Chartered Certified Accountants

GP Money Matters 1

GP Money MattersSpring 2014

SuPERAnnuATIon RATESEmployee contribution rates increased (again) in April 2014. Employer contribution rates remain at 14%

Where superannuable income exceeds a threshold, the whole amount is pensionable at the higher rate, not just the excess. Rates for 2014/2015 are:-

A GP with pensionable earnings of £111,376 will pay £15,036 in employee contributions.A GP with pensionable earnings of £111,377 will pay £16,150 in employee contributions, so by earning £1 more, they would be worse off by £1,113.

up to £15,431 5.0%

£15,342 - £21,387 5.6%

£21,388 - £26,823 7.1%

£26,824 - £49,472 9.3%

£49,473 - £70,630 12.5%

£70,631 - £111,376 13.5%

£111,377 and over 14.5%

CAPITAL ALLowAnCES uPDATECapital allowances are the mechanism used to provide tax relief for capital items, such as cars, equipment and fixtures (but not building structures or land). Normally these amounts are dealt with using an annual rate of 18% or 8%, but in recent years an Annual Investment Allowance (AIA) has permitted the tax relief on the full value of the asset in the year purchased, up to an agreed amount. This applies to qualifying equipment and fixtures, but not cars.

There have been significant fluctuations in the AIA limit in recent years, but the latest budget temporarily increased the allowance from £250,000 to £500,000. Whilst the £250,000 would normally be enough to cover assets purchased by a GP practice,

where there is a new surgery development, the total of qualifying purchases could easily exceed this amount. This is therefore good news for any GP practices currently building new premises as it will accelerate the tax relief available.

The capital allowances rates available for cars vary according to the CO2 emissions, with any claims being restricted to the business use element only. For 2014/15, the rates are as follows:

C02 emissions Capital allowances rate

< 96 g/km 100% in year 1

96 – 130 g/km 18%

>130 g/km 8%

2 GP Money Matters

MoToR ExPEnSES In a recent tax case involving a medical consultant, HMRC highlighted the fact that to qualify for tax relief, journeys must be “wholly and exclusively” for the purpose of business i.e. have no private element. Following on from this, HMRC may decide to take a closer interest in claims made for business travel and require records to be available to support amounts claimed.

For GP principals, travel to/from the surgery is classed as private unless there is something like a home visit on the way. A GP locum who is carrying out sessions at various practices in no set pattern will however, be able to claim mileage from home to surgery.

There are two methods available for claiming car expenses. Once a method has been selected however this must be used until there is a vehicle change:

oPTIon 1Claim a fixed 45p per mile for the first 10,000 business miles and 25p per mile thereafter. This option was not previously permitted for GP principals, but can now be used from 6 April 2014.

oPTIon 2Claim the business proportion of the total motor running costs, including insurance, road tax, repairs and fuel. This will involve the retention of much more paperwork.

THInKInG OF MERGInG? Practice mergers are becoming more common and can happen for a variety of reasons such as cost savings, to share specialist skills or to develop a new surgery premises. There are many issues which need to be considered at an early stage when planning a merger including:

1 Confidentiality - it is recommended a confidentiality agreement is signed at an early stage and a communications lead agreed to avoid staff unrest and rumours.

2 Is it possible to merge the existing GP contracts?

3 MPIG income – this may be lost on merging.

4 Staff issues - different pay scales, different benefits, TuPE, redundancy etc.

5 Pre-merger costs – how these are to be shared.

6 Profitability levels (pre and post merger).

7 Profit sharing arrangements in each practice.

8 Partners’ current account levels in each practice.

9 Drawings methods.

10 How tax liabilities and subscriptions are paid.

11 Property issues.

12 Approval from the CCG.

13 Accounting dates and systems.

14 Effect of merger on superannuation and tax liabilities.

15 Partnership agreement terms.

16 Valuation of assets.

2014/15 GMS ConTRACT CHAnGES AND BMA ‘READy RECKonER’In order to calculate the financial implications from the new GP contract, the BMA has produced a ‘ready reckoner’ calculator, that will predict the possible change in practice funding.

