Navigate Tax and Accounting solutions for UK Nursing Care and Residential Homes
Running a nursing care or residential home in the UK comes with a unique set of responsibilities and challenges. Added pressures, such as attracting and retaining staff due to Brexit, reductions in local authority fees, and rising operational costs, present daily challenges for care homeowners.
In addition to providing quality care to residents, owners, and operators must also navigate the complex landscape of tax and accounting regulations.
Heighten Accountants team of specialist Nursing Care and Residential Homes accountants and tax advisers proactively work with you to grow your business, minimise tax liabilities and maximise profitability.
Whether you are looking to enter this sector for the first time or expand your existing business, our dedicated team of Care and Nursing Homes specialists has all the in-depth knowledge, expertise, and skills to ensure you stay compliant with tax regulator and continue to grow and multiply.
Heighten completed sorted out our books …
“Our accounts were in a real mess due to the poor work of our previous accountants. After Heighten took us over, they completely sorted out our accounts and bookkeeping, and ensured that our financial reports were, and continue to be properly presented.
Now, working with Heighten for a while, we have built up a great relationship with the team and we get on really well. Periodic meetings give us the update and everything gets explained. Recently, we’ve discussed grants and funding options. I am confident to recommend them for your care home business, with Heighten advice and help you can take your business where you need it to take”.
BEECH TREE HOMES LIMITED
What are nursing homes’ accounting requirements?
The care sector is understandably one of the most closely regulated sectors in the UK. While Care Quality Commission (CQC) monitor, inspect and regulate health and social care services, accounting requirements for nursing homes in the UK are primarily governed by the Companies Act 2006 and accounting standards set by the Financial Reporting Council (FRC). Taxation matters are dealt with by His Majesty Revenue and Customs.
As a nursing care home leader, you should focus on the following key accounting considerations specific to your industry:
- Revenue & Expense Recognition:
In your care homes business, you generate revenue from various sources, including fees paid by residents or their families, rentals, local authorities, and the National Health Service (NHS). Revenue recognition is essential, and you must appropriately account for income received from different funding sources, ensuring compliance with relevant guidelines and contractual obligations.
On the other hand, accurately tracking and allocating costs is significant for financial management and reporting in nursing homes. Care homes incur various expenses, including
- Staff salaries
- Food supplies
- Medical supplies
- Utility bills
- Property maintenance
- Administrative costs.
Implementing a robust income and cost accounting system helps allocate costs to different departments, such as nursing, administration, catering, and housekeeping, ensuring accurate financial reporting and cost control are in place.
- Understanding VAT and Business Rates:
Value Added Tax (VAT) and business rates can significantly impact the financial health of your nursing care and residential homes business.
While residential care services are usually exempt from VAT, ancillary services such as laundry or catering may be subject to VAT. You must carefully assess the VAT implications of the services to ensure compliance and optimise tax planning.
Moreover, business rates, which are based on the property’s value, can be a substantial expense. Exploring potential reliefs and exemptions is crucial to managing costs effectively.
- Staff Payroll and National Insurance Contributions:
Managing staff payroll and National Insurance Contributions (NIC) is a critical aspect of running a care home. With a large workforce and varying shift patterns, calculating wages and NIC can be complex.
Staying up to date with the latest legislation, such as changes to minimum wage rates, can help avoid compliance issues. Utilising payroll software or seeking professional advice can streamline payroll processes, ensuring accurate calculations and timely submissions to HM Revenue & Customs (HMRC).
- Capital Allowances and Property Costs:
Nursing care and residential homes often require significant investments in property and equipment. Understanding the concept of capital allowances and how they can be used to offset tax liabilities is essential.
Capital allowances allow businesses to deduct eligible costs, such as those related to building improvements or equipment, from their taxable profits. By identifying and maximising eligible allowances, care home operators can reduce their tax burden and invest in necessary upgrades.
