The new to partnership payment is an incentive scheme set up by NHSE to encourage Doctors to take on a partnership position after a sustained decline in the number of GPs in partnership in recent years. The scheme enables health professionals to receive a payment of £20,000 if they take up a full-time partnership role for the first time after 31 March 2020. There is also a further £4,000 available for on cost expenses and £3,000 for training in respect of early partnership skills development.
The incentive is also available for physiotherapist, pharmacists, nurses and other clinicians taking up a partner position. Practice managers have not yet been included but it is hoped they could be added later. The scheme became effective from 1 July 2020 but applicants are eligible from April 2020.
Please see guidance from NHS England for the full criteria – https://www.england.nhs.uk/wp-content/uploads/2020/10/new-to-partnership-2020-21-guidance.pdf
Treatment in partnership accounts and individual tax returns
The income should be included under NHS income, which can then be distributed to the individual via a prior share of income before the remainder of profits are distributed. As such, this income would form part of the taxable partnership profits on the individual’s self-assessment tax return and would be subject to Income Tax and National Insurance at their marginal rate. The whole amount will not be taxed on receipt as there is potential for claw back, so an amount equivalent to 1/5 will be taxable each year.
Any partners who leave the partnership before the end of the five-year term will have to repay 20% of the funding for each year not completed. We would therefore recommend that the lump sum payment is not directly withdrawn from the practice, but instead is utilized as the new partner’s initial buy in fund for their share of the working capital of the practice.
For NHS pension purposes the incentive is non-pensionable income.
The application form can be found on this link – https://www.england.nhs.uk/wp-content/uploads/2020/06/N2PP-Application-Form-v1.5_distributed.pdf
Before applying for this incentive, consideration must be given to the following:
- An up to date signed partnership agreement or suitable letter on practice headed paper must be attached to the application
- Evidence of a current GMS/PMS contract, will be checked by NHSE with CQC, but a copy of an APMS contract must be provided
- Although partnership agreements might be expensive every partnership should ensure they have a valid and up to date one for their practice
- The possible effect of the additional income on personal tax. For example, this incentive could effectively mean earnings are pushed into higher rates of tax, or income may reach levels above £100,000 where there would be loss of personal allowances to consider. It may be worth asking your accountant for a tax estimate before applying.
- The guidance does state that there is an additional 20% (Pro rata to FTE) available for on costs (tax & NI) which is payable with the incentive payment.
As we are fast approaching the deadline for 2019/20 Self Assessment tax returns to be filed and self assessment tax liabilities to be settled in January 2021 there may be an extra amount to be taken into account if you availed yourself of the option to defer the July 2020 tax payment on account due to having been affected financially due to COVID.
Personal finances may be constrained due to various issues such as a reduction in outside earnings or practice cash flow issues due to certain income streams reducing. If this has been identified as a cashflow issue by practice managers there may have been a reduction in drawings to ensure working capital is maintained. This may have resulted in less available money to pay your tax bill in January.
Therefore early notice of your 31 January 2021 tax liabilities is vital to ensure you have enough in the bank (either personal if you pay it yourself or the practice bank account if this is paid via the practice) to settle the July 2020 payment on account and the January 2021 balancing payment for 2019/20 and the first payment on account for 2020/21 which will also be due in January 2021.
However a lifeline has been offered if individuals are experiencing financial difficulties due to the COVID-19 pandemic with Self Assessment customers being able to apply online for additional support to help spread the cost of their tax bill into monthly payments without the need to call HM Revenue and Customs (HMRC).
HMRC have said:
The online payment plan service can already be used to set up instalment arrangements for paying tax liabilities up to £10,000. From 1 October 2020, HMRC has increased the threshold to £30,000 for Self Assessment customers, to help ease any potential financial burden they may be experiencing due to the coronavirus pandemic.
The increased self-serve Time to Pay limit of £30,000 follows the Chancellor of the Exchequer’s announcement on 24 September to increase support for businesses and individuals through the uncertain months ahead.
As part of his speech, the Chancellor announced that Self Assessment customers could pay their deferred payment on account bill from July 2020, any outstanding tax owed for 2019 to 2020 and their first payment on account bill for this current tax year in monthly instalments, up to 12 months, via this self-serve tool. Customers who need longer than 12 months to settle their tax liabilities are invited to contact HMRC in the usual way.
