MediEstates - Dental Practice Incorporation
Dental Practice Incorporation
There can be many tax advantages arising from incorporating a dental practice, and most practice owners would like to save tax.

Since 2006, incorporation of NHS practices has been legally possible, and since then, despite the postcode lottery of primary care trusts and NHS England local area teams’ attitudes to incorporation, many NHS practice owners have turned their sole trader or partnership practices into limited companies.

However, the NHS England postcode lottery has become almost as difficult to succeed in as getting six numbers correct in the National Lottery! This has given rise to an ever increasing number of ‘flawed’ incorporations.

What is meant by a ‘flawed’ incorporation?

There are many variations on this theme.
The most common flawed method is to keep the NHS contract in the practitioner’s personal name, but transfer the goodwill, related borrowings, and all operational matters into a new limited company. In some instances with no formality or legal agreements – as the Nike marketing slogan says, ‘Just do it!’

This gives rise to potential problems with:
1) Breach of the NHS contract
2) Excludes all dentists (principals and associates) from the NHS Pension scheme
3) Liability for VAT charges
4) Income tax and CGT irregularities.
As the likelihood of our friends at HMRC, NHS England and NHS Pensions being aware of the problems, and challenging the technical points, is low, many practice owners have been tempted to ‘just do it’ and reap the tax benefits.

However, the day of reckoning can come when the time comes to sell the practice.

In order not to have a total or partial reversal of the tax saved by the flawed incorporation, it is necessary to find a buyer who is prepared to take over the flaws, warts and all.

This can be done by the buyer buying the limited company shares, and taking the NHS contract into his personal name by a method known as ‘the partnership route’.

This buyer will almost certainly have advisers who will tell him not to go ahead, and many lenders will not provide funding for the acquisition of a practice structured within a flawed incorporation.

Over recent months the number of dental flawed incorporations coming to market has increased through non-reputable agents – some are sold, some not, but it’s vital that both buyers and sellers are aware of the facts and technicalities.

If there ever there was a case of ‘caveat emptor’ this is it!

Practice One
Practice Location
- this practice was first established by the outgoing principal in 1997 in a converted residential terrace within a large city. It is strategically located on a busy road next to other amenities, ensuring excellent visibility and footfall.

Type of Practice - the practice comprises four surgeries and holds a large NHS contract. The outgoing principal was working on a part-time basis with the majority of UDAs performed by the four associates. There is potential for future expansion at the practice through the acquisition of a neighbouring property.

Financials - annual turnover of £860,000 is almost exclusively generated from the NHS contract for the provision of 32,000 UDAs. The UDA rate is good and profitability at the practice is further enhanced by a moderate associate pay rate and low staff and property costs. The practice employs five dental nurses, two receptionists and a part-time practice manager.

Buyer Appetite - we marketed the practice to our Premier Tier buyers and found demand to be extremely high due to the large NHS contract and the sought-after location. Within six days of marketing we had carried out a viewings open day and secured seven above-asking price offers.

Reason for Sale / Incoming Purchaser - the outgoing principal was looking to reduce their responsibilities whilst the incoming purchaser was purchasing a second practice as an investment.

Price Achieved - £2,100,000 inclusive of goodwill, equipment, fixtures and fittings and freehold, which was well in excess of the original marketing price.
Practice Two
Practice Location
- located within a large coastal town, this transaction involved the sale of a two-site practice owned by the same principal. One site is within the town centre close to other amenities and the other site benefits from an excellent seafront position. Both practices are easily accessible with plentiful parking facilities.

Type of Practice - the income generated is mainly private supported by two small NHS contracts. There are seven surgeries located between the sites with the principal providing clinical hours at both sites. The vendor owned both detached freehold properties and was open to options with regards selling or retaining these.

Financials - the combined turnover of £1,500,000 is made up of 8% NHS income, 28% capitation income and 64% private income, which is delivered through both general dentistry and specialist treatments. Although the two NHS contracts are small they deliver healthy UDA rates of £28 and £30 for the provision of 4,500 UDAs.

Buyer Appetite - we marketed the practice to our general market with 1,471 buyers viewing the practice via our website, 960 buyers receiving detailed sales brochures, 33 viewings being carried out and 29 offers received.

Reason for Sale / Incoming Purchaser - the principal was looking to reduce their responsibilities and was able to negotiate a post-sale associate agreement to stay on at the practice. This helped ensure the continuity of income going forward.

Price Achieved - £1,925,000 inclusive of goodwill, equipment, fixtures and fittings. The freeholds were retained by the outgoing principal and leased back to the purchaser. The transaction took six months from initial marketing to complete.
Practice Three
Practice Location
- the practice is located within a large city in the Midlands and is situated within a health centre alongside other primary care professionals. Established in the 1990s, the current principal acquired the practice in 1993.

Type of Practice - This is a four-surgery NHS practice with all of the income generated by the current principal and two associates. The premises is held on a long-leasehold with a small nominal rental. Expansion is limited within the current footprint, but all surgeries are yet to be utilised.

