on a non-clinical partner impact on seniority and pensions?
Under the new GMS contract practices can included in their
partnership partners who are non-clinical NHS staff as long
as the practice has a least one GP.
One of our clients who is a single-handed GP wanted to
know the implications of making his wife, who was also the
practice manager, a partner and sharing the profits equally.
Our client had suggested the idea as he thought it would
be a good opportunity to share his profits and reduce the
overall tax burden that he and his wife had.
His accounts for the year ended 5th April 2004 showed profits
of £110,000 and he anticipated these would increase
under the new contract due to the income from the quality
and outcomes framework.
The tax and class 4 national insurance contributions on
our clients profits of £110,000 is £39,325.
He employs his wife as the practice manager and pays
her a salary of £25,000 on which he incurs employers’
national insurance contributions of £2,609. She pays
an amount of tax and class 1 national insurance on her salary
of £6,491. In total the couple pay tax and national
insurance of £48,425. If they become a partnership
the wife’s salary and employers’ national insurance
would no longer be a cost and so the revised profits would
be £137,609. If these profits were split equally
this would give them each a share of £68,805 and the
total tax they would pay on their share of profits would
be £22,433 each, saving £3,559 overall.
Although there are tax savings to be made, we pointed out
to our client that there are some implications under the
new contract which he needs to consider before deciding
how they will share the profits.
Under the new contract seniority is calculated on the number
of years’ reckonable service in the NHS plus it is
now linked to superannuable profits. Our client has
30 years reckonable service and is receiving seniority of
£8,675p.a. If he decided to share the profits equally
with his wife and his profits were below two thirds of the
average then his seniority would be restricted.
Under the new contract if a GP’s share of profits
is between one third and two thirds of the average then
the GP would only receive 60% of their seniority entitlement.
If below one third of the average then would receive
If our client’s profits were between one third and
two thirds of the average he would lose an amount of £3,470
of income and if below one third he would lose £8,675
We suggested that if our client’s wife became a partner
that they consider sharing profits other than equally. This
is to ensure that our client does not lose any seniority
income. The only problem is that the average superannuable
profits will not be known until all GP’s have submitted
their forms detailing their individual superannuable profits.
Under the new contract superannuation is now going to be
calculated based on a GP’s share of NHS profits. Although
the guidance on how this will be calculated has still not
been issued, it will not simply be the profits per the accounts
as this includes non-NHS income and non-NHS expenses.
Our client’s profits are £110,000, although
this would be adjusted for non NHS income and non NHS expenses,
this is an estimate of the level of profits that he could
pay superannuation on. If our client decided to share
profits equally with his wife then this would substantially
reduce the amount of NHS profits to about £68,805.
When deciding on how to share profits our client
would need to ensure that his share should at least give
him the same superannuable income as in the previous year
so that this does not affect his pension.
If our client’s wife does become a partner they would
need to decide how to share profits in the most advantageous
way so as not affect seniority income and his superannuable
profits. Certainly in the first year it may be preferable
that his wife takes a reduced share of profits until it
has been established what the average superannuable profits
are for seniority and what his profits would be for superannuation