Dr James, 0s:

Welcome back to Dentists Who Invest Podcast guys. It's about time you did this out too because this has been hot and fun for so many bandits for so long because it affects all of us. News cast in case you didn't know this gonna be VIP added to aligners as of when David? Oh it's already happened. Oh it's already happened. What was it done on that?

David, 18s:

I've not got the date, but it's been a long journey for them. The fact here tribunal one and two and the seconds it's been a long journey for aligners, but it is to my understanding it is a fact for it.

Dr James, 27s:

It's happened already. Well listen, for anybody who doesn't know David Hossein, it's October 25th on the Dentists Who Invest Podcast specialist accountant to dentist. We welcome David back because it's been too long since we've done an episode, but this particular subject merited an episode, didn't it, David? So let's sink our teeth into it, I guess. Pardon the pun. So 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. David, I guess the best place to start. What would you think the best place to start is what it is? Maybe if we could explain for people who don't know, bring them into the loop.

David, 1m 34s:

I think it starts with the aligners, but VAT in dentistry is a big area, and we probably don't have much time to go through it. All I will touch on other aspects on this because we're starting with aligners and what that's about, but HMRC's scope in general within healthcare is widening. And we're seeing creeps scope score scope creep and looking out at different areas, and we need to be mindful of this as a profession. So I will touch on that as we go through this. But the starting point is, as you say, aligners, aligned technology. They hadn't been charging VAT and they've been told they have to now. The reason for that is the tribunals do not agree that it meets the definition of a pathesis, so it's not covered by the VAT exemption. So the labs preparing have to charge 20% VAT going forward. That's a real cost to the dental practice. That will have commercial implications for aligner providers in that price is probably going to go up. Having said that, the aligner market is very complicated right now. You've got a lot of people really, you know, going to the bottom with prices, and there's a lot of competition. So how it plays out commercially is for dentists to figure out. But there is a 20% charge on aligners going forward. That's a real cost of the dentists. The questions we're being asked by clients is what does that mean for us? Does that mean that we have to register for VAT? And the answer's not as straightforward as you might think. The general exemption for providing the orthodontic care, so assessing the patient, planning the treatment, fitting the appliance remains exempt as the supplier of medical care by a registered profession. So that does not change. So dentists who are fitting these currently do not have to register for VAT. And that's the big question being asked how does this impact on us? Do we have to register for that? In general, no. However, it's more complicated, which is why I'm saying this question is a small, big potential thing we need to open up. And dental accountants, we are having conversations around this because it's coming up more and more in legal forums. Because the key distinction is it's medical care. So the reason it's exempt, the reason dentists don't have to register for VAT, is because they're providing medical care, and the VAT Act exempts dentists from having to register for VAT while they're providing medical care. But what does that mean if we are not providing medical care and we are providing cosmetic services solely? And this is where it gets complicated. And I think it is something that we have to start talking about because I think it's going to become a bigger issue going forward as HMRC opens up this ever so slowly, which I suspect is happening.

Dr James, 3m 53s:

David, can I interject? Because I just have a question on what you've just said. So for cosmetic purposes, fine. Someone comes to you, their teeth are functionally and you know, otherwise their mouth is fitting well, but they want an improvement with regards to the appearance of the teeth. Fine. I get in that instance. Is there a distinction that they draw between someone who, for whatever reason, requires orthodontic care, which necessitates clear liner movement, for example, when it is in the interests of the health of their mouth?

David, 4m 24s:

Health is the key thing here. Where there is an element of health that gets us out of the 18. So boiling it down to a very simple statement. If the purpose is to protect, maintain, or restore health, for example, I have an overbite, an underbite, it is affecting my gums, there's a medical reason for that. That keeps it out, that also keeps out any ancillary services. So the uh orthodontic treatment for medical purposes plus the whitening, the whitening is clearly cosmetic, but because the whitening is provided ancillary to and part of that treatment plan, the ancillary services also drops out. That is very that's one statement. The other statement is if I come to you and say, Look, I would like the liners, I've got a wedding coming up, my teeth don't look great, I want the whitening and straightener for the wedding. That is 100% vatable. Now, what's the evidence for this? It's your notes as a dentist. So your notes really have to be very clear, written at the time, not backdated, say the reason I prescribe this is for health reasons, over by underbite, any kind of issues that you've identified. If your notes say wedding coming up, wants to look nice, that should be vattable. And that's black and white. There's no there's no kind of way around that. So it's a big kind of almost ticking time bomb with Saturn's dentist, that cosmetic dentistry. As I say, HMRC are widening their looking at the healthcare sector. It's not just dentists, we've had skincare clinics have the same kind of focus put on them. So it's kind of opening up that conversation and really just to let people be aware that like your your notes really need to make it clear because that's the evidence for the Vatman. If the Vatman come and say, show us that you've been providing healthcare, not cosmetics, it's the notes that determine what you've been doing.