- Funding and Grant Considerations:
Securing funding and grants is an ongoing challenge for nursing care and residential homes. Whether it is government funding, private investments, or grants from charitable organisations, exploring all available options is crucial.
It is essential to research and stay updated on funding opportunities specifically aimed at the care sector. Moreover, understanding the tax implications associated with different funding sources is vital to effectively plan and manage finances.
- Regulatory Compliance and Financial Reporting:
The care sector is subject to strict regulations and reporting requirements. Care home operators must ensure compliance with financial reporting standards, such as the Generally Accepted Accounting Practice (GAAP) and Companies Act 2006.
Accurate and transparent financial statements are essential for regulatory bodies, stakeholders, and potential investors. Engaging professional accountants with expertise in the care sector can help navigate complex reporting requirements and ensure compliance.
- Nursing care home owner’s personal tax
Managing personal tax as a nursing care home owner in the UK requires careful planning and adherence to relevant tax regulations. Some key considerations to effectively manage personal tax as a care home owner may include,
- Understanding your tax obligations
- Separating personal and business finances
- Considering pension contributions
- Claiming allowable expenses
- Obtaining professional advice on tax planning.
Remember, care home accounting and personal tax planning is a complex area, and it is important to consult with a qualified tax professional to ensure compliance and make the most of your personal tax situation.
They can provide personalised advice based on your specific circumstances and help you navigate the intricacies of personal tax management as a nursing care homeowner.
With careful planning and diligent financial management, nursing care and residential homes can continue to provide excellent care while maintaining a financially sustainable operation.
Navigating tax and accounting challenges is a critical aspect of managing nursing care and residential homes in the UK. By understanding the intricacies of Tax, business rates, payroll, capital allowances, acquisition planning, funding opportunities, and regulatory compliance, care home operators and owners can make informed financial decisions and maximise their resources. Seeking professional advice, utilising software solutions, and staying updated on relevant regulations are key strategies for effectively managing tax and accounting matters in this sector.
What is included in our nursing home accounting packages
As specialist care and Nursing Home accountants, Heighten Accountants have been supporting the care home industry since 2011, supplying a wide range of sector-specific services to operators locally and nationwide. Our dedicated team offers a wealth of experience in the care sector including residential homes, nursing homes, and other specialist care services.
We understand that no two care homes are the same, therefore, we offer a personalised care and nursing home accounting packages to work closely with care home owners and decision makers, providing you with the required support and advice from start-up to the initial acquisition and investment structures, and reducing future taxation to enhancing tax relief opportunities.
- Statutory annual accounts & tax returns
- Management of monthly or quarterly accounts
- Business growth and strategic review meetings
- Payroll, rension & bookkeeping service
- Support to statutory audit services
- Care home performance benchmarking
- Financial forecasting and budgeting
- Property issues
- Capital allowances claims
- Company structures
- Capital gains tax planning
- Sales & Acquisition – expanding, buying, or selling
- Exit strategies
- Virtual Finance Director
- VAT advice
- Help with Corporate Financing for new homes or developments
- Financial due diligence
- Personal tax and wealth management
- Carer home tax investigation
Our dedicated team of experts are members of the Healthcare Knowledgebase, ensuring our clients are kept up to date with the latest sector developments and legislation.
We would be lost without Heighten Accountants…
“What we liked about Heighten is that they have a widespread experience in working with care home industry and great links with funding providers allowing us to gain the right finance. Their welcoming friendly team help us on a weekly basis in providing us with full-service accounting. With their help, our financial information is on our fingertips through cloud technology and our management team is really impressed with the details reporting.
Heighten Accountants provide us quarterly management accounts, enabling us to track our progress and keep us on track. Recently, we have been seeking advice on care home acquisition. they know our business inside out and I would definitely recommend Heighten.” Accountants.
K M AHMAD
FOUNDER AND CEO
HOMEWARDS CARE LTD
What else can you expect from us?
