability and cut down the amount of money you pay to the revenue in terms of tax. Now I've got about five or six slides only, James, and a couple of examples from recent work that we've done with dentists, just to place everything into context. Okay, so if that works for you, mate, I'll just crack on. Excellent. Um and it's nice to meet everybody. Um, it'd be good to get some questions at the end just to make sure that everybody's still there and listening to what I'm saying. So if I move it down. Okay, I'm sorry, James. This is uh a different setup to normal, so it may take me two, it may take me a couple of goes to get it working properly. Um I'm Chris, you you know James. It's a very, very short slide. Uh this is a I'm calling this 2.0 because we did a 1.0, worked really well. Uh, and this is going to be even better. So with that in mind, I'll tell you a little bit about my company. Uh we're called Bonham and Brooke. Um, not planning to read all of these slides out to you because everybody can read themselves. Just pick out some some key factors. Uh so we're a tax consultancy, uh, we're based in London, we're growing really fast. When I last spoke to James, we had 75 people in the company. Uh, that's three and a half months ago. We now have 95 people. So we've started another 20 people since last time we spoke, James. Uh in fact, I think we started five people uh this month. So we're on a real upswing. Why we're on an upswing? Because we're very good at helping people um reduce their tax bills, improve their cash flow, and uh really, really transform their businesses from a financial perspective. Um as I mentioned before, I work a lot in the property sector. Property taxation is a huge, huge market. It's not particularly well understood. And I have a bunch of specialist people in the company who are really expert at maximizing the tax leaf available from investment in commercial property. And when we're talking about investments in commercial property, what we're really saying is that if you buy a property, if you build a property, if you convert, renovate, extend, or fit out a property, then you incur a substantial amount of capital expenditure, and there is tax relief available from incurring that capital expenditure. Um the opportunity and uh I think the main opportunity uh is that what we see is that tax is often an afterthought when someone's done something, and I'll show you in a few minutes' time why tax ought to be considered right at the beginning of making an investment rather than afterwards as a way of saving money. Um, and of course, we're good friends with you, James. They've been very supportive both ways, and so we're a partner of yours, and uh it's great to work with you. Um it's probably a bit syrupy, but um there we are. We're just telling the truth. It's it's it's great to work with you. So we're expanding, we're good at what we do, we help people save money, we improve cash flow, we help with financing indirectly, um, and we enjoy working with dentists. So rather than diving straight into capital allowances, which is the main topic of my conversation and tax relief, I wanted to start off just by kind of reminding everybody what's going on at the moment when you're running a practice. Um, and these seem to me to be the five key areas that when I talk to dentists, they have um a big concern or a big interest. Where I can help is with financing and cash flow and tax and investment. The other areas are outside of my scope, um, but I figure that helping in two out of five areas, which are really key, is a useful thing to be able to do, James. Um, if we're talking about financing and cash flow, again, these are the kind of things which I guess everybody on the call would recognize. Uh costs are going up, margins are being squeezed, uh cash flow is uh can be very, very problematic. And obviously, capital investments in chairs and machines, um, maybe IT systems is significant, particularly when you're setting up a practice, and that can type a lot of your cash, which either means you have to borrow money or has another impact on the business. Maybe you can't extract the profits that you'd like to from the business to uh fuel yourself and your family. Clearly, there's a tax burden, um, and it's either a corporation tax version if you've limited, or income tax if you're a sole practitioner or a partnership. And again, that's a big drain on your finances. The last thing which