Making Tax Digital for Medical Practices

HM Revenue and Customs (HMRC) are embracing the digital revolution and making fundamental changes to the way the UK’s tax system works. The Government is referring to these changes as Making Tax Digital (MTD).

The key elements of MTD are:

  • Businesses will be required to keep digital records.
  • Businesses will be required to update HMRC with quarterly reports.
  • An end of year submission/annual taxable profit calculation will be required.

HMRC are proposing a staged introduction to the new rules, starting for many businesses in April 2018 and completing the roll out in full by 2020.

The accounting software used by practices will need to be reviewed to see if it will be compliant with submitting quarterly reports in a digital format. HMRC’s current proposals suggest that invoices must be electronically scanned into software, with this software automatically uploading summarised data (not the invoices themselves) to HMRC. Any practices still using spreadsheets will need to upgrade to a software package that will be able to deal with digital accounting in order to meet the requirements.

We have been in touch with many software providers regarding their GP accounts software and not all of them have plans to make their software compliant with MTD. Therefore, practices will need to find out if their provider has plans to comply with MTD and if not, urgently consider a switch to cloud based accounting software. We would recommend that, if you were going to change your accounting software, it would be from the first day of your next accounting year i.e. this would be from 1 April 2017 for practices with a March 2017 year end.

QuickBooks Online is a secure online accounting system and will be compliant with submitting digital accounts. It allows instant, up-to-date and 24/7 access to your finances, delivered direct to computer, tablet or mobile phone. Our member firm Larking Gowen is an authorised retailer of QuickBooks. If you are interested in a demonstration of the software, please contact us.

We have replied to HMRC’s consultations on MTD. We strongly feel that quarterly reporting for medical practices will not produce accurate results due to the timing of receipt of many core income streams, and we have expressed these concerns to HMRC. We are expecting further announcements to be made over the coming months.

If you have any concerns or would like to discuss any of the issues raised in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Healthcare team.

This article originally appeared on the blog of our member firm, Larking Gowen.

GP Seniority Clawbacks

The following explains the situations which give rise to a seniority clawback and what can be done to anticipate one.

Some seniority facts: 

  • The seniority scheme will end completely on 31 March 2020.
  • Overall seniority spend is reducing by 15% in the intervening years to 2020.
  • Those GPs not in receipt of seniority on 31 March 2014 don’t qualify to receive it under the phasing out provisions.
  • Seniority was available to GP Partners after their second year in partnership – as such only GPs who became partners before 31 March 2012 are still eligible to receive it.
  • Final seniority factor figures are generally not known for four years after the year in question meaning that adjustments will still be made up to around the year 2024.
  • If superannuable earnings (excluding the seniority amount received) fall below two-thirds of the seniority factor then a 40% clawback of seniority is suffered. Below one-third and no seniority is available.
  • The GP’s individual figure for each year comes from the GP’s certificate of pensionable profits and so such a certificate needs to be submitted annually, even if the GP is no longer contributing to the NHS Pension Scheme.

A clawback is common where a GP has stopped working full sessions as it becomes more difficult for them to achieve the required earnings level to receive the full seniority entitlement.

The clawback may occur long after the payment has been banked, and potentially after the GP in question has changed practice or has retired.

The following are the current final seniority figures for GPs in England (as at March 2016):

  • 2012/13 – £91,050
  • 2011/12 – £92,034
  • 2010/11 – £94,080
  • 2009/10 – £93,678
  • 2008/09 – £92,955
  • 2007/08 – £90,375
  • 2006/07 – £92,140

Interim figures in England whilst awaiting the final seniority factors are as follows:

  • 2015/16 – £95,001 (Calculated interim figure)
  • 2014/15 – £96,097 (Agreed Interim figure)
  • 2013/14 – £96,183 (Agreed Interim figure)
  • 2012/13 – £96,646 (Agreed interim figure)

Using the figure of £95k (as an estimate for 2015/16) two-thirds of this is approximately £63k and so earnings below this level gives rise to a future potential clawback.

Where a potential clawback is identified Practices will adopt one of two stances:

  1. “Wait and see” – adopt the stance that if and when the clawback is adjusted it is dealt with at the time of deduction – this is the most risky approach for the partnership as the GP in question may no longer be at the practice but the clawback could be made against the future practice income. A paragraph in the partnership agreement is extremely important to allow recovery from a retired partner if this is the case. Such a recovery may prove inconvenient for both the practice and retired partner.
  2. “Number crunch and forecast” – perform an exercise to ascertain the likely outcome and reserve for this in the accounts so that GP in question has a clean balance because the clawback has already been provided for in the accounts. The partnership deed paragraph is therefore less likely to be relevant (but should still stay in, just in case the averages for the year in question are higher than anticipated, therefore leading to a clawback). If a clawback doesn’t occur (i.e. the final seniority figure is higher than the interim estimates, meaning that the two-thirds test is met) then it is likely to be appropriate for the amount previously reserved in the accounts to be released back to the GP.

As seniority gets relegated to the pages of the history books, in the period between now and 2024, at a time when a large volume of GPs will be retiring, it is important not to overlook this income source and the complexities surrounding it.

If you think we can assist you or your practice on this topic then please contact Hannah Farmborough or call on 0207 429 4147 to be put in touch with a member of our Healthcare team.  

This article originally appeared on the blog of our member firm, MHA MacIntyre Hudson.

GP Net Earnings Declaration – What you need to disclose

If you have found this article then you may be wondering what you need to disclose on your website by 31 March 2016 in relation to GP net earnings of your practice.

This is a summary of guidance extracted from the 2015/16 GMS contract published in March 2015.

Main points: 

  • The mean earnings for all GPs in the practice relating to the previous financial year must be published by 31 March 2016.
  •  Requirement to provide information in paper copy or on a poster to any patients without internet access.
  •  Earnings reported are pre-tax, national insurance and employee pension contributions and are net of practice expenses.
  •  Main items included are global sum, QOF, seniority, vaccinations and nationally determined enhanced services plus reimbursements for personally administered drugs and fees.  The associated expenditure relating to these is deducted from the figure reported.
  •  Examples of items to be excluded are drug reimbursements and dispensing fees along with associated costs; education and training grant income and reimbursements; locum reimbursements (maternity and sickness); non NHS income (for example medical report fees). Also excluded is any money earned from locally commissioned Enhanced Services.

What wording will you need to include on your website?

Example wording taken from the GMS contract guidance is below:

“All GP practices are required to declare the mean earnings (e.g. average pay) for GPs working to deliver NHS services to patients at each practice.

The average pay for GPs working in [insert practice name] in the last financial year was £xx,xxx before tax and National Insurance.  This is for [2] full time GPs, [3] part time GPs and [1] locum GP who worked in the practice for more than six months.”

The contract provides further details of how these figures are calculated and the exact items to include – see pages 10 to 16 of the following link for a fully detailed explanation of this: GMS Contract Guidance

Needless to say for our clients we will provide the wording and calculations as part of our service to GPs when preparing the accounts and personal tax returns along with superannuation certificates for the partners.  The figures will be explained to you and we will work with your practice manager to ensure your compliance with this directive, working on your side to ensure that only that which is absolutely necessary to disclose is disclosed to conform with the direction.

If you would like to discuss this issue in more detail or you would like to speak with a member of our team, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with your local representative.