VAT for dentists: when it’s due and how to pay it!

VAT rules for dentists in the UK can be confusing. Some income gained via the provision of services and treatments are exempt from VAT, while the income from other forms of treatment (most commonly those undertaken purely for aesthetic purposes,) will be subject to VAT at the standard rate.

When do dentists need to register for VAT?

As a self-employed dentist or a dental practice owner, you’ll be required to register for VAT when the income from non-exempt services reaches the current threshold of £90,000. You can find out more about registering for VAT with HMRC here. With the majority of dental services being VAT-exempt, you may not have to register unless you are providing mostly cosmetic services.

Exempt vs non-exempt income

The easiest way to determine what is exempt from VAT and what isn’t is to remember that any income from services to protect, maintain and restore oral health is exempt. These services must be provided by a registered health professional and are concerned with …..the protection, maintenance or restoration of the health of the person receiving the service.’

Typically, under the definition above, the following services will be exempt from VAT:

• Dental care and treatment
• Medical supplies and instruments used to provide the treatment
• Dental prostheses such as crowns, orthodontic appliances, bridges, dentures, artificial teeth and palates.
• Delivery of lectures that improve health such as oral health promotion, and writing reports directly relevant to protecting, maintaining and restoring an individual patient’s health.

On the other hand, services undertaken outside of healthcare and purely for aesthetic reasons will not be VAT-exempt. Some examples could include:

• Teeth whitening
• Veneer fitting
• Teeth realignment
• Sale of toothbrushes/toothpaste

Input VAT & output VAT for dentists

There are two types of VAT to consider as a dental practice. These are input VAT and output VAT. Input VAT is the value-added tax that you are charged when making business purchases, while output VAT is the value-added tax you charge on the sale of treatments and services to customers – albeit in this case only on the non-exempt services such as aesthetic procedures or the sale of toothbrushes and other dental products. Input VAT is classed as an expense, meaning you’re able to reclaim it.

However, it gets tricky here for dental businesses because many of their services are exempt from VAT. Exempt input tax can be recovered, subject to the de minimus rule. For that reason, it’s best to work with an experienced VAT professional when calculating exactly what you can claim back.

Like any other businesses, dentists will have to pay VAT on income from non-exempt services to HMRC when they pass the threshold of £90,000 per annum.

Avoiding late payment

HMRC allows some time at the end of each quarter before a practice must pay the VAT due. VAT returns will show the payment deadline date, but you can also use the Government’s VAT deadline calculator.

HMRC made £346m in interest from taxpayers who paid late or arranged a “Time to Pay” payment plan in the year to October 2023 – a record amount and more than double the £159m it made the year prior.

Dental practises may be waiting on things like unpaid invoices, or be surprised to discover they owe VAT on non-exempt services, which could result in a cash flow pinch point when needing to pay a tax bill. Essential obligation should not have to compete with a practice’s plans for growth, nor should it have any significant impact on cash flow. While careful financial planning can help avoid difficult times, we understand that sometimes things just don’t go to plan. That’s why considering a short-term loan or business finance can help ease the pressure of your VAT bill.

Short-term loan to finance your VAT bill

When working capital volumes don’t permit, practices may need to consider alternative sources to fulfil these costs. Invoice Finance or VAT Loans are one such way of funding this expense and are readily available to businesses within the healthcare sector.

Dental practices can choose for payments to be made directly to HMRC on their behalf. Alternatively, it can go to their account. Ultimately, a loan frees up capital for other practice requirements. We spread the cost over 3 months and offer a quarterly facility to meet these ongoing costs.

Get a free finance quote for your tax bill

We pride ourselves on offering fast, flexible and tailor-made finance solutions for businesses in the healthcare sector. Find out how VAT loans can benefit your practice by calling us on 01244 527300, emailing admin@whiteoakuk.com or visiting our online chat to speak to a member of our team.

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If you are looking to find the right finance for your business, contact us today.

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