we're talking to dentists a lot about at the moment is access to finance. So finance is becoming more expensive, and my view is that anything which helps you improve your ability to borrow money and borrow money cheaply, and then to maximize your cash flow as much as possible is going to be beneficial when you're either setting up, expanding, or running a practice. Other last point before I dive into something even more practical is that there are lots of underutilised tax reliefs that many, many people are not aware of. And in fact, capital allowances is one of those tax reliefs that's not particularly well known, and it ends up with people paying far too much tax. So, like I said at the beginning, my role in life is to educate people to understand that there are tax reliefs, how they apply in the dental sector, and then to help them go and grab them to improve the financial performance of their uh of their businesses or them personally. So the matter at hand are these things called capital allowances. Um I'm sure some people will have heard them already, but as a quick run through, uh HMRC encourages capital expenditure, particularly on property. Uh, main reason being that any every pound spent on commercial property generates a significant amount of spend in the supply chain in the commercial property market and ultimately ends up generating a lot of tax for HMRC. So there's good business sense in HMRC encouraging people to uh improve the kind of estate of properties that we have in this in this in this country. Um however, tax relief is not available on capital expenditure in the same sense as it would be, say, on buying some services or buying some consumables, tax relief on capital expenditure is available by way of what are called capital allowances. Uh we call them CAs. So capital allowances provide tax relief relating to the capital expenditure on commercial assets, so that's property and also equipment. Um it's a very, very complex topic, capital allowances. The legislation which it refers back to is called the Capital Allowances Act 2001, and it gets amended on a regular basis. Um HMRC likes to change the rules every year or every two years just to keep everybody on their toes. So there's a requirement to keep up to date with legislation to know how to best help people. Um the tax relief is available for anybody who pays tax. People who are who don't qualify for the relief would be charities or pension funds or anybody who doesn't pay tax. So, for example, the public sector doesn't pay tax, so any capital investment in the public sector doesn't qualify for capital allowances. Um people say to me, is tax relief through capital allowances something that's a bit risky? Uh, the answer is no. It's not what you might call a Jimmy Carr scheme where you have to go and apologize to people 18 months later for getting involved in some sort of tax wheeze. Um, this is very, very solid tax planning. It's actually encouraged by HMRC, um, but you still need to get it right, otherwise um you don't maximize your claim, or there is potential for them unpicking it through an inquiry. So we specialize in capital allowances to do with property purchases and property construction. And to be good at this, uh you need to have a blend of expertise, which would be uh legal expertise to do with contracts, uh, construction expertise, quantity surveying expertise to do with valuing buildings, accountancy expertise, and tax expertise. Um, and if you had on top of that uh a kind of expertise of getting on with people, it's quite a multidimensional type area that we work in. Um it's a specialist type financial service, it's allied to some of the work that accountants do. So frequently we partner with accounting firms to do the specialist work, which they have maybe started off by doing someone's sets of accounts. But should hasten to add that very few accountants can do what we do. And in fact, um I'm currently unpicking a capital allowances claim that's been done by a dental accountant who I shall not name for obvious reasons, who's completely messed it up, and now their client is potentially looking at an inquiry from HMRC for a massive overclaim through lack of knowledge about actually what works in capital allowances. So bit of a negative comment, but we do see examples where people try and help to the best of their ability but stray out of their sort of comfort zone and end up needing some rescue from me.

