Understanding Accounts & Taxation
Book-Keeping - Setting Up Financial Systems
Pensions & Superannuation
Tax Return & Expenses Forms
Personal Expense Claim Form
Locum Expenses Claim form
Rental Income & Expenses Form
Things to consider before paying
the quality achievement payment to partners
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
|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