Simply search for the ‘ready reckoner’ on the BMA’s website, download the calculator, then enter the practice weighted list size, along with the actual, or anticipated income for QOF, MPIG and the enhanced services from 2013/14.

A manual adjustment may be required to the unplanned admissions DES where the practice’s weighted list size is significantly different to the actual list size. The calculator bases the figure on weighted list size, whereas it should be based on actual list size.

2014/15 PMS ConTRACT CHAnGESPMS practices will be subject to many of the changes applied to GMS practices apart from:

Baseline funding will increase by £4.55 per weighted patient

OOH opt out will be £4.02 per patient

PMS practices will no longer be subject to the 103 QOF points reduction.

With the above changes and a review of all PMS contracts due by March 2016, some practices may find it worthwhile reverting to GMS.

If you would like a full financial assessment of the impact of the contract changes on your practice, please contact us.

GP Money Matters 3

2014/15 EnHAnCED SERvICES CHAnGES

aUto-enRoLMent FOR PEnSIonGP practices are not immune from the requirement for employers to auto-enrol qualifying employees in an appropriate pension scheme and contribute accordingly. Many employees of a GP practice will be members of the NHS Pension Scheme already and fortunately this qualifies as an approved Scheme for auto-enrolment purposes.

Where a practice has employees who are not members of the NHS Pension Scheme however, they will need to check the status of those employees. Any that are classed as qualifying employees need to be automatically enrolled within the NHS Pension Scheme or enrolled in an alternative scheme if they are not eligible to join the NHS Scheme.

The new rules can be quite onerous and practices should ensure they take care to comply. Further guidance for NHS employers can be found at www.nhsba.nhs.uk/pensions.

To find out the date from which the new rules are enforceable for them, individual practices can check their position at www.thepensionregulator.gov.uk/employers/what-is-my-staging-date.aspx

EMPLoyER nIC ALLowAnCEFrom April 2014, most employers will be able to claim a £2,000 reduction in their employer NIC bills. unfortunately, businesses providing NHS services are specifically excluded from this scheme and hence GP practices will not be able to benefit from it. Iris payroll software has a tick box to enable practices to claim this allowance. This should, however be ignored.

OTHER PEnSIon CHANGES1 From 1 April 2014 salaried GP’s can

pension the whole of their pay, including overtime. Previously this was restricted to the equivalent gross pay for a full time GP.

2 From 1 April 2014 locums are able to pension appraisal income if they wish.

3 NHS Pensions can now impose penalties where employers provide extraordinary pay increases close to retirement. This is aimed at preventing the manipulation of salaries in the 3 years prior to retirement in order to boost pension.

The following new enhanced services, which were introduced in 2013/14 have now ceased:

Remote care monitoring On-line access Risk profiling

The dementia enhanced service will continue, with £0.37 per patient available on signing up to the DES and a further (as yet unknown) payment following completion.

The patient participation group DES is continuing at a reduced rate of £0.36 per patient, however there is no longer a requirement to carry out a survey.

Learning disability healthchecks continue with the payment increasing from £102.16 to £116.

There is a slight increase in the rate payable for most vaccinations from £7.63 to £7.64. All vaccinations available in 2013/14 continue into 2014/15 with new programmes for:

Hepatitis B for at risk babies Meningitis C catch up for freshers (aged 17-25)

The new unplanned admissions DES can generate up to £2.87 per patient.

4 GP Money Matters

Paul Stone , Partner at Medical Money ManagementE:paul.stone@medicalmoney.co.ukW:www.medicalmoney.co.uk

The Chancellor announced the most radical change to pensions legislation since 1921, declaring that the Government is prepared to trust people with their pension funds. This move coincided with further changes announced in 2013 to both the Annual Allowance and Lifetime Allowance from the 06th April 2014.

It would be reasonable to say that for most people keeping up with the changes to pension allowances and legislation has been an impossible task. With change after change it is no surprise that for most the impact on them personally can be difficult to quantify. For most GPs it is not the Budget announcement which will impact on them but the reduction in both the Annual Allowance and Lifetime Allowance from 06th April 2014.

