GP Incorporation

A lot of interest has been generated by the recent lead article in the UK200 Group Healthcare News on the subject of GP Incorporation.

I have come up with some follow up points on this subject which I hope you find of interest:

  • In practical terms, very few GP practice partnerships have taken the plunge and incorporated to this point. There are a number of different reasons for this, some of which I will touch upon later.
  • As things stand, the NHS superannuation for incorporated practices is based upon salaries plus dividends for each GP ‘partner’.
  • The movement of a GMS contract from a partnership to a limited company is perhaps one of the key issues that need focusing on. Without the blessing of the local CCG, incorporation could be very difficult for a practice. With the post 31 March 2013 NHS reforms and ending of the old PCTs, there is much uncertainty in the NHS at the moment. Explorative talks with the CCG ought to be undertaken by the practice at an early stage to evaluate their localised attitude to practice incorporation. Some professionals are fearful that CCGs could insist on incorporation application contracts being put out to competitive tender, thereby putting the current practice’s contract potentially at risk. Therefore explorative talks ought to be carried out very early in the process.
  • A lot of accountants and GPs are put off practice incorporation by the complexity of the situation. For many, the perfect practical structure for a GP practice is to operate as a partnership. For instance, first shares of profit are easily put through the profit appropriation account to reflect the varying activities of the individual GP partners. For limited companies, you either have to pay these ‘extras’ as salaries, which could be tax inefficient, or you have to have an ‘alphabet’ share structure to enable some extra profit sharing flexibility.
  • The impact of incorporation on individual GP’s NHS pension positions needs to be carefully considered, as instead of being based on profit share, it is based on salary plus dividends from the company. Any tax planning strategy can therefore potentially have a knock on effect on individual GP’s NHS pension position and this would need to be carefully managed.
  • Some high earning GPs whose NHS pensions are approaching the lifetime allowance limit (reducing to £1.25 million from 2014/15) could be attracted to practice incorporation as a potential way of limiting their NHS superannuation contributions and growth to their pension pots.
  • Some professional healthcare associations have been taking quite an aggressive stance against GP practice incorporation to date.

In summary, I would advise to tread carefully with GP practice incorporation for existing partnerships. Whilst tax and pension changes appear to be making GP practice incorporation more and more attractive, it is a complex area and one in which there have been few pioneers to date, so there are definitely risks involved, as well as potential benefits.

This article was written by Price Bailey Partner, Howard Sears.


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