Dr James, 17m 55s:

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Chris, 19m 57s:

But these are the kind of areas where you would normally incur capital expenditure in a dental practice. And the ones I've highlighted in red are the ones where we add a lot of value. Um clinical equipment and diagnostics and pieces of what I would call loose equipment or fixtures in a building are very, very easy to claim the tax relief on. It's really the building works where you require lots and lots of specialist expertise to maximize the value of the claim. And you can see the kind of areas where we add a lot of value. Um in terms of the tax relief available in a building, there's effectively three sorts of tax relief which might apply to a dental practice and in fact have applied to dental practices I've worked with in the past. Um there are what are called structures and buildings allowances that are to do with the fabric of a building. So if you were to build the shell of a building from scratch, uh you would put up the foundations, the walls, the roof, uh, and then that would be the shell of a building. Then you might fit it out with floors, ceilings, partitions. And this is again the fabric and the shell of a building. Uh that investment qualifies for something called structures and buildings allowance. If you then look at the equipment you put into a dental surgery, which should be chairs, lamps, desks, tables, um, these are things which are pieces of loose equipment. Uh, there's capital ounces available from them, but generally an accountant would know what to do with them. Um, there's also items which are, if you like, built into the building or buried in the building. So we're talking about electrics, plumbing, heating and ventilation, solar equipment, any fitted items, kitchens, toilets, bathrooms, reception areas, changing areas, signage, car. Lighting, these are all areas where there's massive tax relief available. But again, you need to know what you're doing to maximize the claim available for a dentist or in fact for anybody. And the last thing which is less relevant in the dental world is something called land remediation relief, which is if you were to buy a piece of land and build something on it and clean it up, there'd be tax relief available from the cleaning up. Probably more likely if you were to buy a big old Victorian building and it had asbestos in it for some reason, and you either remove the asbestos or encapsulated the asbestos to make it fit for purpose for the 21st century, then there's tax relief available specifically for treating that kind of contaminant in the building. That encourages people, as I say, to improve the quality of the building and the stock of the building. So there are different sorts of tax relief available. And again, you have to know which things qualify for which sort of tax relief, and then be able to maximize the value for one of my clients. Here's an example of a project to put things into context, James. Again, this is a secondhand property. It's uh either an Edwardian or Victorian type property somewhere up north. Let's say it's in Leeds, hypothetically. So somebody's bought a semi-detached house, which they're planning to convert into the surgery on the right hand side, um, engaged an architect to draw the plans up, um, engaged a builder to do the building, engaged a designer and um a decorator to do the decorating, brought the equipment, and I think three to four months later, there was a fully functioning dental practice. Now, all that expenditure qualifies for quite significant tax relief. And if I place this project into context, the actual conversion of the house into something which was much more like a surgery in terms of the walls, ceilings, and floors was about £180,000. The partitions about £20,000. So around £200,000 was spent on putting this property into the right kind of configuration to be a surgery. Um, in fact, we're just looking at one in West London right now where the total expenditure is about £750. So this is a bit less than £750, but these days, um, say to build a squat from scratch could easily be half a million pounds, um, maybe up to a million pounds, depending on the size of the property and the level of fit out specification that you want to work to. Again, you can see that this is this is typical, James, that there's maybe £50,000 of lighting and electrical systems, £25,000 of fire alarms, £50,000 of air con, plumbing, fitted work. So, in total, there's a significant spend here, and pretty much all that spend qualifies for tax relief. Uh, here's a real example from a practice that I just worked with up in Leeds. Uh, it this was uh two different uh rooms. Um £471,000 spent across the two rooms to really bring them up to a different spec. Of that £471, there was about £1,000 which didn't qualify for tax relief. And that was because they had to do a BAT survey, okay, and BAT surveys don't qualify for capital ounces tax relief. But we actually found £470,000 of tax relief in this expenditure, which split into those two categories, and those two categories are really important, James, because the ones called plant and machinery allowances can be used in an accelerated way to reduce your tax bill and improve your cash flow. Whereas the ones called structures and buildings allowances are much, much slower tax relief, and you can use them at 3% a year. So it takes 33 and a third years to use up all those allowances. Um, consequently, plant and machinery allowances are the things which really bring massive value very, very quickly in terms of cash flow and tax reduction to a dentist. And as you can see, of this 471, more than 50% was available to uh Simon, as this dentist is called, um to reduce his tax bill. In fact, in Simon's case, he had carried out the work a year ago, so he'd paid for it and was making quite significant profits as a dentist. Uh so working with his accountant, we put that tax relief into a previous tax year for him, and it actually ended up generating him a very significant tax refund from HMRC. So I've taken Simon's project here and given some examples um based on the figures that I showed you on the last slide, uh the benefit from the claim um if you were a corporation taxpayer, would vary between £50,000 and £66,000. Uh Simon, as it happened, for some reason was an unincorporated business and operating as a sole practitioner. So he was actually on 45% income tax rate and he received a check for £118,000 from HMRC. Now bearing in mind he'd spent about £471, £118,119 is a massive, massive reduction effectively in the cost of carrying out this works. Um his comment to me was if I'd known at the beginning I was going to get £119,000 of tax back from doing this work, um, I might have borrowed less money. I might have spent on rather better equipment, which would have given my practice an even better look and feel. And I would have really been able to work out what the proper return was on my investment in this building work by taking everything into account. It was a fantastic um sort of bonus to have for him afterwards, because I'm not sure anybody's going to walk away from getting £119,000 of cash back from HMRC. Um but truly, he really would he's really said that if he was to do this again, uh he would like to know what he was likely to get in future at the beginning to help him with his decision making about how to fund and what specification to use on his surgery work. So as you can see from this, um the figures are quite substantial, James. And the tax relief available from this kind of investment is very, very significant and really should be taken into consideration if you're going to make any investments.