Our award-winning team of care home specialist accountants provides expert tax and accounting advice to care home clients around London and nationwide.
Our extensive experience of over 20 years in general practice and of over 12 years in the care sector sets us apart from other accountants and advisers.
We are extremely well placed to assist in maximising the profitability and value of your care sector business. We work with you all the way from acquisition to disposal, covering all aspects of business advice, tax planning, and accountancy services.
1. Helping you at each step of your growth
From start-up to exit or succession planning, our team is on hand with our personalised service packages to support you in maximising your business value. By working closely we know the challenges you face within the sector and we help you find the right financial solutions.
2. Forward Thinking Accountants
We provide proactive and innovative advice to our clients. We’re not just accountants, we’re part of your advisory team. You get help driving value through frequent reviews of your financial affairs to ensure optimal tax efficiency tailored to your business objectives.
3. Switching made easy from your current accountants
We handle the switching process on your behalf to ensure a smooth transition.
Our dedicated healthcare team covers many aspects of care including nursing, care only, Autism, learning disability, rehabilitation, and domiciliary care.
How our nursing home accounting service works
Heighten Care Home Accounting service is effortless and simple to use:
Schedule a call
We understand at your Nursing and Care Home, you’re dealing with a unique set of circumstances and have specific questions you need answering. We will arrange your first call with our care home expert to understand your needs.
Get a custom plan
We will create the best strategic route forward for your care home and a personalised plan for your personal tax matters. And provide an approach that’s tailored for you, with no one-size fits all business needs. We offer a fixed fee proposal so you know exactly what your investment with us will be.
Achieve your desired success
We help you define your way to win. We will take all the hassle away for bookkeeping, accounts, tax, payroll, and cashflow, and, by focusing on a regular meeting approach, we will lay out the steps you need to take to get there.
Heighten Residential and Nursing Care Home accounting service sets out the strategic insight of what you tell us you need in the initial meeting. We will also recommend you to our preferred professionals, innovative finance solution providers, and industry-leading software to support your care home business and give you a one-stop experience.
Contact us now to arrange your complimentary initial meeting with our specialist team to discuss how we can look after you and your business
Commonly faced issues in nursing and care home accountancy
In nursing and care home accountancy in the United Kingdom, you may encounter several commonly faced issues as a care home owner. These issues can pose challenges to financial management and compliance of your nursing and residential care home business. Some of the common issues you face may include:
- Complex funding structures
- Advanced income & deferred sales reconciliation
- Effective expenses allocation
- Payroll & timesheet management
- Managing Capital Expenditure and Depreciation.
- Regulatory compliance
- Tax compliance and investigations
- Accounts and financial reporting
- Tax and business planning
- Cash flow management
- Implementing and integrating accounting software
- Payroll, VAT, and Data Quality Health checks
- Care Home Business Benchmarking
Given the complexities and challenges in nursing and care home accountancy, it is advisable for care home owners to work closely with experienced accountants or accounting firms specialising in the care sector.
At Heighten, we can provide expert guidance, address specific challenges, and help navigate the intricacies of accounting and financial management in your nursing and care home business.
Heighten has evolved with us, as our business has grown…
Before working with Heighten we had a stressful struggle to provide the information needed to complete our accounts, payroll and meet other financial obligations. However, when Heighten took over they made the process relatively stress free and helped us initially in streamlining our payroll which was a great pain at the time.
Heighten has been supporting us in providing financial information on time for our several carer home purchases and acquiring buildings for this purpose. As now our business has vastly expended, we found our relationship more fruitful with their advance support and advice. I would definitely recommend Heighten. They know a lot about the care home industry and having an expert in your corner really helps.
MANAGING DIRECTOR (MD)
NORMANSHIRE CARE SERVICES LTD
Nursing Home Accounting FAQs
Starting a nursing care home business in the UK has several tax implications that care home owners need to be aware of. Here are some key tax considerations:
- Corporation Tax: If you operate your nursing care home as a limited company, you will be subject to Corporation Tax on the profits generated by the business.
