The 31 July deadline for GPs to ask NHS Pensions to pay their annual allowance tax charge is fast approaching but accountants are warning that a toxic mix of tax rule changes will bring a sting in the tail for many doctors.

This year, for the first time, NHS Pensions may not allow the full amount of the tax due to be covered by the Scheme Pays facility. In previous years Scheme Pays has allowed doctors to ask NHS Pensions to pay all the tax charges arising from excessive pension growth from their pension pot in exchange for a lower pension in retirement, as long as the tax charge was over £2,000.

However, a change in the tax rules means those with taxable income over £110,000 may find their annual allowance tapered down from £40,000 to just £10,000. The £30,000 loss due to tapering cannot be covered by Scheme Pays and a tax charge of up to £13,500 must be met from doctors’ own personal funds. Only Scottish pension scheme members are able to adopt Scheme Pays on the whole amount.

James Gransby, board member of the Association of Independent Specialist Medical Accountants, and head of healthcare at MHA MacIntyre Hudson, said: “These tax charges were due on 31 January 2018 and are already attracting penalties and interest in the eyes of HMRC. However, the figures relate to the 2016/17 tax year and NHS Pensions are not yet in a position to send figures to members of the pension scheme to help them assess their position. Without specialist advice it will be almost impossible for most doctors to work out what tax they might owe.”

Mr Gransby went onto explain that every GP’s situation will be different and urged doctors who think they may be affected to get in touch with their accountant or financial adviser.

What is 24-hour retirement and how does it work? Writing in the latest issue of Practice Management magazine, specialist medical accountant and AISMA board member James Gransby offers facts and figures on 24-hour retirement for practice managers to share with their doctors. Click here to download the full article

A detailed analysis of the 2018/19 GMS contract has led accountants to predict that practices in England with static list sizes are likely to see a lower increase in funds than the 3.4% announced by NHS Employers on 20 March.

Luke Bennett, a director of the Association of Independent Specialist Medical Accountants, said: “0.8% of the investment is to allow for the predicted increase in the population. Therefore, a practice with a static list size might reasonably expect an increase of not 3.4%, but 2.6%.”

Mr Bennett, a partner at accountancy firm PKF Francis Clark, said that funding increases will depend on practices’ individual characteristics and sources of income since different increases will be applied to different income streams.

He added: “Practices will have to fund increases in expenses out of the increased income. Significantly, the NHS pay deal agreed by union leaders and ministers on 21 March is likely to lead to increases in staff salaries, particularly at the lower end of the pay scales.”

“While most practices are not contractually bound by the Agenda for Change pay rates, they are in many cases competing with secondary care to attract staff.”

Mr Bennett added: “All practices will see some sort of increase in funding and this is to be welcomed as a measure to help maintain financial stability for struggling practices. There may be a further uplift in funding once the Doctors’ and Dentists’ Review Body has reported in May. It is hoped that the difficulties in recruiting and retaining GPs will be recognised in the DDRB report.”

ENDS

Notes for editors

For more information, please contact Rosalind Dewar:

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Accountants are calling for urgent consideration to be given to restoring local knowledge and contacts within primary care support services in England. A briefing submitted to GPC England by the Association of Independent Specialist Medical Accountants (AISMA), says that the centralisation of primary care support services, outsourced by NHS England to Capita, has led to the loss of local knowledge and contact base. The briefing highlighted significant concerns relating to Capita’s performance with regard to practice payments and pension administration.

Andrew Pow, AISMA board member, said: “If there is one aspect that should be considered urgently it is the need for the local support services interface to be restored, so that managers have a “go to” person to contact who can deal with issues in their area.

“This would result in returning the significant amount of lost management time to general practice so that managers can get on with the important job of managing their practices at what is a very difficult time for the sector.”

The AISMA briefing to GPC England highlighted problems in three areas; failure to pay practices in a timely manner for work performed; failure to process the correct pension deductions and update pension records; and failure to provide a clear interface between support services and GP practices to resolve issues quickly.

Dr Krishna Kasaraneni, BMA GP England Executive Team lead on PCSE, said:

“There have been some improvements in the way the PCSE contract has operated since its launch in 2015, largely down to continued pressure from the BMA, LMCs and other organisations. However, there has been a worrying loss of expert knowledge in key areas which AISMA highlights, especially in the administration of key accounting and financial operations. Far too many mistakes are occurring which has left practice payments, pension payments and GP training grants in a state of confusion. The BMA has made it clear to PCSE that this situation must be addressed as a matter of priority.”

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