to consider before paying the quality achievement payment
We are due to receive our achievement payment
for the quality and outcomes framework and the partners
are planning to draw this after staff bonuses have been
paid. Is there anything else we need to consider before
paying out this amount?
Before practices pay out the achievement payment,
they may need to make provision for the balance of superannuation
and higher tax liabilities which may be due in January 2006.
This practice is a two partner practice who
is expecting an achievement payment of £37,000. The
exact figure is not known, due to the final number of points
achieved and the effect of disease prevalence on the clinical
points. The partners were planning to draw £16,000
each after paying a total of £5,000 in staff bonuses.
Balance of superannuation
Under the new contract, superannuation will now be calculated
on the GP’s share of NHS profits. Both GMS and PMS
GPs and non-GP principals will be required to complete an
end of year certificate and submit it to their PCT.
As the profits will not be known until the
accounts have been finalised, the PCT are currently deducting
an estimated figure in respect of superannuation. Some PCTs
have estimated the superannuation based on previous years
deductions which means this is based on a portion of income.
This bears no relation to the changes under the new contract
where superannuation is calculated on actual profits.
Once the PCT receive the completed certificates
of NHS profits for a GP, they will calculate any balance
due from the practice as a whole and either deduct this
from the next monthly GMS payment or request the balance
from the practice.
The balance of superannuation will be 20%
which is made up of the GPs’ (employees’) 6%
contribution and the employers 14% contribution.
We have provided this practice with an estimate
of their NHS profits so that they can make a provision for
the balance of superannuation. The calculations (box A)
show that this two partner practice will have a balance
of superannuation to pay of £8,000. It is recommended
that the partners leave this money in the practice before
they share the achievement payment.
Previously under the old contract GPs didn’t
need to worry about the payment of superannuation as this
was calculated and deducted before they received their quarterly
income. Now that superannuation is based on profits, GPs
will need to consider that they may have a balance of superannuation
to pay if not enough has been deducted by the PCT. This
change will affect practices differently. Practices who
are efficient and control their expenses may find that their
superannuable profits increase considerably and thus will
have a large balance of superannuation which needs to be
Seniority and its link with superannuable profits
Seniority is calculated based on the number of years a GP
has worked for the NHS. However, under the new contract,
it is also linked to the level of the GP’s superannuable
If a GP’s superannuable profits are
below two thirds of the average then the GP’s seniority
will be restricted.
GPs who are currently receiving their full
seniority, may find that if their superannuable profits
are below two thirds of the average, then the PCT will need
to claw back the overpayment. The problem is that the average
superannuable profits will not be known until all GPs in
the country have submitted their end of year certificates,
which may not be until February 2006. This could mean that
a GP whose seniority should be restricted could be being
paid at the full rate for nearly two years, before any adjustment
is made for the overpayment.
It is expected that under the new contract, practices will
see an increase in their profits and this has been the case
for many of our practices. Any increase in profits means
that there will be a balancing tax payment for 2004/05,
together with an increased payment on account for 2005/06,
which will be payable in January 2006. Again GPs will need
to ensure that they are making provision for the increase
in their tax.
For this practice, their profits increased
from £115,000 to £203,000 for the year ended
30th September 2004, this means that both GPs have a large
payment of tax payable in January 2006. Box B shows an estimate
of tax for Dr A of £30,460 and Dr B of £21,570.
It is worth pointing out that although the
achievement payment will not be paid until April/May 2005,
the relevant income needs to be included in the practices
accounts as it has been earned in the year 2004/05 but not
yet received. This is required under current tax legislation
where the accounts should be prepared on an accruals basis
and not a cash basis. Practices will need to ensure that
their accountants are fully aware of this.
Box A – Balance of Superannuation
|Estimate of – Employees 6%
- Employers 14%
Less: superannuation deducted – 6%
Estimate of balance of superannuation due
Box B – Balance of Taxation
|Balance of tax due for 2004/05
1st Payment on account for 2005/06
Estimate of tax due by 31st January 2006