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Holly Gibson, Price Bailey's healthcare expert offers her advice and insight on topical issues affecting the healthcare industry.

Holly Gibson, Price Bailey’s healthcare sector specialist provides an overview of the latest updates from the healthcare industry. This monthly appointment provides all the latest for those working within the industry, or just simply curious to find out more about the latest from within the healthcare space.

The bulletin will aim to look at what has happened recently in the industry, changes to expect, and potential other news and announcements.  Should you have any questions regarding any of the topics discussed or wish to contact Holly to get further information on how Price Bailey can help you or your practice, please use the contact form to be in touch.

The latest…

April and May have provided an array of changes as a result of action and discussion following the Spring Statement. April sees the start of the new financial year too which is always a busy time, and this year is no different as we see some important financial changes being implemented for GPs and the NHS. In this edition we detail the latest concerning property, basis period changes, IR35 and proposed NHS reforms in the event that a Labour government is elected in the next general election.

Property

The 2024 Premises Costs Directions

This month we transitioned into the updated 2024 Premises Costs Directions (PCDs), which provide guidance to NHS England on the provisions of premises funding to GP practices in England. The 2024 Directions replace the 2013 Directions and take effect from 10 May 2024.

The impact of the 2024 PCDs is still unknown, however, below are details of some changes that are worthy of discussion:

  • Priority funding projects are no longer restricted to a minimum of 33% and a maximum of 66% funding, the acquisition of development land (as well as premises) is expressly mentioned, and fit-out works and improvements to premises required due to regulatory changes are now provided for. In principle, funding should be accessed in more situations, which will greatly benefit many practices.
  • The ability for an ‘appointed valuer’ (defined as a suitably qualified professional registered with the Royal Institution of Chartered Surveyors, RICS) to conduct valuations for NHS England, previously exclusively handled by the District Valuer Service, should alleviate the considerable delays in the approval of funding applications.
  • GPs can now apply for grant funding of up to 100% of the project value.

Changes likely to be less welcomed by practices:

  • Applications for notional rent and rent reimbursement include a condition that contractors must inform NHS England of their acceptance or rejection of the funding assessment within 12 weeks. If they fail to do so, NHS England is unable to proceed with the payment.
  • New information has been provided regarding the amount of rent reimbursement available for leasehold premises and the process for submitting a rent reimbursement application. This may lead to delays in decision-making or changes in the reimbursement amount. Additionally, NHS England and ICBs are prohibited from directly negotiating with landlords about rent determination, which may not be favourable to landlords.
  • Alongside the expansion of grant funding, NHS England must now consider a wider range of factors. Their authority to reclaim funding has been increased, and the timelines for repayment and abatement have been extended.

With the changes to 2024 Directions brings uncertainty for many and their will no doubt be a period of getting accustomed to the changes after so many years following the 2013 Directions. No additional funds have been announced for the ICB budget lines, meaning it is unlikely GPs will have any new resource and GP surgery premises will not change.

Practice property loans and interest rates

Still concerning property, the topic of interest rates in the sector has been sparking conversation. The state of the market in 2024 is still tainted with uncertainty, however the return on investment has begun to rise again after a turbulent few years. The demand for property in 2023 decreased due to rising interest rates and inflation. When interest rates increased however, property valuations were unpredictable and the cost of borrowing increased, therefore many GP partners looking to buy in could not afford to buy in. Some outgoing partners are having to wait longer for their property payment and the valuations are causing concern where they may have dropped.

After recently attending an ICAEW conference where property was discussed, the consensus was that this year, interest rates are set to decrease, valuations have already come down (10-15%,) and the return on investment has increased. The return is set to be higher than the cost again and the demand is beginning to bounce back.

Despite these positive glimpses, it is still more important than ever to consider loan type, repayment plans and repayment length. It is important to thoroughly consider the length of repayment and locking in the interest rates on a loan in the event that interest rates could decrease.

 

Basis Period Changes

Currently, partners in GP practices pay income tax on their share of profits for the accounting period ending in the tax year of assessment – this is known as the current year basis. So, if you have a 30 April year-end, for the tax year 2022/23 (ending 5 April 2023), a partner will be assessed on profits from the financial year ended 30 April 2022. This causes a delay in the tax being paid compared to a year end that runs in line with the tax year. If your practice reports to 31 March (or 5 April) each year, you are not affected by the basis period changes.

Moving forward all partners will be taxed on profits that arise in the period 6 April to 5 April the following year – this is known as the tax year basis. The practice year-end will no longer be relevant for the taxation period. The change to a tax year basis came in from 6 April 2024 and will impact the 2024/25 tax year reporting. The 2023/24 tax year, which started on 6 April 2023 is a transitional year and will be subject to special rules.

For some partners, these transitional changes will see tax payments increase considerably in 2023/24 and payments on account for 2024/25 also. Careful planning will be needed to ensure partners can meet their obligations as there are no additional drawings or increase in practice profits to support these payments as it is in essence a catch-up exercise.

A question that arises from this basis period change is: ‘Should we change our practice year-end?’ With the NHS year-end aligned to 31 March, a move could be a good option. For practices that do change, a set of accounts will be prepared up to 31 March 2024. For those that do not, accounts can continue to be prepared as normal and it will be for the practice accountants to apportion profits from those accounts into the relevant tax year.

For a practice continuing with a year-end date falling later in the year, the date of accounts finalisation needs to be considered. Accounts would ideally need to be finalised in advance of the following 31 January, to apportion profits from two accounts years, for purposes of the relevant tax returns. If this is not possible, estimates can be used but they will need to be revised and finalised at the earliest opportunity. Using estimates will possibly cause uncertainty with tax payments as figures are finalised and payments are updating, including payments on account.

IR35 changes

A significant change has been added to IR35 regulations effective from April 6 2024.  Some healthcare professionals provide their services via Personal Service Companies (PSCs) meaning IR35 changes must be complied with. The key changes are that:

  • HMRC will now consider taxes already paid by workers and intermediaries when assessing PAYE liabilities for deemed employers.
  • This approach aims to distribute liability costs more fairly between workers and deemed employers.

We expect individuals providing services through intermediaries, such as PSCs may see reduced PAYE liabilities, and should mean a fairer tax system as taxes already paid by workers are acknowledged.

Recent Announcements

The potential of a Labour Government

This week, Labour have released their five mission points in preparation for their full manifesto. One of the mission headings is NHS and concerns ‘getting the NHS back on its feet.’ Should Labour come into parliament, the NHS will be at the forefront of their missions and are preparing for building an NHS for the future.

Some key takeaways from their mission statement (full details of their proposals can be found on the Labour website link above):

‘As an immediate priority, Labour will grip the biggest crisis in the history of the NHS, tackling the massive waiting list backlog. We will do this by getting the basics right and then undertaking the long-term reforms to make sure the NHS is fit for the future.

  • Faster NHS treatment delivering two million more appointments a year by paying NHS staff more to work evenings and weekends.
  • Fewer cancer deaths by improving early diagnosis for cancer by doubling the number of NHS scanners.
  • 700,00 more urgent dentist appointments.
  • Fast access to mental health services by recruiting 8,500 new NHS mental health staff.
  • Return of the family doctor by cutting red tape so that patients can see the same GP each appointment if they choose to.’

We await the full Labour party manifesto to see how these changes will develop and more detail can be provided, however the proposed NHS changes and funding will be welcome by many in affected industries should we see a Labour government return.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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