Andrew Pow, board member of the Association of Independent Specialist Medical Accountants, said:

“Today’s confirmation that the minimum wage is to increase by 9.8% will be setting the alarm bells ringing in general practice, where funding is not keeping pace with wage growth, led by minimum wage increases.

“Since March 2019 the minimum wage has seen cumulative growth of around 46%, including this latest increase, compared with an increase of around 19% in global sum funding from 2019/20 through to 2023/24.”

“Many practice staff are paid the minimum wage or slightly higher and all will expect their pay to increase proportionate to the 9.8% increase. If global sum funding from April 2024 isn’t increased to take this into account, practices will be left short.”

Mr Pow added that GP partners and locum doctors would save £192 a year from the abolition of Class 2 National Insurance contributions (NICs), and also benefit from a 1% cut in Class 4 NICs on profits between £12,570 and £50,270 from 6 April 2024. For a self-employed GP on £50,000 this will mean a saving of around £375 a year in Class 4 NICs.

 “The 2% cut in the main employee NIC rate from 6 January, coming 3 months earlier than the self employed reduction, will benefit salaried employees and other staff members,” he said. “For a salaried GP on £50,000, this will mean a saving of around £700 a year.”

“The bigger picture, however, is that because income tax thresholds remain frozen until 5 April 2028, more people are paying more tax at higher levels.”

ENDS

Andrew Pow, board member of the Association of Independent Specialist Medical Accountants (AISMA), said:

“It’s good news that the Department of Health & Social Care has taken on board many of the comments from AISMA and other organisations contributing to the consultation. It appears that several of AISMA’s recommendations, including a flexible approach for NHS pension scheme members looking to reinstate part of their opted-out service, will be implemented.

“We also welcome the DHSC’s intention to establish a compensation scheme for pension scheme members suffering tax losses due to 2019 to 2020 tax year annual allowance charge adjustments as part of the wider compensation arrangements.”

Mr Pow continued: “It’s encouraging to see that the DHSC intends to continue engaging with AISMA and other professional bodies on the scenarios arising as the McCloud remedy is rolled out.”

Follow this link to read the DHSC consultation outcome

David Clough, past chairman and founding member of the Association of Independent Specialist Medical Accountants, died unexpectedly last Friday.

Deborah Wood, AISMA Chairman said: “It is with great sadness that we convey the news of David’s death. Many within the AISMA community knew David, who continued to support and champion the Association after his retirement, regularly attending our annual conference with his wife Linda. He will be greatly missed by us all.”

Specialist medical accountants have highlighted concerns that GPs could be overlooked in measures to remedy unlawful NHS Pension Scheme discrimination identified by the McCloud judgment.

In its response to the government’s consultation on the second set of draft amendments to NHS Pension Schemes Regulations addressing the McCloud remedy, the Association of Independent Specialist Medical Accountants (AISMA) is calling for the amendments to make specific provision for GPs, alongside non-GP providers and dental practitioners.

Central to AISMA’s concerns is the provision of Remediable Service Statements, which all active and deferred members of the pension scheme are due to receive by 1 April 2025. For GPs, the provision of Remediable Service Statements will depend on the NHS Business Authority (NHSBA) delivering Annual Allowance Pension Savings Statements and Total Reward Statements. However, there are issues relating to the updating of records the NHSBA needs to provide these statements, due to long-running problems in the processing of GP pension returns at Primary Care Support England (PCSE).

Deborah Wood, AISMA Chairman, said: “A significant proportion of the GPs AISMA accountants represent do not receive automatic Annual Allowance Pension Savings Statements when they should, nor can they access Total Reward Statements. As part of the McCloud remedy, a distinct, separate exercise is needed to bring GPs’ records up to date and to ensure accurate information is held by NHSBA.”

She added that that while the NHSBA might issue the various statements on time to meet the Remediable Service Statements deadlines, for GPs the statements may well be incorrect or unreliable because of the delays and errors already in the system.

“Some medical professionals might receive their Remediable Service Statements much earlier than others in the period up to March 2025, but GPs may find themselves left behind, if the errors and arrears are not dealt with well before the deadline.”

Speaking on behalf of the Association of Independent Specialist Medical Accountants, Andrew Pow said:

“The increase in the annual allowance on pension savings is welcome. Together with the recent announcement on retirement flexibilities and plans to remove the impact of inflation within the annual allowance calculation, this is a positive and long overdue change.

“While some high earning GPs will continue to be impacted by annual allowance charges, the changes announced in the Budget mean that the vast majority of GPs will no longer be affected.

“The changes will also ensure that in most cases, mid-career hospital consultants will not be impacted by annual allowance charges. That said, large pay increments above inflation may still lead to charges but at significantly lower levels.

“The abolition of the lifetime allowance, which means the lifetime value of pensions can grow without additional tax charges, may result in more GPs and consultants considering continued NHS service rather than taking early retirement.

“While some issues remain, the Budget announcement represents a positive step which will ensure our senior clinicians can now be less concerned with pension tax issues as their careers progress.”

ENDS

The Association of Independent Specialist Medical Accountants wishes to send condolences to the Royal Family on the passing of Her Majesty Queen Elizabeth II.

We join with all our members for this period of national mourning and reflection on a life of remarkable service and dedication.

The Association of Independent Specialist Medical Accountants is calling on the Treasury to take action to prevent thousands of GPs being landed with punitive tax charges due to the current steep rise in inflation.

In a letter to The Rt Hon Lucy Frazer QC MP, Financial Secretary to the Treasury, the Association highlights how mounting concern within the medical profession over perceived unfairness in the annual allowance tax could lead to GPs either reducing sessions or leaving the NHS.

The letter explains the disconnect between how inflation adjustments are calculated by HMRC, compared with how the NHS pension is calculated. Whereas the calculation is meant to ensure that pension growth simply resulting from inflation is disregarded, this is not the case.