- Value Added Tax (VAT): Care home services are generally exempt from VAT. However, certain ancillary services may be subject to VAT.
- National Insurance Contributions (NIC): As an employer, you will be responsible for deducting and paying NIC for your employees.
- Payroll Taxes: Care homes typically have a significant workforce, and accurate payroll management is essential to operate a payroll system.
- Capital Allowances: When you purchase assets for your care home, such as medical equipment or furniture, you may be eligible to claim capital allowances.
- Property Taxes: Owning or renting property for your care home may have implications for property taxes. Understanding the business rates and potential reliefs or exemptions is crucial to managing property-related tax costs effectively.
- Business Expenses: Care home owners can claim tax deductions for allowable business expenses such as staff salaries, insurance, maintenance, utility bills, and professional fees.
- Personal Tax Considerations: As a care home owner, you may also have personal tax implications.
It is crucial to consult with a qualified tax professional or accountant who specialises in the care sector to ensure compliance with tax regulations, maximise tax benefits, and effectively manage the tax implications of starting a nursing care home business in the UK.
Handling UK VAT for care home services and ancillary services requires careful consideration and understanding of the applicable rules. Here are some key points to consider:
- Exemption for Care Home Services: In the UK, most care home services are exempt from VAT. This means you do not charge VAT on the fees you receive from residents for accommodation and personal care services. It is important to clearly indicate on your invoices that the services provided are exempt from VAT.
- Ancillary Services and VAT Liability: While care home services are generally exempt, ancillary services may attract VAT. Ancillary services are additional services that are not directly related to the provision of accommodation and personal care. Examples of ancillary services that may be subject to VAT include catering, laundry, hairdressing, and transportation. These services are considered separately from the exempt care services.
- VAT Registration: If your care home business provides ancillary services subject to VAT, you may need to register for VAT with HM Revenue & Customs (HMRC) if your taxable turnover exceeds the VAT registration threshold. It is important to monitor your turnover regularly and register for VAT in a timely manner if required.
- Mixed or Composite Supplies: In some cases, you may provide a combination of exempt care services and ancillary services subject to VAT. This is known as a “mixed” or “composite” supply. In such cases, you need to carefully identify and apportion the fees charged to appropriately account for the VAT liability on the ancillary services. This can be complex, and seeking professional advice is recommended to ensure correct VAT treatment.
- VAT Recovery on Inputs: Care homes that are VAT registered may be able to recover VAT on certain inputs or purchases that relate directly to the ancillary services subject to VAT. This includes VAT on goods and services such as catering supplies, equipment, and maintenance. Keep accurate records of VAT incurred on these inputs to support your VAT reclaims.
- Partial Exemption: If your care home business makes both exempt and taxable supplies, you may need to apply the partial exemption method to determine how much VAT you can recover. Partial exemption rules can be complex, and it is advisable to consult with a VAT specialist to ensure compliance with the regulations.
- Considerations for VAT Flat Rate Scheme: Depending on your business turnover and circumstances, you may also consider joining the VAT Flat Rate Scheme. The Flat Rate Scheme simplifies VAT calculations and may be beneficial for care homes that have limited VAT recovery on inputs. However, it is essential to assess the suitability and potential savings of the scheme based on your specific situation. It is crucial to consult with a qualified tax advisor or VAT specialist to ensure compliance with VAT regulations, determine the correct VAT treatment for your care home services and ancillary services, and optimize your VAT position. They can provide tailored advice based on your specific circumstances and help you navigate the complexities of VAT in the care home sector.
When it comes to treating care home staff wages and benefits for tax purposes in the UK, there are several considerations. Here are some general guidelines:
Employee Wages: Care home staff wages are subject to income tax and National Insurance contributions (NICs) through the Pay As You Earn (PAYE) system. As an employer, you are responsible for deducting the appropriate taxes and NICs from employees’ wages and remitting them to HM Revenue and Customs (HMRC).
