Transcript PPT - Northern Deanery
Welcome to a presentation by
Practice Finance
Mandy Riley
Birbeck Medical Group
Ann-Marie Tulloch
Dodd & Co Accountants
Session 1 • GP Partner • Practice accounts Session 2 • Salaried GP • Locum • Tax for the self-employed • NHS Pension Scheme
Agenda
What Is A Partner?
• Self employed NHS contractor o GMS contract - partnership holds the contract o PMS contract - individuals hold the contract • Partner in the business and allocated a share of profits • Self-employed individual for tax and national insurance • Access to NHS Pension Scheme
Important Documents
• Partnership agreement o Legal agreement between partners, split of profits, sickness, maternity, paternity rights o Seek specialist legal advice • Accounts o Potential earnings / drawings o o Tax and superannuation liabilities Buy in o Get specialist accountancy advice
Accounts
• Four components to a set of accounts: 1.
2.
3.
4.
Profit and loss account Balance sheet Partners capital accounts Partners current accounts • See example accounts
P&L Account - Summary
Pages 4 and 5 • What does it tell you?
• GMS or PMS practice • Dispensing or non-dispensing • Practice net profit - £393,170, £60.48 per patient • How many partners there are – 2.5 FTE • How profits are split between partners • Potential earnings – c£150k per FTE partner • Benchmark against other practices
P&L Account - Detailed
Pages 8-13 • What does it tell you?
• Main income streams • Main costs • Detailed comparison with previous year • Movements should mirror changes to GMS/PMS contract • Ability to benchmark individual lines to improve practice performance
Standard GMC Contract
• Global sum payments are a contribution towards the contractor’s costs in delivering essential & additional services including staff.
• Essential services in core hours 8am – 6.30pm
“registered patients and temporary who are, or believe themselves to be ill ……….” • Additional Services: “registered patients and temporary provided with cervical screening, contraceptive services, vaccinations and immunisations, childhood vaccinations, child health surveillance, maternity medical services & minor surgery”
Contract - Now
• Main income streams – How are they paid? – what changes have occurred to the core contract in 2014/15?
• GMS - £73.56pp (2014 £66.25) • MPIG – removal over 7 years • PMS – contracts under review • Enhanced services – most renewed for 1 year • QOF – reduction in points 900 to 559 • Seniority – withdrawal by 2020
Contract - future
• Contract changes for 2015/16 • Unplanned admissions, extended hours and learning disability EHS extended for a further year • Patient participation and alcohol EHS will end • QOF – no changes to points, indicators or thresholds • Reimbursement for maternity/paternity locum costs • Improvements to patient online access • Working to address recruitment and retention of GPs • Develop GP premises • Publishing GP earnings on website
Balance Sheet
Page 7 • What does it tell you?
• Assets of the practice – do they own a property?
• Liabilities of the practice – who do they owe money to?
• How the practice is financed – does this fit comfortably with you?
• How much you will need to pay in ASSETS – LIABILITIES = NET WORTH OF PARTNERSHIP Split between the partners
Property Ownership
Page 14 – capital account BUY IN = % based on VALUE OF PROPERTY less LOAN Buying 50% share £32,500 =(£100,000 - £35,000)x50% Buying 1/3 share £21,666 =(£100,000 -£35,000) x1/3 • • • • • Investment in the bricks and mortar Get the property valued Who pays for the valuation?
How will you finance the buy in – savings? Loan?
Timing of buy in
Current Account
• • • • • • • • Page 15 Working capital – day to day funds Practice needs cash to pay bills before it gets paid for work done All partners must therefore contribute to working capital / leave money in their current accounts Available to draw when practice cash flow allows Closing balance is undrawn profits Can increase or decrease depending upon proportion of profit drawn in the year, also with tax and SA paid/due.
Already taxed earnings Will be paid out if leave
Loans To Buy In
• Property and /or working capital loans • Banks still keen to lend to GPs • Historically viewed GPs as relatively low risk • Preferential interest rates • Secured or unsecured lending • Use healthcare specialists at the banks • Increase in form filling - affordability • Can take time to arrange • Tax relief on interest
Key Questions To Ask
• Copy of the most recent accounts • Copy of the partnership agreement • Practice list size - benchmarking • Which partner are you replacing?
– How many sessions did they work?
- Did they have any specialisms?
• How much could I earn?
– How are profits split between partners?
• Who pays the tax?
– When will the first bill be?
– How much will it be?
Key Questions To Ask (2)
• Which expenses does the practice meet?
- National insurance - Subscriptions - Insurances, prof indemnity • Drawings – How much?
– Paid monthly in advance or arrears?
• Practice buy in – How much?
– How is it calculated – property valued?
– When will I be expected to buy in – 6 mths?
