A sole trade client was making average taxable profits of around £100,000 per annum, with an average tax liability of £35,000 per year. After detailed consideration of the pros and cons of incorporation, we helped them to incorporate their dental practice six years ago. The overall tax savings to date, after considering the Capital Gains Tax on incorporation, are more than £118,000 and we anticipate that they will continue to make a tax saving each year until they sell/retire.
Whilst the rules regarding incorporation changed in December 2014, reducing the tax benefits associated with the sale of the practice goodwill on incorporation, there are other reliefs available such that the Capital Gains Tax liability on incorporation could be avoided. With corporation tax rates due to drop to 17% in 2020, the ongoing tax savings may still make incorporation worthwhile. A regular review of your circumstances by a specialist is essential.