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
Do your accounts deal with employer’s
I am a GP in a four partner practice and I
receive an equal share of profits. I joined the NHS pension scheme
in 1991 and therefore, my earnings are capped for pension purposes.
Also the senior partner is now receiving his NHS pension and no
longer pays superannuation. We are concerned that we will be paying
the cost of the other partner’s employer’s superannuation.
How can we ensure that this is dealt with fairly in the accounts?
Firstly, it is important to understand what
has changed since the introduction of the new contract and why
you need to ensure that the GP’s employer’s superannuation
is dealt with correctly in the accounts.
GPs are unique, as you are both self-employed
individuals and are also employees of the NHS. Your contribution
to the NHS pension scheme is 6% of your superannuable income,
and since 1st April 2004 the definition has changed to your NHS
As you are also employees of the NHS, the
PCT, as your notional employer paid the employer’s contributions
into the scheme up to 31st March 2004. Many GPs will not have
been aware of this as it was dealt with directly.
Not only has the definition of superannuable
income changed since 1st April 2004, but also the GP’s employer’s
superannuation, which was previously paid by the PCT, is now funded
through your global sum and MPIG correction factor. The income
from the quality and outcomes framework and enhanced services
also includes an element of income towards the cost of the employer’s
contribution. As practices have been given this additional funding,
you are now responsible for paying your own employer’s contribution
for you as GP’s on your superannuable income.
Currently the PCT are making deductions for
both the employees (your 6% contribution) and the employer’s
contribution (14%). Your employee contribution will continue to
be shown as part of your drawings in the accounts. The employer’s
contribution should be shown as an expense in the accounts or
offset against the additional income to pay this contribution.
If the profits are shared equally, then each
you might expect to have an equal share of the employer’s
contribution. However, although you share profits equally, your
individual NHS profits for superannuation will not be the same
for each partner. The reason for this is that the calculation
of NHS profits will also include your individual personal expenses
and any outside income that is now superannauble. If a partner
joined the NHS pension scheme after June 1989, and their NHS profits
are higher than the Inland Revenue earning cap which for 2004/05
is £102,000, then their individual NHS profits will be capped
to £102,000 and this will be the amount that superannuation
will be calculated on.
As you can see from table A, Dr A no longer
pays superannuation and therefore his employers contribution is
nil. If the employer’s contribution is not separately identified
to each partner and is shared equally, then Dr A is paying £12,775
of the other partner’s employer’s contribution.
To ensure that this is dealt with fairly each
partner’s employer’s contribution can be allocated
to them as a prior expense, before the balance of profits are
Practices whose accountants do not specialise
in dealing with GP’s should ensure that they inform them
of the implications of the employer’s contributions.
It’s also worth pointing out that any
GPs, who are not contributing to the NHS pension scheme, will
still need to complete the annual certificate of pension profits
as this also determines the amount of seniority income they are
|Profits per the accounts
NHS Profits for superannuation purposes
Employer’s superannuation (14%)
Share of employer’s superannuation if shared equally