Dr James, 29m 57s:

I think uh one interesting thing to mention as well, Chris. If I if I may just jump in at this point, I know in this example that this was uh well the taxes already paid, you know, it was in with even, but it was in it was within it was rather recent, it was within the last 12 months. You may have mentioned this tonight, and apologies if I didn't hear you say this, but there is no uh they call in legal terms a statute of limitations, right? You know what I mean? There's no there's no limit in terms of when you can claim these back, providing they were unclaimed in the first place, right? Even if you bought the building from someone else.

Chris, 30m 32s:

Absolutely right, and you're just you've jumped ahead of three slides, James.

Dr James, 30m 36s:

So I'll beg your pardon of all the voices. I wasn't I wasn't sure you were gonna bring it up. It just it just caught my ear last time. It was interesting.

Chris, 30m 44s:

I was gonna test you later, so you've actually just uh so you can adjust there. All right. Um again, I I've got three or four more slides, then we can take some some questions, James. Um, I thought people on the call might be interested to understand how the tax savings work. Um in this case, this is um these are accurate figures from the the guy I worked with. Uh, I think he's got two dental practices, so the turnover from his practice is about 1.2 million, which I understand is pretty good. Um, and of that he was making about 30% trading profit. Um but he also was within his trading profit um able to expense £50,000 in terms of depreciation. So his true profit is actually £410,000 of that £1.2 million. Uh if you were a corporation taxpayer, uh then your tax bill would be about £102,000. Um, but using again an example for capital allowances, it's typical that you might get £100,000 of capital allowances back. So the capital allowances actually are a bit like depreciation. Uh in America they're called tax depreciation. So your tax due is based on what's called your taxable profit. The capital allowances then reduce your taxable profit, and that reduces the tax you have to pay. So, in this simple example, someone has saved £25,000. I can't really use Simon's proper figures here, James, because they're confidential. Um, but I can use an example that shows, again, this is a very, very significant financial benefit for someone who actually can make a claim. Um, going on to what you were saying, James, there are different scenarios under which you can make a claim for tax relief relating to property. Uh, very simple scenarios would be if you were buying a residential property for commercial proper for commercial purposes. So if you were to buy a semi or a detached house, like one of my clients has done in Glasgow to convert into a surgery, then that can free up the capital allowances buried in that property. And the reason it frees it up is purely because uh residential property is not commercial, therefore the owner of a residential property cannot claim capital allowances, but when there's a change of use agreed through planning, it unlocks normally about 25% of the price of the property as tax relief. The same thing would be true if you were buying a property from a non-taxpaying body, public sector, charity, SIP, pension funds, because again, they failed the test of having to pay tax, and therefore buying the property unlocks normally again about 25% of the purchase price of a property. And the last scenario would be um if you were to buy a property from a developer or a builder, then to qualify for capital allowances, you need to hold a property as an asset, and a builder would normally hold a property as trading stock. So, again, a develop a builder or a developer is disqualified from making capital allowances claims, therefore, the capital allowances transfer onto the person who buys the property from the builder or developer. So there are scenarios that we see quite a lot with dentists, James. Um there are other scenarios as well, but going on to what you were saying, you're absolutely right. If you're looking at construction type work, um, fitting out, extending, building, converting, renovating, there is no statute of limitations or no time limit on how far you can go back to analyze that work to look for unclaimed capital allowances, which is exactly what you were saying before. There is no statute of limitations. Um I would say, however, that anything that's done more than say 10 or 15 years ago may well have been redone, James. And so um you'd be able to count the most recent capital work, but the work done like 20 years ago, for example, effectively would have been destroyed by the new work, and HMRC won't let you claim twice. But anyway, yes, there is no time limit for going back to look at construction expenditure, and we spend a lot of our time uh trying to, if you like, value the assets in a building which have been constructed quite a long time ago. And that really is everything. And my summary is that there's massive tax relief available from investments in commercial property. Uh, dentists are one of the groups of people in the country who invest hugely in commercial property um to run their practices, and then increasingly to provide the look and feel and the customer experience, if you like, that makes them an attractive practice. Um the tax saving is very, very significant. The cash flow impact is very, very significant. If you do an evaluation before you start a project, it can help with the financing and it can help you maximize the return on investment. Um, you need special people to be able to maximize these claims or do these assessments with a combination of skills that are quite unusual to find in one person. And my team, which is across the country, is very good at doing this work. Um, we partner with you, we provide a good service, um, and we're very, very keen to talk to people to see if we can help them unlock some of this potential tax relief and cash savings in their property. So that's it for me, James. I can't hear you.

