Dental News
Spring 2021

In Budget 2021 the Chancellor has further extended the scheme to 30 September 2021.

The level of grant available to employers under the scheme will stay the same until 30 June 2021.

From 1 July 2021, the level of grant will be reduced and employers will be asked to contribute towards the cost of furloughed employees’ wages. To be eligible for the grant an employer must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

The reduction in the level of the grant means that the percentage recovery of furloughed wages will be as follows:

• for July 2021 70% of furloughed wages up to a maximum of £2187.50 and
• for August and September 2021 60% of furloughed wages up to a maximum of £1,875.00.

Employers will need to continue to fund employer NICs and mandatory minimum automatic enrolment pension contributions.

The Chancellor has also extended eligibility for the scheme. For periods starting on or after 1 May 2021, employers can claim for employees who were employed on 2 March 2021, as long as a PAYE Real Time Information (RTI) submission was made between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee.

Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.

Under this measure a company will be allowed to claim:

• a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
• a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.

A claim will not be available for motor cars.

This relief is not available for unincorporated businesses.

It is not yet clear whether dental equipment will be eligible.

NHS England has imposed contractual performance targets to NHS dental practices across England. Practices will need to perform 45% of their normal quarterly UDA target for the quarter ended 31 March 2021 (less an abatement for variable costs not incurred) in order to pay the full contract value. For orthodontic activity, 70% of monthly contracted UOAs must be completed.

NHS Contract holders delivering this monthly activity during this period will then be deemed to have performed the equivalent of full contract for this period when calculating any annual clawback calculations.

If the UDA/UOA target is not met, contract payments will be assessed on the percentage of UDAs/UOAs delivered against the above targets.

For example, an NHS practice/contract holder who performs 80% of the 45% target for January 2021 to March 2021 will have effectively completed 36% of contracted activity for this quarter (i.e. 80% x 45%). This will result in the NHS practice/contract holder receiving 80% of their contract payments for the quarter. Any delivery between 36% and 45% will lead to proportional contract funding of between 80% and 100%.

Contract holders delivering less than the threshold of 36% of contracted UDAs/UOAs for the period (which is 80% of the 45% target) will only be deemed to have delivered the actual activity performed during the months of January 2021 to March 2021, plus any deemed activity for the months April 2020 to December 2020.

In effect, for Quarter 4, if a practice reaches the threshold of 36% pro-rata UDA delivery, each UDA delivered is worth 2.2 UDAs (the 2.2 equates to 100%/45%). If the practice fails to reach 36% of pro-rata UDAs, each UDA is worth one UDA and will be paid on UDAs delivered rather than at the enhanced 2.2 rate.

Commissioners do have discretion to make exceptions to practices where in exceptional circumstances, the activity target is not achievable for example where practice staff are required to self-isolate. It is also worthy to note that should practices perform more than 45% of activity in the quarter, any overperformance of up to 2% can be offset against 2021/2022 UDA requirements.

In order to monitor performance, NHS Providers can now access a newly launched Quarter 4 report via Compass.

Contractual provisions for the 2021/22 year will commence on 1 April 2021 and as at the time of writing are still to be announced by NHS England.

Switching to an electric vehicle can be tax beneficial and the UK government is actively encouraging companies to move to zero emission vehicles by offering favourable tax rates over the next three years.

For the 2021/22 tax year, a fully electric vehicle will fall in the 1% Benefit in Kind tax rate, which does sit favourably when comparing the tax due on either a petrol or diesel vehicle, although the government has announced an incremental increase of 1% to 2% for the 2022/23 tax year.

These low Benefit in Kinds (BIK) on new and fully electric cars (or good hybrids) means that anyone operating via a limited company may consider leasing or purchasing a relevant vehicle.  Based on current legislation, it is generally tax-efficient to purchase fully electric cars as company cars via a limited company. This is because the company car tax (1% for 2021/22) will be less than the Income Tax payable on the dividend should a company director/shareholder wish to extract funds to fund the car purchase personally.

If you purchase a plug-in hybrid car then it will be dependent on how many miles a vehicle can cover under battery power and the emissions figure as to whether it is more tax-efficient to purchase as company cars through a limited company or individual ownership.

Please see below the things to consider regarding purchasing a car from the company.

Benefit in Kind (BIK)

It is important to know that the provision of a company car gives rise to a benefit in kind, which has tax implications for both you and the company. You will be liable to pay Income Tax on the benefit and the company would also suffer Class 1A National Insurance (NICs). 

The benefit in kind (BIK) rate is also dependent on the level of CO2 emissions of the car, but as you are aware from 6 April 2021 the BIK % for cars which are fully electric will be 1%.

The BIK % is applied to the list price to get the BIK figure - this will then be the figure that you will pay Tax on. The BIK will be declared on your personal Tax Return as employment income.  

For example, a Tesla car with a list price of £90,000 would generate a BIK figure of £900. For a higher-rate tax payer, income tax liability of £360 (£900 x 40%) will arise on the company car for the 2021/22 tax year.

The company will also be liable to Class 1A National Insurance Contributions at a rate of 13.8% of the BIK figure. In the above example this would be £124.20 (£900 x 13.8%). Please note however, that the company will receive Corporation Tax relief on the Class 1A National Insurance Contributions paid.

Capital Allowances

The company will be able to claim tax relief on the purchase, the amount of the relief is dependent on the level of CO2 emissions of the car. From 6 April 2021, the following capital allowances can be received on the cost of the car:-

Electric charge-points are also eligible for 100% first year allowances until April 2023.

Please note that currently (up to 5 April 2021) 100% first year allowances are available on new and unused vehicles where emissions do not exceed 50g/km. If you are considering buying a low emission car that is not necessarily fully electric you may wish to acquire this before 5 April 2021 in order for the company to benefit from full tax relief on the cost of the vehicle.

In order to obtain tax relief in the form of capital allowances, the company will need to either:

• purchase the car outright
• purchase the car using a straight-forward loan with interest in the company’s name or
• by hire purchase in the company’s name.

It is also worth noting that if Capital Allowances are claimed, when you come to sell the car in the future, if the car is worth more than the ‘tax value’ of the car then the company may have to repay back some of the tax relief. This is known as a ‘balancing charge’.

Tax relief on financing and associated car expenses

The company will also receive tax relief on car running expenses and if the vehicle is purchased using a loan, the company will receive tax relief on the interest element of the monthly repayment.

The company would not receive capital allowances however if it were to lease the car. Instead the company would receive Corporation Tax relief on the lease/rental payments. (From 6 April 2021 relief subject to 15% disallowance if >50g/km).

For cars financed via a Personal Car Purchase (PCP), the initial deposit would qualify for full tax relief and the company would receive Corporation Tax relief on its monthly contract payments and balloon payment (agreed final sum to purchase the car or transfer agreement to a new car).

If you would like assistance in calculating tax savings and any tax and National Insurance implications on any specific cars, you should speak with your usual contact at Humphrey & Co for more details.