Why Become A Regular GP
• Treat patients, not just illness • Rewarding/job satisfaction • Seeing the good with the bad • Supportive interactive environment/part of the team • Regular Hours & remuneration • Intellectually stimulating • Special interest/Practice involvement
Salaried GP
• • • • • Tax, National Insurance and SA deducted at source by employer Net pay is yours to spend Sickness/maternity/paternity rights set out in employment contract Expense claims limited • • Subscriptions Mileage not reimbursed by employer Use P45 or complete P46 if changing jobs
Locum
• • • • • • • Responsible for invoicing practices Greater flexibility – sessions/rates Care re. long-term cover No sickness/maternity/paternity rights Notify HMRC of self employment Complete Tax Return and calculate/pay own tax Practice pays ER superann
Take Home Pay Comparison
• • • • GP Partner o Profit less tax, NI, EE superann and
ER superann
Salaried GP o o Gross pay less tax, NI and EE superann = Net pay Employer pays ER superann Locum o o Total fees, less tax, NI and EE superann Practice pays ER superann Think about subs and other costs
Tax Tax TAX!
Clue:
SELF
Assessment
Becoming Self Employed
• • • • • Requirement to notify H M Revenue & Customs Deadline 5 October after end of tax year start self employment Register online or ask us Failure to notify penalty Form CWF1
National Insurance
• Class 2 NIC – £2.75 per week (i.e. £143.00 per annum) – Most commonly paid by monthly or 6 monthly DD at the moment – Under self assessment from April 2016 – Jan/July • Class 4 NIC – Profit related • Profits £ - £ 9% • Profits > £ 2% – Apply for deferment if you pay class 1 too
Paid January and July
2014/15
Tax
Personal allowance (0%) Basic Rate Band (20%) HR Band (40%) Additional Rate (45%) 10,000 * 10,001 – 41,865 41,866 – 149,999 >150,000 * Reduced if earn over £100,000
What Am I Taxed On?
• • ALL taxable income • Self employment income • Salary, rental profits, bank interest, dividends etc Relief for Superann/personal pension contributions, professional loan interest, gift aid etc.
Motor Expenses
• • • Fixed Mileage Rate on business miles • First 10,000 at 45p per mile • Rest at 25p per mile Actual Costs plus Capital Allowances • Fuel, Repairs, RFL, Insurance etc • • Claim % based on business use Mileage log recommended – business miles vs private miles Be consistent
Other Expenses
• • • • • Use of Home Telephone/Computer costs Subscriptions Courses Other equipment • Business use only
Tax Example
• • Year end 31 March 2014 – profits £60,000 Year end 31 March 2015 – profits £70,000 • 2013/14 payment profile is as follows: Balance due 31/01/15 £17,226
Tax Gets Complicated
Tax Example
2014/15 payment profile is as follows: 31/01/15 1 31/07/15 2 st nd POA 14/15 POA 14/15 £8,613 £8,613
Tax due 31 January 2015
Bal 13/14 £17,226 1 st POA 14/15 £8,613 Total Due £
25,839
Tax Example
2014/15 payment profile is as follows: 31/01/15 1 31/07/15 2 st nd POA 14/15 POA 14/15 £8,613 £8,613 31/01/16 Bal 14/15 1 st POA 15/16 Total Due £4,016 £10,621 £14,637
Tax Bombshell
• Likely to be higher rate tax payers • 40% on earnings over £41,865 • If profits rise – January tax bill goes up by 60% of the increase
Tax Example – Falling Profits
• • Year end 31 March 2014 – profits £60,000 Year end 31 March 2015 – profits £50,000 • 2013/14 payment profile is as follows: Balance due 31/01/15 £17,226
Tax Example – Falling Profits
• 2014/15 payment profile is as follows: 31/01/15 1 31/07/15 2 st nd POA POA £8,613 £8,613 30/09/15 Repayment 14/15 31/01/16 1 st POA 15/16 £4,384 £6,421 • • Could reduce July POA to £4,229 Could reduce January & July POA to £6,421
Tax Summary
• • • First year of self employment – no POA No POA = High tax bill in January – ask us for an estimate Future years Profits ↑ higher tax on 31 January Profits ↓ no balancing payment refund due or reduction in one/both POA
Locum Companies
• Tax/SA savings vs NHS pension
“A GP locum who sets themselves up as a limited company cannot be pensionable in the NHS pension scheme”
• Negotiate a higher rate?
Locum Companies
• • • • Separate legal entity Income earned by limited company • • Company invoices for work Fees paid into its bank account Not salaried posts Company pays corporation tax (20%)
Earnings From Companies
• Salary – Basic salary • Dividends – Taxed on recipient – Must go into their bank account • Tax savings if dividends are paid to a BR tax payer, spouse or child over 18 yrs
Mileage And Expenses
• Cars generally run privately due to BIK rules • Reclaim business mileage at fixed rates 45p/25p • Other expenses o o o o o Subs Medical indemnity – personal or Co. name Locum insurance – Co. name Telephone – contract in Co. name Broadband – business proportion
Statutory Accounts
• Filed within 10 months of year end • Corporation tax due 9mths and 1 day after year end • Corporation tax return due 12 months after accounting year end • File annual return • File forms for changes to directors and shareholders etc • Additional costs associated with statutory requirements.