Dr James, 36m 59s:

Uh can you hear me now?

Chris, 37m 1s:

Yes, I can.

Dr James, 37m 2s:

Yeah. I was just saying, thanks for that, super valuable. And yeah, it was definitely eye-opening, I guess, whenever when you and I initially started talking, just how much of a untapped, I guess, potential here there is. And obviously, we just need to ensure that it's done properly, of course, um, by someone who actually has expertise in this area, but there is, I guess, an opportunity on the table, I think it's fair to say, uh, for dental practices that are out there. The the the thing that really, just as you were saying a second ago, uh, the thing that really kind of caught my eye, or one of the things that caught my eye, was that you can't, it can go back indefinitely, like as it can be claimed even if it's like 30 years ago or something along those lines. And chances are, and I wanted to ask you on that, actually, in your experience out of the dental practices that you've worked with, how many times is this stuff just like totally untapped where they just haven't been claimed at all? Or uh, you know, capital allowances just weren't even a thing that have been mentioned to a particular dentist uh via their accountant or or whatever. Uh I guess I'd like to know that. And then follow-up, slight follow-up question. What proportion of the time have they been done, but they could capital allowances have been filed for, but they could have been done much better? I'm interested to know the split on that one. Is it is it is it rare that they're done to a very high standard? Is kind of what I'm getting at.

Chris, 38m 28s:

Two questions there that I will unpack, as people now say. Um first question: I think that maybe the 2080 rule applies with dentists, James. That's okay.

Dr James, 38m 42s:

I mean, I'm glad I asked this question. This is interesting. Yeah, knowledge. Okay, Pareto's law, Pareto's law, idiot.

Chris, 38m 50s:

It applies in a lot of different situations, doesn't it?

Dr James, 38m 53s:

Yeah.

Chris, 38m 54s:

Um, I if I look at the last 40 or 50 dentists that I've spoken to, yeah, I would say about 20% of them have been um made aware of capital allowances by their accountant. Okay. And they will be people who maybe have got a relatively large accountant, maybe in the top 20 or the top 50 in the country.

Dr James, 39m 20s:

Yeah.

Chris, 39m 21s:

Um, we're certainly if your accountant was one of the really big ones, like you know, PWC or KPMG or all these really kind of um household names, then they will certainly have looked at it. But again, there's not many dental practices where PWC would be interested in because they're just not big enough to be the kind of client they go after. So I would say about 80% of people have uh never heard of capital allowances, 20% have. Of the 20% that have, um, I would say um about half are people where their accountant would refer them to somebody like me, or in fact to me, because it's a specialist skill. So they would they would pick up the opportunity if you like, James, they'd also know that it was outside of their skill set and they needed somebody um with different skills to do it, and then it's probably about 10% who'd have a go, right? And as I said before, I'm currently trying to fix something where someone's had a go um and made a real Horlicks of it. Um so that's my experience of the last 40 or 50 dentists that I've spoken to. I mean, it's not everybody in the country, mate, so um you can only I I can only tell you what I've come across. They're the kind of figures I would say. Um, and in terms of the kind of quality and the value of a claim, um, I mean, a specialist will always do a better job than a general accountant. Um, it's a very complex area, there's a lot of legislation, uh, there are a lot of different changes that happen. You've got to know about building works and uh how you can maximize the different types of allowances. Very few accountants would have people who've got building and construction experience. Uh, so we'll always do a better job on them. Um, and even if um somebody was uh uh an experienced um property type accountant, we'd probably do about 20% better than them anyway, because of the trips to the trade that you only pick up from being a specialist in something. That's a bit of a ramble, James, but did it answer your question?

