Step 5. Meeting with your accountant
It is advisable to talk through your plans with your accountant before implementing a new fee-based pricing structure. They may have some useful comments or observations, which could save you time and money later on. It should be noted that some practices report a slightly reduced cash flow for the first 12-18 months if a significant number of patients have been signed up to a payment plan for spectacle wearers. This is most likely to be due to the discount offered on product, but is likely to be recouped as the monthly care payments continue to come in between purchases. Others have not reported any negative impact as their patients continue spending a similar amount on eyewear that they used to, prior to receiving the discount.
VAT
The introduction of a professional fee based plan is likely to have an impact on calculations for VAT, as professional fees are VAT exempt. This will usually be in favour of the practice, rather than Her Majesty’s Revenue & Customs (HMRC) regardless of whether you currently use the cost apportionment or disclosure method (see statement from BNB Tax Consultants below). Whilst it will not usually be necessary to renegotiate any arrangement with your VAT office, it will provide you with a greater body of evidence for the proportion of charges for fees compared with product.
According to BNB Tax Consultants
(VAT advisers to the AOP)
‘…any change in business practices will have an impact upon the VAT calculations… In principle, the professional fee basis should give a higher level of exempt income, which may be advantageous for business. However, this will, in turn, have a knock on effect on input tax recovery.
What the professional fee basis does do is to provide the documentation to support the VAT position, which may be very helpful for those involved in protracted negotiations with HMRC. However, be careful that it does not show your VAT calculations to be wildly inaccurate!
Anecdotal evidence from AOP members indicates that officers of HMRC are systematically revisiting the methodologies utilised by opticians to calculate the taxable/exempt split. This applies to both cost apportionment and disclosure methods.’
Any concerns about VAT should be discussed with your accountant.
If you are an AOP member you can contact BNB Tax Consultants.
Telephone: 0121 483 6850
Email: steve.botham@bnbtax.com