• Not a short-term decision
Pensions
Pensions
“We understand, that you are NOT an Independent Financial Advisor and therefore cannot advise us in any way about our pensions.”
The NHS Pension Scheme Is Changing
• • • The 1995 Scheme (“Old”) The 2008 Scheme (“New”) • Joining after 1 April 2008 • Chose to move from Old scheme The 2015 Scheme (“New New?!?”) • Joining after 1 April 2015 • All members unless transitional protection
NPA MRA Membership Limit Max Membership Pension Lump Sum
Comparison Of Schemes
1995
60 50 16 - 70 45 years 1.4% 4.2%
2008
65 55 16 – 75 45 years 1.87% Nil
2015
State Pension Age 57?
16 – 75 No limit 1.85% Nil
2015 Scheme – Key Facts
• • • • • • • Existing benefits frozen At retirement existing benefits calc inline with rules of 2008 scheme – watch breaks of > 5yrs CARE scheme Linked to state retirement age – gov.uk website Accrual rate of 1/54 i.e. 1.85%, with no TFCS Yearly revaluation of CPI + 1.5% for active members Early retirement reduction buy-out option to eliminate or lower cost of early retirement
2015 Scheme – Key Facts (2)
• ERR buy-out – max 3 yrs before NPA and not before age 65 • ERR buy-out cost depend upon age and number of years being purchased e.g. 3 yrs at age 20 = 3.6%, at age 60 = 4.7% • Benefits can be taken at the same time as 2008 section (with reduction) or at NPA or any date between
CARE Pension Calculation
X
1/54th
=
Year 1 Annual pensionable pay
• Pensionable pay £50,000 x 1/54 th = £926
CARE Pension Calculation
• Year 1 pension is revalued by CPI + 1.5% = £958 • (CPI + 1.5% = say 3.5%)
Year 1 After Revaluation
CARE Pension Calculation
• Year 1 pot continues to be revalued until retirement 10 yrs = £1,306
Year 6 Year 1 After 20 Years Revaluation Year 4 Year 2 Year 1 Year 5 Year 3
• A new pot for each year of membership
CARE Pension Calculation
• The total of all your pots after revaluation gives your final pension
Total Pension
Contribution Rates
Up to £15,431.99
£15,432 - £21,387.99
£21,388 - £26,823.99
£26,824 - £49,472.99
£49,473 - £70,630.99
£70,631 - £111,376.99
£111,377 plus 5 % 5.6 % 7.1 % 9.3 % 12.5 % 13.5 % 14.5 % Employers 14.3% (13.5% in Scotland)
2015/16 – 2018/19 Rates
Additional Pension
• • • • • • Up to £5,000 additional pension per annum in £250 tranches Lump sum or monthly payments Calculator on website With or without dependent cover Consult IFA and Tax adviser before committing CARE re annual allowance
Pensions
Pensions – Salaried GPs
• • • Estimate of pensionable earnings – set tier rate Type 2 certificate • Submit by 28 February • Exclude trainee earnings in first year Under/overpayments collected in next tax year from relevant source • Ensure exclude from next years form
Pensions - Locums
• • • • Practitioner scheme Locum A & B forms “Short term deputising work” Fee based GP work over a longer period Practitioner Type 2 scheme Appraisal income (from April 2014)
Employer Contributions
• Now paid E’er contributions in addition to fee
Receive £1,000 fee + £126 to pay over to PCT
• Must pay over contributions – FRAUD!!
E.g.
£1,000 £900 £126
Pensions Locums
• • • • • Submit within 10 weeks Locum A form signed by practice Pay contributions 7 days after month end Not OOH work • • • Keep copies of forms For tax return For SA certificate For evidence for pension record
Pensions - Partners
• • • • Estimate of Pensionable Profits – sets tier rate • • Deadline 1 March POA deducted monthly Annual certificate of profit Deadline 28 February Balancing payment/refund due March • Delay if late submitting certificate – impact on tax relief
Annual Allowance
• • • • • • • Maximum contributions to a pension scheme in a tax year Limit from 1 April 2014 reduced to £40,000 Taxed on excess over £40,000 (highest rate) 3 year c/fwd Defined benefit scheme – growth in pension Remember personal pensions Change in circumstances becoming partner in high earning practice immediately after qualifying Pension flexibilities
Pension – Where To Get Help
• • • • • • • Scheme Guide on website www.nhsbsa.nhs.uk/pensions FAQ’s Member forms Fact sheets Calculators Newsletters