Dr James, 41m 44s:

No, that that is actually the reason why I like questions like that, because even though the answer is slightly it's it's it's in the field knowledge, as in it's from your experience. It's always going to be a dick your finger put it in the air thing, somewhat, because 50 is not like the biggest sample size, right? But at the same time, it's but 50 has still got some validity though, right? Like it's not like there's like five of them, you know. So it's it kind of gives us a little bit of an idea as to what's out there. So 80% is pretty significant. And I was wondering another thing, Chris, that you said to me once in in one of our conversations, um, you were saying that uh as part of what you do or what you'd advocate is you actually go out to the dental practice and have a look around to figure out what where the capital allowances come from, which is obviously not something that a typical accountant would do, they would just do it from behind a desk. What are you looking for is what I'm where I'm going with that. What are you looking for when you do that?

Chris, 42m 45s:

So if I there's two things there, I think, James. If I draw a distinction between me and the accountancy firm. Sure. Um, firstly, uh, if you were to if you were to buy a property, for example, from a builder, uh, let's say you bought a property for half a million pounds, yeah?

Dr James, 43m 4s:

Yeah.

Chris, 43m 4s:

Uh what you would normally get is a receipt from the builder going to James, Dr. James Martin, one property, £500,000, yeah?

Dr James, 43m 13s:

Yeah.

Chris, 43m 15s:

And you'd pay that bill. Um if I was to say to you, what is the inherent value of the electrical systems inside that building, you'd go, I have no idea, Chris, because all I've got is an invoice that says one building, £500,000. Um, so you need to you need to survey a property to effectively do a reconstruction of how much the various items inside that side that building would have cost to build the building, right? So you need to send a surveyor in, the surveyor would be a quantity surveyor, they would be able to value the electrical systems, the plumbing, and all the items in a building, um, which again, an accountant cannot do. They're also not allowed to do because for an accountant to make capital analysis claims, they need information to the level of quality which either ACCA or ICAW or their governing body would require for them to be covered on their professional indemnity insurance. But because we're surveyors, we have different skills and we have a way of working with HMRC that recognizes the fact that we're builders rather than accountants. So we can go into places where accountants cannot go. Right? That's a good point, I think, for me to make. Okay. So if you work just off costs and diagrams, you're going to miss things because you have to you're not working off reality, you're working off theory. Um, and then if we go into a building looking for allowances, um we will establish the value of electrical systems, plumbing systems, carpets, uh tiles, uh partitions, uh, lighting, heating, uh H VAC. If I'm repeating myself, I'm sorry here, James, but really everything that goes into a building is effectively allowable for tax relief. So we look for everything um signage, CCTV, fire alarms, external lighting, even gates, um and back doors and stairwells and lifts and elevators, all these things are part of our job when we go looking for really. They're part of what you would call energy efficiency type systems.

Dr James, 46m 27s:

Sure. Yeah, yeah, yeah. No, just curious. Were you were you finished there? Because there's a few more questions. There's another question that's just popped up in the chat. Okay. Sure. Okay, cool. Let's have a look at that then. Uh, next question in the chat is from uh Minakshi. Uh shout out to Minakshi. Uh, if the construction work is done from a SIP, uh as a money in a SIP as property uh belongs to SIP, does capital allowances still apply?

Chris, 46m 57s:

Unfortunately not, James.