Customers who wish to set up their own self-serve Time to Pay arrangements must meet the following requirements:
- they need to have no:
- outstanding tax returns
- other tax debts
- other HMRC payment plans set up
- the debt needs to be between £32 and £30,000
- the payment plan needs to be set up no later than 60 days after the due date of a debt
Customers using self-serve Time to Pay will be required to pay any interest on the tax owed. Interest will be applied to any outstanding balance from 1 February 2021.
If your Self Assessment debts are over £30,000, or you need longer than 12 months to pay your debt in full, you may still be able to set up a Time to Pay arrangement by calling the Self Assessment Payment Helpline.
If you anticipate that profits have reduced in the 2020/21 tax year please contact us to consider reducing your 2020/21 payments on account due January and July 2021. We can prepare draft calculations to estimate your 2020/21 tax liability. Fees will be available on request.
Annual Allowance pension tax charge
As you may be aware, further tax may be due if your pension savings each year exceed the available Annual Allowance threshold. The standard allowance is £40,000, but this may be reduced (tapered) for higher earners. There is a facility to bring forward unused allowances from the previous three years should pension savings have been below the available limit in those years. Where a taxable excess occurs, it is possible to ask the NHS Pension Scheme to pay the tax for you. Your pension in retirement would then be reduced to recover the tax paid on your behalf.
In a move designed to encourage clinicians not to reduce work commitments in the NHS, NHS England has provided a commitment for the 2019/20 year only that, where the option for the scheme to pay the tax is taken, the pension in retirement will be reduced in the normal way but the NHS will pay you a corresponding compensation payment, subject to Pay As You Earn deductions, that will entirely recompense you for the reduction in pension. You would consequently suffer no financial loss.
It is possible to submit an estimated Scheme Pays Election (SPE) for as little as £1 for each scheme you are a member of. The deadline for submission of this is 31 July 2021. Where an estimated election is submitted for 2019/20, you then have until 31 July 2024 to amend the SPE. By completing an election you would be safeguarding your ability to use this facility and, more importantly for this one year, retain the guarantee from the NHS to recompense the pension reduction. This commitment does not apply if you pay the pension tax charge yourself as part of your normal self-assessment tax liabilities.
The application form for the compensation scheme was released by the NHS for England and Wales on 10 December 2020, with instructions that it should be completed and submitted at the same time as, or slightly after, the scheme pays election. If requested so to do, we will assist our clients with the completion of both forms. Fee proposals for this service are available on request. The submission deadline for the compensation application is 31 March 2022, although there remains a little uncertainty as to the process for GPs. More is expected about this in the near future.
Whilst NHS Pensions are obliged to accept SPEs under certain conditions, they may voluntarily accept them even if those conditions are not met. If a voluntary election is accepted, the tax for 2019/20 remains due by 31 January 2021. If NHS Pensions pay this over to HMRC later than that, which is entirely possible as the election submission deadline is 31 July 2021, HMRC may charge interest, which will fall to the individual. Similarly, where estimated elections are amended when final figures are known, interest may again arise to the individual. MHA Moore and Smalley do not take responsibility for any interest that might arise in these circumstances.
If you are an employed clinician, (not a GP) you should have had your 2019/20 Pension Savings Statement by 6 October 2020, if you have not received one, we recommend that you request it so that the position can be checked and a SPE submitted if required.
Please note that this scheme does not apply to clinicians who are members of the NHS Scotland Pension Scheme.
Pension certificates’ season will soon be upon us once again and, as many will have seen, PCSE can sometimes run into problems with processing the end of year certificates. What can be done to try and help the process run smoothly?
Partners and salaried GPs
Generally speaking, a partner or salaried GP without GP Solo earnings should not encounter too many issues. One key consideration here is whether or not previous year’s certificates have been processed. This year we have seen, on a number of occasions, PCSE being unable to process the current year certificate due to the prior year’s certificate not yet being resolved. The best way to check this is to access the most recent Total Rewards Statement. This can be obtained by going to https://www.totalrewardstatements.nhs.uk/ logging in and downloading a copy of the latest statement. Once downloaded we recommend that a copy should be provided to your accountant so they can review the pension record. This can be a useful exercise for a number of reasons: to ensure the record is up to date; to identify any potential errors or gaps in the record.
GP Solo forms
A common cause for issues in the processing of certificates arises due to GP Solo income and contributions. The reason that certificates are often rejected where there is a GP Solo income source is due to a discrepancy between the certificate that is submitted and the doctor’s respective Open Exeter record.
