Responding to the problems highlighted by the BMA concerning PCSE Online, Deborah Wood, chairman of the Association of Independent Specialist Medical Accountants (AISMA), said:

“AISMA fully supports the idea of building a system that allows practices more control of their financial records.

“However, disappointingly, the launch of PCSE Online has exacerbated the problems GPs and their practices face when interacting with Primary Care Support England.”

Ms Wood, who is Healthcare Services Partner at MHA Moore and Smalley, continued: “Users have had difficulty in logging onto PCSE Online to access any information and numerous problems with the system have been identified by AISMA members. These include inaccurate fee statements which mean practices will have difficulty reconciling monthly payments.

“Pension submissions through the online system do not deal with the legacy problems that remain in the National Health Application and Infrastructure Services (NHAIS) systems. This will increase the time and effort needed to correct pension records.

“While the launch of any new system will have snags that need fixing, PCSE Online is currently not fit for purpose and AISMA is calling for urgent rectification. In the case of fee statements, this needs to be fixed immediately.”

ENDS

The suggestions made by the Association of Independent Specialist Medical Accountants (AISMA) in response to a recent government consultation on the NHS Pension Scheme have yielded good news for GP practices affected by final pay control rules. The official response, published last week on the gov.uk website, includes AISMA suggestions which will be included in reforms to the final pay control regulations.

Final pay controls were introduced on 1st April 2014 to stop the abuse of the NHS Pension Scheme, whereby a practice gives a large pay rise to someone before retirement in order to boost their pension. It also applied to increases in profit shares for non-GP partners, including practice managers. This can result in a hefty charge being levied on the GP practice.

James Gransby, AISMA Vice Chair and partner, RSM UK Tax and Accounting Limited, said: “The proposals will significantly reduce the number of charges being levied by increasing the cases where exemptions apply. One of the areas that concerned AISMA members was pensionable pay increases for non-GP partners due to an increase in profit share percentage as a result of another partner reducing their sessional commitment. These partners will now be exempt from final pay control rules because another partner leaving the practice has been deemed to be outside the employer’s control.”

Mr Gransby continued: “It is estimated that over 20% of practices have been landed with a final pay controls charge, many with substantial six-figure sums. The rules have now been relaxed and these practices now have a six-month window of opportunity to have these figures revised downwards, or eradicated altogether, if the charge was levied since 1 April 2018 and if they can benefit from the new rules.”

Mr Gransby warned that the legislation is complex, as are the changes, and that practices should seek specialist advice to assess whether they can benefits from the changes retrospectively.

Want to know more about how to maintain healthy practice profits without compromising on patient care? AISMA accountants James Gransby, Abi Newbury and Andrew Burwood give their expert advice and top tips in the latest episode of the AISMA Finance Clinic.

The AISMA Finance Clinic, an initiative developed in collaboration with Practice Index, brings together members of the Association of Independent Specialist Medical Accountants to answer questions from practice managers about topical financial issues in UK primary care. Each episode explores a different theme, such as preparing the year-end accounts, budgeting, cashflow, workforce and practice profitability.

Follow this link to see the latest episode

James Gransby, Vice-Chairman, Association of Independent Specialist Medical Accountants, said:

“In a widely predicted move, the lifetime allowance limit for pensions has been frozen at £1,073,100 for the tax years up to and including 2025/26. This would affect anyone expecting to draw an NHS pension of over £46,656 and with this limit now being frozen, more people will be caught by this tax charge. The effect is an extra £21,000 tax charge on the pension pot at retirement.

“There will be some extra costs for GP practices paying staff the National Living Wage who will see this increase from £8.72 to £8.91 per hour which represents a 2.2% increase.

“With personal tax allowances frozen, doctors who are higher rate tax payers should also expect to pay extra tax. For any doctor earning over £55,000 this will equate to around £100 a month more tax by 2026.”

AISMA welcomes the proposals made by the government to rectify the discrimination that arose from transitioning NHS pension scheme members to the 2015 Scheme. The decision to opt for the Deferred Choice Underpin (DCU) takes the pressure away from any immediate need to make decisions and members should therefore be no worse off than they are now and many will see significant improvements to their pension benefits from opting back into the legacy pension schemes.

There will be additional positive consequences for many higher earners through reduced annual allowance tax charges which will need retrospective adjustment.

The changes will put significant pressure on NHS Pensions (and their regional equivalents) to update pension records with an end date set of 1 October 2023 to do this. NHS Pensions will also need to consider the complicated issues around how to allow GP’s who have previously opted out to unpick these decisions if appropriate.

While AISMA welcomed changes that were made to the annual allowance tapering rules in the March 2020 Budget, many higher earning GPs will still exceed the allowance and face tax charges.