Dr James, 47m 0s:

Oh, really?

Chris, 47m 1s:

Okay, so that's right there. A SIP is obviously a financial wrapper which uh doesn't pay any tax. So effectively, if you spend money on a property from within a SIP, then um the allowances are held in limbo, I suppose is the best way of putting it. Um if you were to sell the property from the SIP to somebody else, then the allowances would become unlocked and they'd go over to the person who buys the property from you. Um it's just I mean, you know, it works both ways. If you buy a property from a SIP, you unlock the allowances.

Dr James, 47m 46s:

Yeah.

Chris, 47m 46s:

Um if you put the property into a SIP, I mean that's another point actually. If you've got anybody that you know who's thinking of putting a property into a SIP, then it'd be a good idea to get the capital allowances from the property before you put it into the SIP, so you can use the capital allowances against either your income tax or your corporation tax. Um, because I say the SIP doesn't pay tax, so it has no real use for tax relief.

Dr James, 48m 16s:

Yeah, 100%. That's actually a brilliant question. That's actually a really good question.

Chris, 48m 20s:

Um sorry about that. I wish it was different, but it's not. And again, there are quite a few um financial decisions to be made here. I mean, I've I know some dentists, James, who um buy a property in a SIP and then they use the income and the profits from their trade, the dental trade, to pay for any fit-out work. Um, it can be more tax efficient to pay for the fit-out work and any equipment from your trading company rather than from the SIP. But there are we're going into kind of, I mean, I'm having to talk about these areas, but it's slightly more advanced financial planning to work out whether you should pay for the um the works or buy the building in a SIP or in your trading business. If it was me, I guess I would try and pay for things out of my trading business because the tax benefit from my trading business is going to be more significant than out of my SIP. Um, but I mean there are other things you need to take into consideration as well. Um, but if if anybody wants to talk about the options they've got for where which kind of where they pay for the work, then again, we're quite happy to have that chat and maybe give some advice on where to pay for it from.

Dr James, 49m 44s:

Sure. Sounds good. And actually worth mentioning as well that for the people on the webinar who want who wish to speak to Chris, we will be sending out a link that you can use to uh connect with Chris at the end of the webinar via email. And then also in addition to that, obviously Chris's details are in front of you right there as well for your for your benefit. Chris, I had, you know what, we're coming up to the hour mark, and I like to keep these things, you know, Einstein said a great thing. Every everything should be as you shouldn't you should make things as simple as possible, but not any simpler. And I love that quote, okay? And what I'm I love that quote because it's like, okay, we want to simplify stuff, but we want to do it justice at the same time, you know. And I think we've done a really well-rounded job of representing capital allowances and what you guys do this evening. I had one more fun thing just to wrap up on actually providing anybody else doesn't have any questions. I remember last time you were telling me about all the little niche things out there. Because what you want to do, where possible, now correct me if I'm wrong, you're the expert on this, you've got the structures and buildings allowance, and you've got the plant machinery. Yeah. Yeah. Yes. And where possible, you want to make a distinction, you want to get as many things as possible to be the plant machinery uh allowances because they give you immediate tax relief rather than spread over exactly how many years. And one example of that that I really like that you came up with, you were like, it's very important to get an itemized bill or an itemized invoice for your dental practice, and it has to be itemized in really granular detail. And one example you give was it was about the doors in the dental practice, right? I know this sounds so niche, and everybody's rolling their eyes, like, what the hell? This is gonna be really boring. But it I I found it really interesting, uh, I guess. And you were saying that if you itemize the doors and the hinges separately, the doors are buildings allowance, but the hinges are plant machinery just because they're tech they're technically a little hinge, right? So it's a machinery, they are a piece of plant and machinery. Yeah, yeah, yeah, yeah. And that was it. Have I got that right? Have I remembered that correctly? Yes, you have. Okay.

Chris, 51m 50s:

You have that plant and machinery is a very, very wide concept, right? Um, plant and machinery allowances were invented in the 17th century, right?

Dr James, 52m 5s:

Yes.