Dr James, 6m 9s:

All right, so we've covered how VAT applies whenever it comes to our clear aligners. Anything else we should talk about? Any other areas it applies to?

David, 6m 20s:

Yeah, absolutely. Um, there are other things that the practice will be doing that um could be vatible. And we kind of touched a little bit on whitening. Whitening that is just provided as a standalone service. Patient shows up, doesn't have any other treatment other than I would like my teeth whitening, that is a vatable uh event. Um we have a threshold to meet, so um, if a practice provides over 90,000 pounds worth of vatable services, it then has to register for VAT. In practice, very rare, unless practice is doing a lot of significant amounts of whitening and Botox, because Botox is the other area. But we also need to have an eye to what we talked about a minute ago about pure cosmetic stuff, and it's been a bit of a grey area that we've we've known about. Um the other bit is retail. So if we're selling toothbrushes, whitening kits, mouthwash, all that stuff also um becomes part of this bucket that you have to catch up. What are we doing that could be vattable? Um so if we go over 90,000, we have to register for that. There is one more which I think um it's come up recently and um it needs talking about, and that is reverse charge VAT on Google and Facebook. Um I'll need to explain what I mean by that. So going back to the the um the statement, if you have vatable sales of over 90,000, you have to register VAT. We have a situation with reverse charge VAT where if the um if you're buying services from Google or Facebook who are not UK resident and they're in Ireland, they um use something called the reverse charge um VAT mechanism, which basically means the value of the service that they provide to you, they don't charge you VAT, but they pass the responsibility for accounting VAT over to you, the business owner. Okay, that's the principle. So if you're working with Google, you're working on Facebook, whatever the value of products you're buying from and services forms part of your responsibility to account for that. In plain terms, if you give Google and Facebook £100,000, you've gone over the VAT threshold.

Dr James, 8m 42s:

Even under the money going out rather than money going in.

David, 8m 44s:

Yeah, because that the that under the reverse charge forms part of your box one under that return. It's a reverse charge mechanism. So now we're into well, what if I do 40 grand worth of Botox and I've got 60 grand worth of work with Google? And we need to be talking about this because there are practices out there who will be in that situation and need to get it looked at.

Dr James, 9m 8s:

And just to recap, the threshold for this is 100 grand, not 90 grand.

David, 9m 13s:

No, the that threshold is 90,000 pounds.

Dr James, 9m 16s:

Right. Oh, so it is you were just the hundred thousand was figured if it's ninety grand, that's the limit.

David, 9m 20s:

Yeah, yeah. So once you go overnight.

Dr James, 9m 22s:

So yeah, gotcha. Okay. Right. Well, I've so many questions this side, but I sense you're in full flow there.

David, 9m 30s:

Yeah, well, it it's it's one of those where it's a lot of people a lot of practice owners will be listening to this going, oh my god, we spend a lot of money with Google and Facebook. And usually the marketing companies um because we we get questions about well, what about if my uh marketing agency incurs that cost and they recharge it to us under standard rate? So they engage with Google on our behalf. Um that could work, but in most instances, the marketing agencies get you to engage directly with Facebook and Google. Um, I suspect that gives them issues at their side, but that's a conversation I think practice owners need to be having now with their um marketing providers. How are we dealing with this VAT issue? Um, and discussing any solutions. But again, this is a very big area. This point of today is awareness, so it's just to let people be aware that this is something that needs to be looked at, especially you've got big marketing budgets and some of the larger private practices spent a lot of money with Google, so it does need looking at.

Dr James, 10m 27s:

Jeez. And yeah, we could probably talk about that for after the ages, but I guess one thing that pops into my mind is um if you had all of your different practices in different limited companies, would that be a way around that if you kept the net spend in each one of those companies under that threshold, or no?

David, 10m 44s:

I I think you'd be okay if it's net per legal entity. I think you'd be okay with that.

Dr James, 10m 50s:

But get advice, I'm guessing.