This means GPs could well end up paying tax simply due to inflation which was never intended by the legislation. The amounts modelled by pensions experts for an average earning GP are high.

Andrew Pow, AISMA board member, said: “The pensions annual allowance tax charge remains a significant barrier to retention of doctors to work sessions in the NHS at a time when the NHS arguably needs them most. GPs will need to consider whether they wish to work additional shifts, for example in primary care network roles or for out of hours organisations.”

AISMA is proposing three short-term actions to resolve the issue:

1 – Amend Section 235 (3) of the Finance Act 2004 so that the inflation measurement for NHS workers is aligned between HMRC and NHS Pension calculations. This will smooth out growth calculations to remove all inflation differences enabling fairer taxation but also making it easier to predict ahead.

2 – Recognise years of negative growth and allow them to be carried back to the previous year to allow matching of tax charges to real growth over a longer period.

3 – Allow NHS England and the devolved bodies to replicate the 2019/20 compensation scheme to protect clinicians from pension growth so that they are freed up to work at maximum capacity in the NHS.

Read the letter to HMT in full

Read the response from HM Treasury – 4 July 2022

The Association of Independent Specialist Medical Accountants has confirmed that management work carried out by primary care network (PCN) clinical directors could be subject to VAT. AISMA has been seeking clarification from HMRC on this issue since 2019 when PCNs were first established.

The clarification was confirmed in updated PCN tax guidance, presented in a technical briefing to AISMA accountants today (Friday 20 May) at the Association’s 25th annual conference by Jonathan Main, VAT and Indirect Taxes Partner at MHA Moore and Smalley, and AISMA’s specialist VAT lead.

Mr Main said: “When PCNs were first set up there was an assumption that the work carried out by PCN clinical directors would be exempt from VAT because they would be involved in healthcare services. However, HMRC does not agree where the role of the clinical director is leading and managing the PCN and supporting practices with planning, direction and governance, rather than directly concerning the protection, maintenance or restoration of the health of the patient.”

This means that the work carried out by PCN clinical directors on behalf of the practices in the network would now be a standard rated service. Any individual or business organisation providing services exceeding the VAT-rated services threshold of £85,000 in any 12-month period must register for VAT.

Andrew Pow, AISMA board member, said: “The way PCNs have been commissioned does not work from a VAT perspective, particularly in relation to staff employed to work across practices, as illustrated by this clarification from HMRC.

“Those who have taken advice regarding re-structuring, for example moving the PCN employed staff within a federation or company owned by the PCN members, may be able to manage any VAT exposure using a cost sharing exemption. However, many PCNs are loose arrangements with no formal structure for dealing with VAT.

“This could lead to a position where VAT becomes due which would not be recoverable. This would reduce the budget available to the PCN by 20%.

Mr Pow added that the clarification means that there is now an urgent need for PCNs to look at how they are structured to mitigate the risk to practices employing staff and supplying them to other practices in the network.

“It’s not simply a question of buying an off-the-shelf company and getting on with it. The company needs to be set up correctly, with shareholdings allocated to each of the participating practices in the network, and a cost-sharing arrangement put in place. These are complex and time-consuming issues for PCNs to deal with and specialist accountancy and legal advice will be required.”

The Department of Health and Social Care has published its response to the consultation setting out proposed changes to member contributions to the NHS Pension Scheme.

Commenting on the response, Deborah Wood, chairman of the Association of Independent Specialist Medical Accountants and healthcare services partner at MHA Moore and Smalley, said:

“Postponing the changes to pension contributions until 1 October 2022 will create complexities for practice payroll systems and AISMA’s view is that implementation from April 2023 would be preferable.

“Moving the tiered rate contribution closer to the 9.8% overall cost of funding required for the pension scheme is sensible and will benefit most GPs whose earnings are in the higher bandings. Sensible too is the reduction in due course of the number of tier bands.

“We also welcome the move to basing tiers and contributions on actual pensionable pay, rather than whole time equivalent pay. However, it is disappointing that the opportunity was not taken to also remove the need for annualisation for GPs who are members of the pension scheme.”

“The 2022/23 annual certificate of pensionable profits for both partners and salaried GPs will now need to accommodate a mid-year tiered rate adjustment calculation, adding yet more complexity to the process.”

ENDS

The Association of Independent Specialist Medical Accountants (AISMA) is calling for an extension of the 11 February deadline for GPs in England to claim for compensation against the pension annual allowance tax charge for 2019/20 because many GPs have not received the information they need to make a claim.

A special compensation arrangement was set up for clinical staff caught by the tax charge during the year 2019/20. Under the arrangement, members of the NHS pension scheme elect for the scheme to pay the tax charge on their behalf. When they retire, they are then compensated for the effect of the deduction on their income from the pension scheme.

GPs in England must first submit a ‘scheme pays’ election to NHS Pensions and then submit a claim for compensation to PCSE by 11 February 2022. Before they can make a claim, they need to receive a pension savings statement for the year from NHS Pensions. However, many GPs have yet to receive their pension savings statements and nor have their pension records been updated.

James Gransby, AISMA vice-chairman and partner at RSM UK Tax and Accounting, said: “GPs are unable to make an accurate claim for compensation if they don’t have information they need about the growth of their pension benefits. Through no fault of their own many GPs are at risk of losing compensation which could be worth thousands of pounds across the years of their retirement.”

Andrew Pow, AISMA board member and healthcare partner at Mazars, added: “GPs should be allowed a dispensation so that they can submit a claim at the point they have received information from NHS Pensions about their annual allowance charge for 2019/20. Any GPs who think they may be at risk of a charge should be talking to their accountants about this now and consider making an estimated claim.”

Find an accountant