Chris, 52m 6s:

And and at the time a hinge was, you know, the height of technology, probably. So I mean, nothing's changed since then, but you but you're right. To put your example into slightly um more graphic context, if you were to buy a door and and if you were to buy and hang a door in a dental practice, it might cost you 300 quid. If I'm an accountant, I look at that door and I see 300 quid of structures and buildings allowance, which is a very slow tax relief that writes down over 33 years. If I look at it as a capital allowances person, I go, well, the door locking mechanism is mechanical, that's plantar machinery. The the closing mechanism at the top is plantar machinery, um, the hinges are planter machinery, the cutting of the holes in the doors to put these things in is planter machinery. So there's probably um a hundred pounds or 120 pounds of planter machinery in that door, which as you say can be moved from the kind of slow lane into the fast lane. Um, so yeah, I I find that quite fascinating as well, James. What also I find fascinating is that if you I worked on a hotel, for example, um the hotel was on quite a noisy street and so the hotel company um spent hundreds of thousands of pounds on special acoustic curtains to reduce the noise pollution in the rooms. Um and because those those curtains have a um a sort of function rather than just being curtains, those curtains qualified as platter machinery as opposed to normal curtains, which are normally structures and buildings. I had another client which was a big wedding venue up in Northumberland, and it was a Greek-themed wedding venue. They spent half a million pounds on some plastering, nymphs and fawns and all this kind of stuff. Um and we argued successfully that that plastering created the ambience for the wedding venue, which had a Greek theme. And so, again, half a million pounds was moved from plastering into um something with a functional purpose, which was creating the look and feel and the ambience for that venue. Another example was an air conditioning system. Um, if you uh build a room with a false ceiling, and you can argue that the false ceiling is part of the airflow in a building, then again the full the ceiling becomes a functional item as opposed to a ceiling. So you can move the ceiling from structures into plants and machinery. Carpets, um, if you were to buy some carpets for your practice and you were to buy carpet squares and stick them down, they're plant and machinery. But if you were to buy a fitted carpet and fit it, then it's structures. So there are lots and lots of little mad things here, uh, James. Um other aspect would be if you were to buy um, say you were to have a room and or x-ray room or x-ray area and lead line the walls, then again, the lead in the walls becomes something that has a function, which is obviously stop the x-rays uh permeating out into the rest of the building. So the lead in the walls would again become plants and machinery as opposed to structural item. I mean, as you can see, I'm not it's a bit mad. Um, it's our life, so we live it. It's a bit mad, but you're absolutely right. There are some things where you sit there and scratch your head and go, that really oughtn't be a piece of plant and machinery. Um, but it is, right? Um there we are.

Dr James, 56m 21s:

I think we could probably make a webinar all about those, right? I bet about those mad things. I bet there's thousands of them. By the way, I did see someone write on the screen, how can I ask a question? They were trying to communicate with us. Did you notice that? Was it doodled? Someone doodled on the screen. They were it was like they were trying to communicate to it uh to a extraterrestrial, maybe yeah, like like a Ouija board or something, you know what I mean? Freak me out a little bit. But um whoever that person was, feel free to jump on camera. If you can't, there's a chat button at the bottom. Okay, you can chip hit the chat button and type your question in. But if you can't figure that out, feel free to jump on. Uh just unmute yourself and ask a question. We've probably got time for maybe one more. Um, there's a question in the chat, I'll answer that. And to the person who was just uh doodling just then, trying to communicate with us, if you'd like to jump on, feel free to do it just for just before we wrap up. Or maybe it was John, I'm not sure because I see John's asked the question here. Okay, so question from John John Odney Odney, beg your pardon. Uh, I think that's from nine. Uh, can these be claimed in a leased property question?

Chris, 57m 37s:

100%. Capital allowances belong to the person who spends the money, James. So whether you are a leaseholder or a freeholder, if you've spent the money, then the allowances belong to you. The only caveat would be if your landlord made a contribution to your costs from doing the building work, then that portion of the building work or the allowances from that portion would belong to the landlord purely because they follow the person who's um funded the works.