David, 10m 53s:

I mean, that's a mind fielder. I mean, uh, if a client came to me with that, I'd have to put it about people. So I'm not a VAT um um super expert, we're very aware of things, but you've got things like VAT groups and ways around it and options and stuff, and but I think it's per entity. But if anyone's got that situation, um talk to your accountant about it.

Dr James, 11m 11s:

Because the thing is, if you've got one, if you're a corporate of any size, like maybe five dental practices, you're you you're easily clearing if and that's all in one entity, you're easily clearing a hundred grand in Facebook to spend uh every year. UK dentists, Dentists Who Invests now has an official platform where you can learn about finance and obtain UK compliant, verifiable CBD at the same time. The only platform that exists on which you can do both. The Smart Money Members Club has hundreds of hours of mini courses, webinar series, and live day recordings on all things finance slash tax efficiency for UK dentists. This includes complete courses on how tax works for UK dentists, finance so that you can invest and grow your own money, business so you can improve your profitability as an associate or principal, and for those out there that want it, there's also a mini course and how you can responsibly enter the crypto space using measured amounts of capital. I've gathered this content from the best of the best I could find in each respective area so that you know that this is how people at the forefront of each field advise their clients. The Smart Money Members Club also contains discounts on common things that UK dentists need to pay for on a regular basis. This includes a whopping 10% discount on dental indemnity, the offer to beat your income protection deal no matter what you're paying, and for the principals out there, 5% discount on lab bills and 10% discount on practice insurance. These are designed to offer hundreds, if not thousands, in annual savings. The purpose of this members club is to not only boost your monthly income but also manage your outgoings as much as possible and therefore create more profit. To celebrate the launch of the Smart Money Members Club, and given that the CPD deadline is coming up soon, I've decided to offer the first month of this platform entirely for free. This offer will end in the coming weeks as soon as the current CPD cycle is up. To collect your CPD for this podcast episode using the Smart Money Members Club, feel free to use the link in the description of this podcast.

David, 13m 14s:

Yeah, and the problem for corporates is they tend to use one company because they get a group discount if they're putting it through one account, as opposed to having it build separately.

Dr James, 13m 23s:

So um my nice.

David, 13m 28s:

We have had to have a corporate re look at this to use the right word, um where we've had to get the VAT split across entities because of this issue. Um and it worked on that specific occasion, but the details of that were very specific, which is why you have to get it looked at properly.

Dr James, 13m 44s:

And tell me this, correct me if I'm wrong, and you may have said this at the start, but just to reiterate, as soon as your entity is VAT registered, it then means all of your revenue is vatable, correct?

David, 13m 55s:

It wouldn't mean your your standard uh medical dentistry would not, so you wouldn't be charging VAT on your uh exempt dentistry, but you would have to put your Botox prices, you'd have to put 20% of that on your Botox. So whether you increase your prices or you are losing 20% in VAT that you have to pay for the tax plan and your um product sales and um lining, you'd have to charge VAT on that. For me, it's also the extra, you've now got a quarterly VAT process to deal with and more compliance. Um and the extra cost, so let's use the Google example. If you're paying Google £100,000, you then have to account for £20,000 worth of output VAT that you've not um received, so it's going to cost you that 20%. So it it will generate a real cost to you of £20,000. There is a partial exemption reclaim method for this, which just means that you can reclaim part of your VAT going for. So if a dental practice has to register VAT, they can now partially recover that on overheads that they are incurring to the percentage of what their vatable turnover is, which for most people won't be much with it. So it's generally main, mainly dental and a little bit both-ups and other stuff.

Dr James, 15m 10s:

Understood. Okay, so those would be the main downsides. But like I say, I actually previously thought until you said that that everything becomes valuable at that stage, but you still have an exemption on the stuff that would normally not is not valuable revenue. It's just on it's just the extra faff with this other stuff that is the main downside. Correct. Okay, thumbs up. That's something at least. Okay, fine. Um, moving on, what do you feel is I've got a million questions, but I don't want to sidetrack things too much because I want to get the absolute most juice out of this podcast for the listeners. Anything else pertinent you feel the audience needs to know?

