There are various tax reasons why a dentist would choose to incorporate his or her practice. These are, of course, generally accountant driven and the new 50 per cent tax rate will undoubtedly fuel the financial reasons. There are also some persuasive legal reasons to incorporate, which are the subject of this article. When the sole holder of an NHS dental contract dies, the primary care trust contract dies with him. Unless the practice is largely private, this means that the practice is transformed, overnight, from an asset with a significant capital value, to a liability: a business with staff costs and property costs, but no revenue! The PCTs are required to keep the contract going for a short time, but this is really tantamount to re-arranging the deckchairs on the Titanic! By transferring the benefit of the PCT contract into a limited company, the PCT contract does not immediately come to an end on the death of the practice owner. Rather, the PCT contract remains in the name of the company, control of which will pass to the deceased’s estate.

PCT issues

The most significant obstacle to incorporation is the PCT. The PCT may delay making a decision or just be obstructive. The current record sits with one particular home county PCT, who messed around a client hoping to incorporate for over a year. We got there in the end, although we did have to take the matter to the NHS Litigation Authority.

That said, most PCTs will generally agree to incorporation, though sometimes with certain conditions. The PCT may require a ‘change of control’ provision in the corporate PCT contract. This would (seek to) provide that the PCT contract would come to an end if the practice owner sold the company. This is a potentially serious matter, which needs to be carefully negotiated.


There are, of course, administrative burdens and costs involved with running the practice through a limited company. For example, the company will need to keep board minutes and maintain company registers (both honoured in the breach) and file annual accounts and annual returns. Another disadvantage is that it is more difficult (and so more expensive in terms of fees) to sell a company which owns a practice, than to sell the underlying practice. If the company sells the underlying practice and then passes the proceeds of sale to the practice owner, there can be unpleasant tax consequences. This brings me neatly to a form of quasi-incorporation.


The case is clear (see above) for putting the PCT contract into a company. That said, the practice owner may favour a simple life and prefer to keep the practice in his own name.

This can be achieved, together with the protection of the PCT contract, by the PCT contract being notionally transferred into the name of the company, but for the practice owner to continue to run the practice and be paid for the NHS dentistry carried out at the practice.

How is this achieved? The PCT contract is transferred to the company, as set out above. Once the PCT contract has been issued to the company, the company would direct the PCT to (continue to) pay all revenues arising under the PCT contract to the practice owner. The practice owner and the company would then enter into an agreement known as a Declaration of Trust.

The document would provide for the company to ensure that all PCT revenues are paid directly to the practice owner and the practice owner would undertake to the company to meet all the company’s obligations to provide NHS dentistry to NHS patients and otherwise to meet all of the clinical and other requirements of the company under the PCT contract.

The company would not trade, would have no bank account and would have no value. It would therefore simply file dormant accounts and would require minimal administrative support. All employees and business and property matters would remain the responsibility of the practice owner.

When it comes to the practice sale, the practice (including the goodwill) would be sold by the practice owner in the usual way. The only unusual feature would be that the company would be sold for just a notional £1, with the PCT contract going with it.


The partnership route may be used where the seller wishes to sell his practice to the buyer and the PCT has refused to issue a replacement PCT contract to the buyer.

On completion of the sale of the practice (other than the NHS contract), the parties go into partnership in relation to the NHS contract. The partnership agreement will specify that the seller will not be entitled to receive any of the fees arising out of the PCT contract until the PCT has recognised the partnership and amended the PCT contract accordingly. At that point, the sale completes and the fees arising out of the PCT contract are all paid to the buyer. After a couple of months, the seller simply retires from the partnership. If the NHS contract is a GDS contract, the PCT is contractually obliged to permit the entering into of the partnership.

However, if the NHS contract is a PDS contract, no such obligation exists. It may be necessary therefore to convert the PDS contract into a GDS contract at this point.

Generally speaking, there is a legal obligation on the PCT to permit the conversion of the PDS contract into a GDS contract. The exception is that if the PCT contract is exclusively for specialist services (for example an orthodontic practice), the PCT is not required to permit the conversion of the PCT contract.

This device can also be used to protect the sole holder of an NHS dental contract. He might arrange for the PCT contract to be put into the joint names of him and another, that is, a partnership. The practice owner would retain all but a tiny part of the revenue. If the practice owner dies, the PCT contract would remain in force, in the sole name of his ‘partner’.

Naturally, the partnership agreement would require the surviving ‘partner’ to deal with the PCT contract in accordance with the wishes of the practice owner’s family.

So what should you do now? It would be a good idea to debate the prospect of a quasi- incorporation with your accountant, or indeed with us. There does not seem any reason not to incorporate the PCT contract, atleast on the Declaration of Trust basis.

Russell Abrahams, Solicitor, Abrahams Dresden LLP

Abrahams Dresden articles and guidance notes are for general information purposes only and generally state the law as at the date of publication.  The information may not be relied upon as legal advice.  We are of course always happy to advise directly on specific issues arising.