Financials - the practice has an NHS contract value of £575,000 for 20,000 UDAs, representing a good UDA rate. There is £51,000 fee per item work completed creating a total annual turnover of £626,000. The associate generates 16,000 UDAs with the principal completing 4,000 UDAs alongside all of the private income.

Buyer Appetite - multiple offers for the practice were received from our Premier Tier buyers, which resulted in a higher sale price being achieved.

Reason for sale / Incoming Purchaser - the vendor was looking to reduce responsibilities prior to eventual retirement and wanted to continue working at the practice post-sale. This suited the incoming purchaser who already owned a small group of practices and was looking for an associate-led practice.

Price Achieved - £1,430,000 inclusive of goodwill, equipment, fixtures and fittings and freehold.
Posted by: Alan Suggett - UNW LLP on

General Buyer Terms 

This agreement is in relation to MediEstates Limited whose registered office is at 1st Floor, Pacific House, Stanier Way, Wyvern Business Park, Derby, DE21 6BF acting for and on behalf of our clients ("the Vendors"); and yourself (Buyer's Name) in relation for an introduction to a prospective sale of a business as a going concern. By registering through this agreement I agree to all terms set out below:

  1. Definitions
    In this Agreement the following terms and phrases shall have the following meaning unless the context otherwise requires:

    Dental Practice business providing dental care. This business is under the MediEstates Ltd sale terms.
    Confidential Information
    Means the actual Vendors identity and all confidential information in respect of the Business, including, but not limited to, any ideas, business methods, prices, accounts, finance, marketing, research, development, manpower plans, processes, market opportunities, intentions, design rights, product information, customer lists or details, employees’ details, trade secrets, computer systems and software, and other matters connected with the products or services manufactured, marketed, provided or obtained by the Vendor, and information concerning the Vendor’s relationships with actual or potential clients or customers and the needs and requirements of such clients’ or customers’ operations.
  2. Obligation of Confidentiality
    The Prospective Purchaser agrees to treat as confidential, information supplied by or on behalf of the Vendor in connection with the sale of the Business.
  3. Exclusions
    The obligation of confidentiality set out in clause 2 does not apply to:
    1. any information received from a third party who was legally free at the time of disclosure to disclose it;
    2. any information which was already lawfully in the Prospective Purchaser’s possession prior to receiving it from MediEstates Ltd on behalf of the Vendor; and
    3. any information which is in its entirety already in the public domain.
  4. Duties of Prospective Purchaser
    1. The Prospective Purchaser shall take such a reasonable security measures to protect the Confidential Information and trade secrets.
    2. The Prospective Purchaser shall not, without the prior written consent of the Vendor, permit any of the Confidential Information:
      1. to be disclosed, other than in confidence to its legal or professional advisors;
      2. to be copied or reproduced;
      3. to be commercially exploited in any way;
      4. to be used for any purpose other than in connection with the prospective purchase of the Business;
      5. MediEstates is registered under the Data Protection Act 2018. Upon Signing this agreement you agree to follow the legal obligations of this act to protect the details of the information supplied to you, with it no to be passed outside of the control of you the prospective purchaser.
    3. The Prospective Purchaser agrees to keep a record of Confidential Information received.
    4. The Prospective Purchaser will return to MediEstates or the Vendor all documents containing Confidential Information and all copies of those documents on demand at any time which are in its possession or under its control, and for this purpose the term “documents” includes computer discs and all other materials capable of storing data and information. The Prospective Purchaser agrees that such documents remain the property of the MediEstates on behalf of the Vendor.
    5. The Prospective Purchaser must not jeopardise or re-direct the sale under any circumstances.
    6. The Prospective Purchaser must not contact the Local Area Team or CCG regarding any practice sale, by any means of media unless written permission is granted from the Vendor.
    7. To carry out own due diligence on practice purchases and accepts that any information MediEstates has supplied is information provided by the vendor and is not responsible for its accuracy or completeness.
  5. This Agreement
    The existence of this Agreement and its terms are confidential and neither MediEstates nor the Purchaser may disclose anything about this Agreement or its subject matter or implementation to any person other than in confidence to their legal or professional advisers.
  6. Duties of Prospective Purchaser
    When buying Dental practices, finance is normally needed. Our organisation operated over more than one of the MediHoldings brand, by completing this from you agree that the information can be shared to our other organisations to avoid the need to register independently and provide the best possible service.

    MediEstates will refer you to the specialist dental lending team and MediFinancial who will contact the necessary banks, whom have preferential healthcare lending rates in some cases, to ascertain which funding is available to you.
    By signing this agreement you do not have to use any of the banks MediFinancial contact, it is just another service which we provide.
  7. Deposit for Dental Practice
    If you are interested in putting forward a formal offer in for a practice, once the offer is accepted there will be a deposit required to secure the practice sale which is dependant of the practice size. This deposit is held in a client account and will be returned to the buyer on completion of the practice sale. You the buyer, will be required to sign a deposit schedule which will cover the buyer and the seller in the event that the practice sale does not proceed.
  8. Changes to this Agreement
    Any changes made to this agreement must be authorised and signed by one of MediEstates Ltd Directors.
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