It is first necessary to make sure that the GP Solo form(s), that form the basis of what will be included on the certificate, is correct. The easiest way to check this is to confirm that the figure included in box I of the form (Total paid to member after deducting all employee contributions) is correct and agrees to what has actually been received. We recommend that this is done before signing and agreeing the form.
It is also important to ensure that any employee’s contributions (and potentially AVCs, Added Years or Additional Pension contributions) have been collected by the GP Solo provider, if appropriate. The next step is to check what is currently in the Open Exeter record. This can be confirmed by checking the 2019/20 superannuation statement which is available from Open Exeter and the practice manager should know how to find this for you. It is not uncommon for the Open Exeter record to show different figures to those on the GP Solo form. If the figures on the GP Solo form agree to those in Exeter, then there should be no issue. If there is a discrepancy, then the GP Solo provider needs to assist to discuss and amend this discrepancy and help to get the Exeter record updated.
A change in role?
If there has been a change of role from a salaried GP to a partner or vice versa then this can often cause issues with pension administration. There is a requirement to ensure that each practitioner is accurately recorded on the GP performer’s list. PCSE have recently made changes to their systems and changes to the performer’s list can be made online: https://pcse.england.nhs.uk/services/performers-lists/gp-performers-list-for-england/.
The next step is to ensure that the Open Exeter record is up to date and accurate. If roles have changed during the year (and the performer’s list has been updated accordingly), then there should be two separate local GP codes during the year. These should split out the pension contributions between the two roles.
We have seen on numerous occasions where all contributions are recorded on one code and have not been transferred to a new code as they should. An update to the performer’s list should trigger the opening of a new local GP code and the contributions should be moved to this. It is also important to note that an updated estimate of pensionable pay should be submitted by the practice to reflect the change in role and provide a new estimate on which the deductions are based . If the contributions have not been transferred, then PCSE should be contacted to ask them to update the record . It is also worth noting that a change in role will make the completion of the pension certificate more complicated, as both a Type 1 and Type 2 form will be needed. Each of the respective forms will rely on the other, so it is recommended that these are prepared at the same time.
As ever the regulatory requirements around the processing of pension certificates and the interaction with PCSE continues to be complex. We are here to help, so please do contact us.
If you are unsure about how the above may apply to you, then please get in touch with Chris Ellison, Healthcare Services Senior Accountant, or alternatively contact us here.
It is that time of year again, Christmas is around the corner. However, this year is a little different as many of us will be working from home on Christmas jumper day and it is unlikely that we be catching up with colleagues at the annual Christmas party.
To stay in the Christmas sprit employers may want to send gifts to their employees instead, however if that gift gives rise to a personal tax charge it may be unwelcome. As HMRC see gifts to employees as benefits it will be necessary to consider if the trivial benefit rules for employers and employees apply, so certain gifts are exempt from income tax and national insurance.
The key conditions
The current form of the trivial benefit rules imply that no tax is payable if all of the following points apply.
- The gift has cost the employer £50 or less, including VAT, per employee.
- The gift is not cash or a cash voucher (retail gift vouchers should be allowable).
- The gift is not a reward for the employees work, past or present.
- The gift is not part of the work contract or other arrangement.
Tax is due on all gifts that do not meet these conditions. As this is an all or nothing exemption, gifts with a value in excess of £50 will be fully taxable in line with the benefit in kind rules.
Where the benefits are classed as ‘trivial’, HMRC do not require any notification of these gifts being made.
Where various gifts are bought in bulk and provided to employees, working out the exact cost per individual gift may be impractical. When this happens the average cost of the gift can be used, and it must come under the £50 limit to remain ‘trivial’.
The special treatment of directors
Directors of close companies i.e. companies owned and controlled by five or fewer shareholders, have an annual cap placed on the value of ‘trivial’ gifts they receive in one tax year. The current form of the rules has a cap of £300. General employees are not subject to this rule.
What to watch out for
There is no general rule which places a limit on the number of ‘trivial’ gifts an employee can receive in one tax year, provided all the rules are met per gift. HMRC do however have rules in place which prevent employers from trying to divide a larger gift into several smaller gifts.
An example of this provided by HMRC shows how providing an employee with a gift card costing £10, would initially fall within the ‘trivial’ benefit rules. If the employer were then to top up the same card on 7 further occasions at a cost of £10 per time the total cost to the employer would be £80. Even though the card is topped up at separate occasions, the provision of the card forms a single benefit, and the total cost would be fully taxable in line with the benefit in kind rules. Retail vouchers from different stores should not fall under this treatment as they do not constitute one single benefit, so the limit per voucher would remain at £50.
