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Savings in employer’s
national insurance by changing the status of your salaried GP
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We are looking to employ a salaried GP to
replace our senior partner who has just retired. We have heard
that there are significant savings to be made in National insurance
if we alter their status to being a “fixed profit share
partner”. We would like to know what the implications are
for both the practice and the salaried GP if we decide to do this?
If you employ a salaried GP, they will be
included on the payroll and taxed at source just like any other
member of staff. As their employer, you will pay employer’s
national insurance, which is currently 12.8%.
If you employ a salaried GP on a gross salary
of £65,000 this would cost you £7,693 in employer’s
national insurance contributions. This could be saved if the GP
became a fixed profit sharing partner, as they would no longer
be an employee, but self-employed. The savings in national insurance
makes this an attractive option, but there are many other factors
to consider.
To be treated as a self employed partner they
would need to have the same risks and rewards as the other partners.
Their profit share should be the higher of their fixed share or
a percentage of the profits, with the aim of the fixed share being
the higher amount.
Implications for the practice
If the salaried GP became a “fixed profit
sharing partner”, they would essentially be a partner in
the practice. This would mean would have the same rights and responsibilities
as the other partners in the practice.
One main disadvantage is that they would be
able to have sight of your practice accounts, which may cause
some difficulties for high earning practices.
If the GP is taking on the same workload and
responsibilities similar to the other partners, but is earning
a lot less this could cause problems within the partnership. The
GP may want to try and agree a higher fixed share once they have
seen how much the other partners are earning.
Making the GP a fixed profit sharing partner could be an opportunity
to reward them for their work by agreeing a fixed share plus a
small share of the profits. For example, your could agree that
they would receive a percentage share of the quality and outcomes
framework if the practice achieved a certain number of points.
The GP would have the same rights as any partner,
which would mean they could have access to the accounting books
and records, however they would not need to be a signatory for
the bank, i.e. signing cheques. As a partner they would be able
to sign contracts on behalf of the partnership which again may
lead to problems if not been discussed with other partners. If
the practice did not want the GP to be able to have these responsibilities
then this would need to be clearly stated in the partnership agreement.
The partnership agreement would need to be
updated for the new partner, which would include details of their
responsibilities, fixed profit share and other specific matters.
The PCT would need to be informed that the
practice have taken on a partner. As a partner the GP would be
entitled to seniority income, which they would not receive as
an employed GP. This would mean that their profit share would
be their fixed share plus their seniority.
Implications for the salaried GP
As a fixed profit sharing partner, they would
have the status of being a partner as opposed to just a member
of staff, but would also have joint and several liability like
any other partner. They would also become responsible for their
tax affairs whereas being a salaried GP this is dealt with by
the practice through PAYE. This means they need to register as
self employed, complete a tax return and pay their tax liabilities
by the relevant deadlines. If they use an accountant to deal with
there tax affairs, they will have the cost of the accountant’s
fees.
However, an advantage of being self-employed
is that they would be able to claim a lot more expenses for tax
relief compared to an employed GP.
Under the new contract, partners are required
to complete a certificate of their NHS pensionable profits, and
although they would be a fixed profit share partner, a certificate
would still need to be completed and submitted to the PCT.
September 2005
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