Ireland has about 2,400 veterinary practitioners serving 130,000 farmers.
Of course many veterinary practices are now city based and deal almost entirely with pets through small animal clinics. Equally, some vets work on Department of Agriculture-based projects including meat plant and livestock inspection duties.
Other vets work almost exclusively within the horse and greyhound industries. Surprisingly enough, a report from the Competition Authority suggested that after all of these non-traditional activities are excluded only about 60% of registered veterinary practitioners work in private practice.
In Ireland, the Veterinary Practice Act 2005 regulates the industry in conjunction with the Veterinary Council of Ireland a body established by the same Act. Practices are typically small with an average of three vets per practice.
Looking a little deeper at the Irish regulations around veterinary practice provides an explanation of the current profile of vets operating exclusively as sole traders.
The first part of the jigsaw is the wide definition for the practice of veterinary medicine which amongst other factors includes the diagnosing of disease, injury, pain, deformity, defect or state of health as well as the carrying out of treatment services in relation to any of these.
The second piece is the restriction of the provision of these services or indeed the prescribing of remedies by a person other than a veterinary practitioner.
The final piece is a restriction of the practice of veterinary medicine to individuals.
These restrictions have effectively reinforced the traditional model of the provision of veterinary services through sole trader/self-employed practices.
On one hand this limitation has some benefits: For instance there is no opportunity for monopolisation of the industry by chains of veterinary practices.
On the opposite side, the restriction of veterinary practice to sole traders has some significant downfalls.
On the tax side, vets are exposed to income tax on all income earned from the practice – the taxation of profits at income tax rates can be particularly harsh in an environment where vets are carrying debtors.
In the case of rising debtor balances, due for example to either weather influences on farmers’ ability to pay, the effect on taxation is that veterinary practitioners effectively end up paying tax on profits even though cashflow may be disastrous.
The purchase of commercial property by a veterinary practice can have a similar outcome, where profits are taxed in full, yet repayments on commercial property, unlike farm buildings, are not tax deductible.
In the case of vets wishing to retire, the choices and options to dispose of your business are narrow. Given the earlier mentioned rules regarding the diagnosis and prescription of medicine, this type of work carried on by one retiring vet can only be performed by another vet.
As such, practices find it difficult to grow in scale through efficiencies.
Back on the tax side, the buy-in to a veterinary practice by a would-be newcomer is not deductible for income tax purposes.
All of this translates into a situation where retiring vets have limited choices as to how they dispose of their business, and face a muted price for the disposal of their business compared to what could be achievable with a corporate customer.
There are a variety of other tax and financial benefits which could arise from incorporation, including the option to grant employees share benefits, the potential for the business itself to buyout a retiring vet and greater pension funding options.
In general, company/corporate structures can add a certain professionalism to the way a business is run, this springs from the legal obligations on directors and a whole variety of Companies Acts obligations.
The Competition Authority of Ireland recommended in 2008 that veterinary practices should be allowed to establish companies, suggesting that consumers would benefit from enhanced competition, cost savings from more efficient practices and greater choice of service.
Interestingly, vets in the UK have been able to incorporate their practices for a number of years.
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