This issue kicks off with an autumn financial planner from
AISMA Vice Chairman James Gransby, that highlights what you should be focusing
on now and sets some priorities for the months ahead.
AISMA board member Sue Beaton writes how planning ahead over
the next few months could help practices keep on track financially as the
impacts of Covid-19 on cash flow and profitability start to be felt.
Practices all over the UK are having to grapple with patient
expectations after the massive changes to the way in which primary care
services are delivered as a result of the pandemic. Practice management
consultant Fiona Dalziel shares her ideas on how practices can help fill the
gap in patients’ understanding of the ‘new normal’.
In our regular AGONY AccoUNTant feature, Abi Newbury answers questions about PCN money and tax, drug reimbursements and a cash mis-match. Finally, specialist medical solicitor Alison Oliver runs through the main features of the NHS New to Partnership Scheme, summarising some key considerations for both the practice and a new partner joining.
Sale and leaseback of practice property
A GP partnership will own many assets including fixtures and fittings, medical equipment and sometimes the property that the practice works from. There are many advantages to this such as control over how the property is used and maintained and also if you are in the fortunate position of being in a building that grows in value, potentially receiving more for your investment when leaving the partnership than you paid when joining. However, the property can also tie up capital and if mortgages and loans are involved then monthly repayments can significantly affect cash flow. Sale and leaseback can be viewed as a way of releasing the capital and enabling the money to be utilised for other things such as personal mortgages and school fees. The property will be sold by the partnership to a third party who then immediately grants a lease back to the partnership. The use of the property will then continue under the lease arrangement with the third party often for a term of 20-25 years.
Advantages of sale and leaseback
New partners are potentially reluctant to buy into a property particularly at a time when they are starting out in their career and may have other personal liabilities such as buying their own home.
If there are existing partnership loans in place secured on the property any increase in borrowings either within the partnership or personally to buy in might be at different rates and new partners may not want to enter into such arrangements. There may be redemption penalties on the old loan arrangements that make shopping around for other competitive rates less viable. Therefore it may seem to be more attractive to an incoming partner to be part of a lease arrangement rather than purchasing a property. The main advantage for leasing premises is that the equity in the premises does not have to be funded by the partners.
Disadvantages of sale and leaseback
An incoming partner needs to be aware that all responsibilities of the partnership are jointly and severally liable, which means if they are taking on significant long term liabilities with respect to the lease and have no underlying property asset on which to secure those liabilities there is possibly a higher personal risk than if they were party to loan finance to own the building instead
When selling the property to the third party a capital gain (or loss) will crystallise. As the sale of the property is not classed as a cessation of the business then Entrepreneur’s Relief ( now known as Business Asset Disposal Relief) will not be available and capital gains will be due at the current CGT rate of 20% rather than the 10% reduced rate. If the property has increased in value since the partner purchased their share this may result in a significant amount of capital gains tax to pay.
Following leaseback, any subsequent growth in the value of the property is forgone by the partners and the third party will benefit from this.
Stamp duty land tax (SDLT) may be due on the lease and NHSE may not reimburse these costs.
The partnership will be reliant on the third party making or approving significant improvements to the property such as an extension.
The terms of the lease may also transfer the responsibility to the partnership for the repair and maintenance of the property on an ongoing basis and will no doubt include a closing dilapidations provision at the end of the lease term. NHSE are unlikely to reimburse the full amount of these costs and therefore the partnership will have to fund the difference.
Prior to sale to the third party the partnership may have benefitted from notional rent and other rental income from other businesses such as pharmacies. Once the property has been sold notional rent ceases and any third party income will be that of the landlord owner unless permission is given to sub-let rooms.
If you are considering the sale and leaseback of your property, we can help guide you through the maze of accounting and tax issues and can recommend solicitors to help with the legal aspects.
Are you considering partnership as the next step in your career as a general practitioner?
There are many reasons for making a long-term commitment to a GP practice. Getting to know your patients and their families; understanding the needs of the local population; shaping the way in which care is provided – all of these aspects of working in a partnership can be rewarding an fulfilling.
Grasping the financial and business aspects of contributing to a GP practice, however, can be daunting.
The best course of action is to tackle these head-on. This guide has been written to explain some of the key business areas you will be involved with as a partner, so you have a thorough understanding of the financial pros and cons before joining a practice.