PPD Exclusive Article – September 2012 PLAN AHEAD AND GET PREPARED IF YOU ARE THINKING OF SELLING The success of the Olympics and Team GB has in a small way made up for the lack of performance of the sun this summer! At Frank Taylor and Associates, we are always working on improving our own performance and as our clients go through the sale and purchase process, we take on board their comments. We have had several comments from principals who are concerned about how unprepared they felt at the beginning of the sale process and we know there is much to consider. As a result, we will be running a series of seminars later in the year specifically to help principals prepare for this exciting and potentially life-changing experience and will bring together other professional advisers so we can cover a range of topics for any principal considering an exit strategy. Ideally, if you are considering a sale in the next three years you really do need to start planning now. A well prepared and informed principal can only realise maximum benefit if an effective exit strategy is in place. The physical sale of a practice should be seen as the tip of the iceberg, as underneath this asset there has to be layers of financial and legal strategies in place to ensure the maximum benefit is realised. We value and sell hundreds of practices across England and Wales every year and recognise how individual the practices and the principals are. However, there is much common ground and one area where we regularly hear concern is around pension provision. We work closely with trusted specialist dental advisers, and if you aren’t already aware, then it might be an unfortunate surprise that in April 2012 the standard Lifetime Allowance (LTA) for pensions was reduced from £1.8 million to £1.5 million. This means any pension assets held on retirement exceeding £1.5 million will be taxed at 55%. This has sparked a necessity for high-earners nearing retirement to perform what is known as a ‘headroom check’ to make sure their level of pension contributions won’t take them over the £1.5million and incur a large tax bill on retirement. If you haven’t been made aware of this by your adviser, then seriously consider the service they are providing. We believe any dentists considering retirement in the next few years should consider a headroom check as doctors and dentists who have a high level of earnings usually make contributions to personal pensions to enhance their pensions for retirement. Where the LTA can potentially have an effect is when a dentist receives an NHS pension, which could easily take them above £1.5million. As you can imagine, it’s not easy to go through the process of all the calculations, and dealing with the NHS can take up valuable time, so we would always recommend using a specialist adviser. They can provide a detailed forecast of where your current path will take you and use their experience to suggest ways of planning your finances so as to avoid unnecessary tax and to maximise your pension. There are a number of ways to manage your pension funds and avoid exceeding your LTA. Even if you’re not nearing retirement, the earlier you perform a headroom check, the better planned you will be for your retirement years. 72 September 2012 PPD If you would like to let us know what is going on in your part of the UK, we’d be delighted to hear from you. Please contact us at: [email protected] PPDEXCLUSIVE Frank Taylor and Associates practicevalue index Information supplied by Frank Taylor and Associates. For reasons of confidentiality we cannot name the practices or show pictures of them, but all have been sold within recent weeks. www.ft-associates.com Chris Strevens is a director and co-owner of Frank Taylor and Associates, the leading independent valuers and sales agent to the dental profession.