Tax Codes: Each employee should have a tax code issued by HMRC, which determines the amount of income tax to be deducted from their wages. The tax code considers factors such as personal allowances, benefits, and any other taxable income.
National Insurance Contributions: Both you as the employer and your employees are required to pay NICs. The amount of NICs depends on the employee’s earnings and their category of National Insurance. You must deduct NICs from their wages and also contribute your share as an employer.
Benefits-in-Kind: If you provide additional benefits to your care home staff, such as accommodation or meals, these may be considered as benefits-in-kind and may have tax implications. In some cases, these benefits may be subject to income tax and NICs.
Pensions: As an employer, you may be required to offer a workplace pension scheme and automatically enroll eligible employees. The pension contributions need to be deducted from the employee’s wages and paid into the pension scheme.
Statutory Sick Pay (SSP): If a staff member is unable to work due to sickness, you may be required to pay them SSP. SSP is subject to income tax and NICs, similar to regular wages.
Reporting and Documentation: You need to keep accurate payroll records, including details of employee wages, benefits, deductions, and payments to HMRC. It’s important to meet all the reporting requirements and deadlines set by HMRC.
It’s crucial to ensure that you comply with the latest tax regulations and seek advice from a qualified accountant or tax specialist to address the specific needs and circumstances of your care home. They can provide detailed guidance tailored to your situation, helping you fulfill your tax obligations correctly.
Yes, as a nursing care home in the UK, you can generally claim capital allowances for eligible equipment and renovations. Capital allowances allow you to deduct the cost of qualifying assets from your taxable profits, reducing your overall tax liability. Here are some key points to consider:
Plant and Machinery: Most equipment used in your nursing care home qualifies as plant and machinery for capital allowance purposes. This can include items such as medical equipment, furniture, fixtures, and vehicles used for business purposes. The cost of acquiring or improving these assets can be claimed as capital allowances.
Annual Investment Allowance (AIA): The AIA provides a 100% allowance for qualifying expenditure on most types of plant and machinery. You can deduct the full cost of eligible assets, up to the annual limit, from your taxable profits.
Writing Down Allowance (WDA): If your capital expenditure exceeds the AIA limit or if the assets do not qualify for the AIA, you can claim a WDA on the remaining cost. The WDA rate depends on the type of asset, such as 18% or 6% for general pool assets.
Renovations and Improvements: Capital allowances may also be available for certain building renovations and improvements that qualify as integral features or assets within the special rate pool. This can include things like plumbing, heating, electrical systems, and sanitary fittings. The special rate pool generally attracts a WDA at a rate of 6%.
Timing of Claims: Capital allowances are typically claimed in the tax return for the accounting period in which the expenditure is incurred. However, there are rules for transitional periods and specific circumstances, so it’s essential to consult with an accountant or tax advisor to ensure compliance.
Consult a Tax Advisor: Given the complexity of capital allowances and the specific circumstances of your nursing care home, it is recommended to seek advice from a qualified tax advisor or accountant. They can provide tailored guidance, help you identify eligible assets, calculate the allowances, and assist with the proper documentation and tax planning.
Remember that tax laws and regulations can change over time, so it’s important to consult with a professional to ensure you have the most up-to-date and accurate information regarding capital allowances for your nursing care home.
How should we account for the sale of services or products to residents for our Nursing and residential care home in the UK?
When accounting for the sale of services or products to residents in your nursing and residential care home in the UK, there are several considerations. Here’s a general guideline:
Revenue Classification: Revenue should be recognized when it is probable that economic benefits will flow to the care home, and the amount can be reliably measured.
Service Fees: If you charge residents for services provided, such as accommodation, nursing care, meals, or other additional services, these fees should be recognized as revenue in the period when the services are provided. Revenue should be recorded at the fair value of the consideration received or receivable.