David, 15m 46s:

There is uh to finish the point on the VAT, um there is an added um complication on a sale of a practice as well. And this came up at the uh NASDAQ meeting I was at a couple of weeks ago. Um, because lawyers are now um wording the VAT section of the uh share purchase agreements and um business transfer agreements a lot more detailed to cover for things like VAT problems. So if you sell any practice, you you'll have a bigger section to disclose on this. Um and one thing that um came up is actually if you are supposed to be VAT registered and you haven't been, um, and you're a sole trader, let's say you want to practice, James, you're a sole trader, um, should have been VAT registered, you sell your practice to me, million pound, two million pound, um HMRC could come and say actually you should have charged VAT on the sale of that business. Potentially. Okay. So it's an area where we have to be mindful now of the full impact of VAT within the transaction. There are um there's a section called transfer of going concern, where if the buyer registers with VAT as well, we don't have to deal with it, but it's something that lawyers are becoming more aware to now when they're buying and selling practices, they're having to ask these questions and think about that a lot more carefully. Um it's been a long time coming for the dental sector, and I think we're gonna see more of this. Um as I say, I think HMRC are looking at healthcare a little bit more closely. We've seen it with the uh the skincare cases that have gone to tribunal, and you know, skincare um used to be that say, Well, we're doing it for health, mental health, and that's why we're not charging VAT. And this is also a conversation within the practice about are we actually referring people to GPs? If somebody comes and says, Look, my my smile is terrible, it causes me distress. My mental health is bad. Okay, mental health is part of health, but have we referred them to a GP as well and said, Okay, we've done have we done our clinical um responsibility and pass that person over to a mental health clinician? Because that supports the position that we've got. So it's it's a very big, big area. This and I could talk for forever and I don't I'm sure that'll bore everybody, so I won't.

Dr James, 18m 0s:

Sure, sure. I guess one thing is important to mention is a lot of dentists don't track their numbers to that level of detail, do they?

David, 18m 7s:

They don't, and they might be required to um optometrists have this problem where they have to look at their revenue quarterly and certain sales of um prescription and non-prescription, they have to account for that differently. And it's it's a bloody nightmare, it really is. It's just an extra admin layer that I'm sure practice owners wouldn't want to go through. So it's it's just something to be mindful of.

Dr James, 18m 29s:

Yeah, for sure. And I guess that's where your zeros and things like that are gonna help, etc.

David, 18m 38s:

Plus the practice software, yeah. I think more the practice management software, like your dentally or um, you know, recording the treatments correctly at source, because that the zero will take the data from dentally, you integrate the two. And um, so I think the source data is where it needs to be properly and the clinical notes.

Dr James, 18m 56s:

Yeah, and you know, there is a that's actually something that's kind of hot at the minute, is these third-party apps that integrate with your PMS and they give you a breakdown of your revenue, where it's going, profitability per associate, profitability per treatment, everything along those lines. Whereas once upon a time we had to put that all into uh spreadsheets. Maybe you've come across a few of those just out of interest. We've seen all sorts. Uh yeah, yeah. The the those are hot at the minute. Uh, there's a few companies that are that are doing that right now that I won't I won't I won't name drop on the podcast, but um uh yeah, that that maybe it's time to look at those. Um, as I said, this is not you know in any way an advertisement for anything like that. So, like I say, I won't drop any names, but it's just purely from the point of view of uh the the merit would be that this revenue is a lot more trackable, uh of course. Okay, David, again, I have loads of stuff that we could probably get into. We have five minutes left in this podcast because you want to make it powerful, impactful, and punchy. Anything else uh top of mind that the dentists out there should know.

David, 19m 54s:

So I think I think I've covered everything I've got down so far. I wanted to, I know because we could have gone forever. Um, but those are the key areas. I think I've said it a few times, but I just want to say it again. It's the clinical notes that are really important here, and that would be the one thing to take away is you're gonna run your practice the way you run it. You're gonna put you're gonna treat people who come through the door with what they ask. Business isn't gonna change for dentists, but what you can change is having better notes. And I don't, you know, it's not as an accountant, I don't go in and look at people's notes, but that would be the one takeaway for me is um especially with technology nowadays as well. Are you are your clinicians trying to, especially where you've got associates you know doing this, they need to be aware that um they have to make really good notes to stress where where you've provided something for a clinical purpose and not a cosmetic purpose, the notes need to reflect that. And it's okay if that service is ancillary, so the full treatment plan includes health and and cosmetics, but the notes have to say it. Um and as you say, there's a lot of technology now with AI, and it's a lot easier to get these things down, but doing it as you're going along, not you know, not backdating them is is is the way because you'll just lose track of things.

