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Things to consider before paying the quality achievement payment to partners

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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 provided for.

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 profits.

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

  Dr A Dr B
Estimate of – Employees 6%
- Employers 14%
Total superannuation
Less: superannuation deducted – 6%
- 14%
Estimate of balance of superannuation due

Box B – Balance of Taxation

  Dr A Dr B
Balance of tax due for 2004/05
1st Payment on account for 2005/06
Estimate of tax due by 31st January 2006


March 2005