The Treasury has confirmed that no further flexibilities are being proposed to reduce the scope of those being impacted.*

A significant issue remains for GPs in receiving timely and accurate pension information and while improvements have been made, there are gaps remaining in many pension records, making it difficult for GPs to assess their possible tax liabilities.

The current system of estimated scheme pays elections having to be submitted and then corrected several years later is unhelpful for pension scheme members, who may ultimately pay for this through increased administration charges.

* https://www.gov.uk/government/consultations/nhs-pension-scheme-increased-flexibility/outcome/nhs-pension-scheme-pension-flexibility-response-to-consultation

It’s important for practices to review their GMS/PMS statements on Open Exeter each month and reconcile them to the money received into their bank accounts. Writing in Practice Index, AISMA accountant David Lockitt offers some tips to practice managers on checking the practice’s monthly statements for payments and deductions. Visit the Practice Index website to read the article in full.

Welcoming the letter from NHSE/I on 7 January 2021, setting out plans to free up general practice to support COVID vaccination, Andrew Pow, AISMA Board member said:

“In November we wrote to the British Medical Association to explain the financial impact of COVID-19 on general practice. Highlighting the concerns AISMA members had about practices finances during the current difficult year, the letter called for pragmatic solutions through income guarantees and cost reimbursements.

“The measures NHSE/I have put in place for the remainder of the 2020/21 financial year answer many of the concerns we raised in our letter and we are pleased that steps are to be taken immediately to reprioritise work in general practice. The additional funding for PCNs is particularly welcome, given the essential role they are playing in managing the COVID vaccination programme.

“AISMA will monitor the situation for GP practices over the coming months and will continue to brief the BMA and NHSE/I on financial issues as they arise.”

Follow this link to download the NHSE/I letter

The Association of Independent Specialist Medical Accountants (AISMA) and the healthcare group of the Institute of Chartered Accountants of England and Wales have together issued guidance for primary care networks (PCNs) and their member practices on the tax treatment of PCN income and expenditure.

PCNs are recommended to meet tax requirements by drawing up financial statements that provide a summary of transactions across the network for the relevant accounting period. The financial statements will enable member practices to reflect their share of PCN transactions correctly into their own practice accounts so that they can meet the requirements of tax legislation for the completion of partnership tax returns. The deadline for submitting tax returns for 2019/20 is 31 January 2021.

Deborah Wood, AISMA chairman, said: “This joint guidance has been issued to resolve conflicting views on how to account for PCN surpluses. Many practices are not seeing this income as part of their contract, despite it being commissioned as a Direct Enhanced Service. This means there is potential for practices to under declare their income tax for 2019-20.”

HMRC states that income is earned when services are performed and that the timing of issuing bills, invoicing, or receiving payments does not determine when income should be recognised.

For example, if income is received under the terms of the 2019/20 PCN Directed Enhanced Service, which has no requirement for practices or PCNs to do anything beyond 31 March 2020 to ensure that the core £1.50 per patient income is earned, then that income must be recognised in the year to 31 March 2020, even if it has not been spent on any specific activities at that time. The surplus falls into profit and becomes available working capital to be spent at some future date or to be distributed to the PCN members.

Financial reporting rules specifically prohibit provisions being made for future expenses and losses in the financial statements when no obligation exists at the balance sheet date.

Ms Wood added that this will be a recurring issue in 2020/21 as some PCNs struggle to use their network core payments for the year because of the continuing drain on practice resources as a result of the pandemic.

Follow this link to download the guidance document

Commenting on the publication yesterday by NHS England and NHS Improvement of the 2019/20 Pensions Annual Allowance Charge Compensation Policy, Andrew Pow, board director of the Association of Independent Specialist Medical Accountants, said:

“The publication of the rules by which NHSE&I will compensate clinicians for annual allowance charges are welcomed. However, GPs will have issues with meeting the strict 31 July 2021 deadline for submitting a Scheme Pays Election because of the lengthy process involved in PCSE processing the 2019/20 pension forms and for the Pensions Agency to calculate the pensions growth.

“GPs will therefore need to submit estimated elections, or at the very least a protective nominal election by 31 July 2021 if they think they are at risk of having an annual allowance charge in 2019/20.

“GPs will then have to apply using a separate compensation policy application form via PCSE. The methodology of this has not yet been agreed with PCSE so GPs at the moment cannot make the compensation application.

“A significant number of GPs do not have correctly updated pension records. Producing accurate information will be at the heart of making this policy work and there is an urgent need for PCSE to correct the large number of out-of-date records.

“The policy is based on a very complicated system with many possibilities for things to go wrong. It’s essential for GPs to keep hold of the records and confirmation letters that they receive right up until retirement.”

ENDS