Dr James, 21m 5s:

Sure. And just to reiterate that point that you made earlier, because I feel this is a really key takeaway for the dentist, the ancillary treatment plans, you can have a treatment plan that is um to tell me if I'm wrong, but this is what I'm taking from what you're saying, right? You can have a treatment plan that is 10% health and 90% cosmetics, and that's all that's that doesn't apply, correct? As long as there's some component of health in there.

David, 21m 29s:

There's health, therefore it's ancillary.

Dr James, 21m 32s:

Wow, okay. So something to keep in mind to the dentists who are listening. And David, is there some HMRC approved explainer that we can put in our notes which covers us 100%? Is there some agreed upon wording on that?

David, 21m 47s:

Absolutely not, and they won't give it. HMRC are terrible. Um, there are other VAT rulings that as accounts we're like, can you please give us your guidance on this and put it in black and white? And they come back with no. We won't give you our guidance that we have. So they have they have this written guidance and they refuse to give it to us because potentially rightly or wrongly, they were saying, Well, well, if we give our guidance not to accountants, accountants are very clever and they'll just read the rules and they'll figure out how to get round them. So they don't release their guidance on certain things, and VAT is they're not too us for not giving out VAT guidance because of that reason if accountants will figure out to play it and uh work around it. So um it's hard, it makes it really hard.

Dr James, 22m 29s:

Right. So the best information that we have right now is that as long as we clearly articulate that there's some component of health in our treatment plans where where that is true and accurate, of course, uh that will mean that this gives us the best chance possible of uh how can I say this, navigating these new rules. Is that fair to say?

unknown, 22m 50s:

Yeah.

Dr James, 22m 50s:

Bang. All right, cool. I love I love takeaways, you know. I love the I love action points on these sorts of things. Because I know, David, I'm sure you know this as well. The last thing Dennis want to hear is they've got an extra thing to put in their notes, okay? Because those notes just get longer year on year. There seems to be more things that we have to record, write down to what etch we used on the tooth and how long we etched for and how long we scrubbed the bond in and all sorts of things. And I I've been there, guys, I've sat in the chair, you know, so if we can if we can get this in, uh, this is great. And just to reiterate, David, this this would apply. I think clear aligners is the obvious one, isn't it? Because that's done a lot of time for cosmetic reasons. I mean, whitening, again, there's going to be some lab bill component to uh of course, however, that's more or less a cosmetic thing. But then again, it might also apply whenever you're doing uh veneers uh and crowns and restorative work if it's for cosmetic reasons. Any other things that you can think of? I guess anything with a lab bill, really.

David, 23m 47s:

It applies it applies to everything. Um that's why it's hard for me. And um I I can't sorry, go on.

Dr James, 23m 54s:

No, no, no, no, no. You've actually just made me think of a new caveat to this. This would even apply in a restorative case where we don't have lab work necessarily.

David, 24m 2s:

If the if if it's been done solely for cosmetic reasons, that's where we have a problem. And that's where it's for the clinician to say, no, there's a health impact here on gum, on over by, under buy, on functionality. Um it's the clinician to to make that call and it's on you guys.

Dr James, 24m 22s:

Dang, you're actually right. I've actually just considered that new facet of it as we were talking just now. It's literally not if there's just lab work, it's anything cosmetic, which which could include uh how can I say this, uh direct restoration of uh your your anterior teeth, which is composite veneers, which 99% of the time is gonna be cosmetic, really, isn't it? Most of the time. So that's actually the one we've got to watch out for, guys. Anyway, there's a whole big rabbit hole that we could get into in this podcast. We're gonna wrap up now because we want to keep it powerful and punchy. David, if anybody listening to the podcast say wants to reach out to you off the back of this, how are they best off finding you?

David, 25m 0s:

Uh you can go to the website or2.uk, um on Facebook as well. You can send me a DM. Um, yeah. If if you're worried about anything that's been mentioned today, please get it looked at. We can help or talk to your accountant. Smash in the show. Don't ignore it, I think, is uh my message. Don't ignore it. It's it's you need to be aware of it and get it looked at.

Dr James, 25m 18s:

For sure, it's a biggie. And also worth mentioning, you can find David on the Dennis Invest Facebook group. Uh, feel free to search David Hossein in the members section if that is something that you want to follow up on with David. Uh going off the back of anything that we said today. David, always a pleasure. We will talk soon again, my friend.

David, 25m 34s:

Thanks, James. Good to start to you.