Residents’ Deposits or Prepayments: If residents make deposits or prepayments for future services, these amounts should be recorded as a liability on your balance sheet until the services are provided. Once the services are delivered, the prepayment is recognized as revenue.
VAT Treatment: Consider the VAT (Value Added Tax) treatment for the services or products provided. In the UK, some care home services may be exempt from VAT, while others may be subject to VAT at a reduced rate or the standard rate. Consult with a tax advisor or accountant to ensure compliance with VAT regulations.
Accounting for Additional Services: If you provide additional services or products to residents that are separate from the basic care package, such as hairdressing, laundry services, or outings, these should be accounted for separately. Revenue from these additional services should be recognized when the services are provided.
Proper Record-keeping: Maintain accurate records of revenue generated from the sale of services or products to residents. This includes invoices, receipts, and any supporting documentation. These records are important for financial reporting, tax compliance, and internal management purposes.
It’s crucial to consult with a qualified accountant or financial advisor who is familiar with the accounting standards and regulations applicable to the care home sector in the UK. They can provide specific guidance based on your care home’s circumstances and ensure compliance with accounting principles and regulatory requirements.
There are several tax reliefs and exemptions available for nursing care or residential care homes in the UK. Here are some of the key ones to consider:
- Business Rates Relief
- Capital Allowances
- Research and Development (R&D) Tax Relief
- VAT Exemptions
- Enhanced Capital Allowances for Energy-Efficient Equipment
- Employment Allowance
It’s important to note that tax reliefs and exemptions can change over time, and eligibility criteria may vary based on individual circumstances. Therefore, it’s recommended to consult with a qualified accountant or tax advisor who specialises in the healthcare sector to ensure you take full advantage of available tax reliefs and exemptions specific to your nursing care or residential care home.
How do we handle self-employed contractors or agency workers for our UK nursing care homes for tax purposes?
When it comes to handling self-employed contractors or agency workers for UK tax purposes in your nursing care home, there are a few considerations to keep in mind. Here’s a general guideline:
Employment Status Determination: It’s important to correctly determine the employment status of the individuals working in your care home. This determination determines the tax and National Insurance obligations.
Self-Employed Contractors: If an individual is genuinely self-employed, they are responsible for their own tax and National Insurance contributions. They should invoice your care home for their services and handle their own tax affairs, including registering as self-employed with HM Revenue and Customs (HMRC) and filing self-assessment tax returns.
IR35 Rules for Contractors: In some cases, the IR35 rules may apply if the self-employed contractor works in a manner similar to an employee. IR35 rules determine whether the contractor should be considered a “disguised employee” for tax purposes. From April 2021, for medium and large businesses, the responsibility for determining the employment status and applying IR35 rules may shift from the contractor to the care home, known as “off-payroll working.”
Agency Workers: If you engage agency workers through an employment agency, the agency is typically responsible for handling the workers’ tax and National Insurance obligations. The agency pays the workers’ wages, deducts the relevant taxes and NICs, and issues them with the appropriate payroll documents.
Payroll and Reporting: If you have employees, including agency workers treated as employees, you must operate a payroll scheme and deduct income tax and National Insurance contributions from their wages. You are responsible for providing them with payslips and submitting regular reports to HMRC through Real-Time Information (RTI).
Employment Rights and Benefits: The employment status of workers determines their rights and entitlements, such as holiday pay, sick pay, and pension contributions. Employees are entitled to employment benefits, while self-employed contractors are generally not.
Compliance and Documentation: Ensure that you comply with all relevant tax and employment legislation, including keeping accurate records of payments made to contractors or agency workers. Maintain proper documentation, such as contracts, invoices, and payroll records, to support your tax and employment arrangements.
It’s important to note that employment status determinations and tax regulations can be complex. Therefore, it’s recommended to consult with a qualified accountant, employment law specialist, or tax advisor who can provide guidance tailored to your specific circumstances and ensure compliance with relevant laws and regulations.