Care Home Accountants

As a care home business you will need to pay income tax or corporation tax on your profits, VAT on taxable supplies, and payroll taxes for your employees. You’ll also need to comply with HMRC requirements for record keeping and reporting.

Corporation tax must be paid on any taxable profits your care home business makes over £50,000 in a tax year. The current UK corporation tax rate is 19%. You must register your company with HMRC, file a Company Tax Return, and pay corporation tax bills annually. Keep accurate financial records to calculate taxable profits correctly. Allowable deductions include wages, purchases, utilities, repairs and other expenses incurred wholly and exclusively for business purposes.

Care home fees for state-funded residents are VAT exempt as care homes are deemed eligible bodies under VAT law. However, self-funded resident fees may need VAT added if the care is judged to be ‘extra’. Take advice on whether additions like enhanced food, furnishings or entertainment constitute extra services requiring VAT at 20%.

Care homes can reclaim VAT paid on allowable expenses. You should ensure suppliers provide valid VAT invoices showing VAT registration details. Keep careful records of purchases and expenses. Register for VAT if taxable supplies exceed the £85,000 compulsory registration threshold to reclaim VAT. Voluntary registration is possible below this threshold if you want to reclaim VAT.

You must register with HMRC as an employer and operate PAYE on wages to deduct income tax and national insurance contributions (NICs). PAYE Real Time Information submissions to HMRC report deductions made. You must pay employer NICs on top of gross pay. Keep records of payments and deductions. End of year tasks include providing P60 forms and reporting expenses and benefits.

Care homes can claim capital allowances for buying vans and minibuses used at least 80% for business purposes. The annual investment allowance provides 100% deduction on up to £1 million spent on plant and machinery. Fuel scale charges and mileage rates can be used to deduct running costs as expenses. Tax benefits make vehicle ownership more affordable.

Interest on loans taken out for business purposes can be claimed as a deductible expense. Relief is possible on loans used to buy business equipment or property. Record loan interest and capital repayments carefully. You may also be able to claim relief on any arrangement fees or related costs.

Capital allowances can be claimed for renovations, repairs, and maintenance work per the capital/revenue distinction rules. Capital work adds new functionality or extends asset life providing allowances. Revenue work restores existing functionality with costs deductible against profits. Building improvements may qualify for capital allowances.

Trading losses can be offset against other income in the same tax year or carried back to the previous year. For unincorporated businesses loss relief is available against future profits. Companies can surrender losses in return for tax repayments where group relief applies. Take expert advice to utilise any available loss relief.

Tax efficient routes for retirement and succession planning include sale of goodwill, deed of variation and share reorganisations. Owners retiring can benefit from business asset disposal relief, gifting shares to successors, and extracting profits as dividends. Tax rules change frequently so professional advice is recommended.