On 1^st April 2023 the main rate of Corporation Tax, which businesses pay on taxable profits over £250,000, increased from 19% to 25%. Small businesses with profits of less than £50,000 will continue to pay 19%.

If your healthcare business has profits falling between these two thresholds then tax will be charged at a rate between 19% and 25%, dependent upon how close to either £50,000 to £250,000 its profits fall, in accordance with HMRC’s marginal relief scheme.

All businesses should be looking at ways to mitigate the rise if they have profits above £50,000, particularly if they are between £50,000 and £250,000, since they will be paying a higher effective rate of tax on profits within this range.

Another complicating factor to be aware of is that if your healthcare company has any associated companies then the thresholds so the corporation tax rates are divided by the total number of associated companies. Associated companies include parent or subsidiary companies, or any which are under the control of the same person or persons. The net effect of which will be to advance the point at which companies become liable to the main rate of corporation tax.

With all of this in mind, while the aim of any business is to maximise its profits, it is worth ensuring that your company is making use of all available allowances and opportunities, ensuring any expenditure is wholly and exclusively for the purpose of the trade.

To do so it is necessary to take a proactive stance and plan your tax strategy in advance, rather than waiting until the accounts are prepared and the tax is calculated.

This is because most expenditure and allowances can only be claimed if they are incurred within the accounting period.

One area that is sometimes neglected by small healthcare businesses is capital expenditure. It is possible for companies to claim a 100% tax deduction in the year of expenditure, subject to qualifying criteria. This could include items such as:

• Computers and printers
• Office equipment, such as chairs and desks
• Medical equipment used in your business; and
• Commercial vehicles and fully electric vehicles.

It is also important to ensure that no expenses relating to the business are missed, even if they have been paid for personally. This can be difficult to identify, particularly where there is overlap between the work you do for your company, and the work done as part of your employment elsewhere. However, if something benefits both you and your company it may be possible to claim a proportion as a company expense. This could include:

• Professional indemnity insurance;
• Training courses, conferences and associated travel; and
• Relevant professional subscriptions.

A final point to consider is the composition of any remuneration package your company may pay you, or a spouse, for working in the business. The increase in corporation tax can mean that an increased salary, or bonus, may be more tax efficient overall than a dividend.

While many professionals in the medical sector will already be enrolled in a pension scheme outside of their company and are therefore already using their annual pension allowance, company pension contributions can still form part of a tax efficient remuneration package for other employees within the company.

Contact a member of the Healthcare sector team at Shaw Gibbs for more information and insight into how to structure your business for tax efficiency.