The Annual Allowance (AA) has continued to reduce, with a further reduction this year to £40,000. Some GPs will have already received Pension Saving Statements showing the impact of the Scheme accrual on the AA when the allowance was £50,000. With a further reduction to £40,000 for the current tax year more GPs will continue to breach the thresholds and therefore suffer additional tax charges on their NHS Pension benefits before taking any pension entitlement. This could be further increased with any additional pension funding such as Added Years, Additional Pension or any other Private Pension arrangements. With the excess over the AA considered an unauthorised payment, subject to income tax at an individual’s highest marginal rate, the financial penalty for this payment could be quite severe.

To enable individuals to review this position here are the steps that need to be undertaken:

• Obtain a Pension Savings Statement from the NHS Pension Agency. This will show the amount of AA used and whether an individual has any availability to carry forward any unused allowances.• If an individual has any additional pensions, check out the impact this is having on their own specific AA situation• Seek specialist advice on the most suitable actions to take to reduce any potential AA tax charge.

In addition to the new AA, the Lifetime Allowance (LTA) reduced to £1.25m from 06th April 2014. As with the AA this will affect a lot more GPs at the time of retirement and when taking benefits from any pension plan. To give some degree of protection against the LTA tax charge Individual Protection 2014 (IP2014) has been introduced. This will allow those individuals who have pension rights in excess of £1.25m to protect the value of their pension benefits on a personal protection value up to a maximum of £1.5m.

As with the AA it is important to obtain certain information to check if IP2014 is a suitable option. Individuals should:

• Speak to the NHS Pensions Agency and obtain a value of their pension benefits as at 05th April 2014• Obtain the values of all other pension benefits held as at 05th April 2014, as these need to be included in the total figure along with any previously crystallised pension benefits.• Calculate how these benefits are measured against the LTA and whether IP2014 would be an option to protect the value against the LTA tax charge in the future.• Apply to Her Majesty’s Revenue & Customs (HMRC) for IP2014; individuals have until April 2017 to do this.• Seek specialist advice on the impact of the LTA and how to mitigate any potential problems.

Other key changes to Pensions from the Budget and the Finance Bill 2014 include:

• Trivial Commutation pension limits increased to £10,000 from the previous £2,000, with up to 3 (previously 2) such payments available from an individual’s personal pension arrangements.• Increase in the amount of total pension savings that can be taken as a lump sum on grounds of triviality from £18,000 to £30,000.• The amount of pension needed to access Flexible Drawdown reduced from £20,000 to £12,000. This will further reduce to £0 from 06th April 2015.• The amount of income that can be taken is dictated by the Government Actuary’s Department (GAD). Capped Drawdown

limits increased to 150% of GAD from the previous 120%

In addition to all the above regulatory changes the NHS Pension Scheme contribution levels have also increased on the 01st April (further information on this is available on the NHS Pensions website) and the new NHS Pension Scheme is due to launch in less than 12 months from now on the 01st April 2015.

The information contained within this article is for information purposes only, does not take into account your personal circumstances, and is not a substitute for obtaining professional financial advice.

The information provided is based on our understanding of current law and taxation as at April 2014. HMRC policy, practice, and legislation may change in the future.

Pensions UPdate – THE BuDGET AND 2014 FINANCE BILL

Paul Stone Partner MMM

Lentells Medical Services Division 17 - 18 Leach Road, Chard Business Park, Chard, Somerset TA20 1FA Tel: 01460 64441 Email: medical@lentells.co.uk Web: www.lentells.co.uk

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Registered as auditors and regulated for a range of investment business activities in the united Kingdom by the Association of Chartered Certified Accountants.

This firm is not authorised under the Financial Services and Markets Act 2000 but we are, in certain circumstances, able to offer a limited range of investment services to clients because we are members of the Association of Chartered Certified Accountants. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide.

Medical Money ManagementEstuary House, Peninsula Park, Rydon Lane, Exeter EX2 7XETel: 01392 354760Email: paul.stone@medicalmoney.co.uk

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Please remember that the value of investments can fall as well as rise and is not guaranteed. The above is based upon current legislation which is subject to change. Medical Money Management and Medical Money Management (General Insurance Brokers) Ltd are Authorised and Regulated by the FCA.