Many GPs will play an active part in clinical commissioning groups (CCGs). GPs, their partners and practice managers will need to face the challenges of a change to their working commitment and the effects that this will have on both personal and practice income.
HMRC employment status law is strong, and it should be assumed that an ‘office holder’ of a CCG will normally be classed as employed and taxed under PAYE. Non-office holders carrying out ad hoc work will need to be considered in light of the legislation. Usually they will fail to be classed as self-employed with regard to substitution (ability to send a replacement to fulfil the agreed role at their discretion). These GPs will be regarded as ‘employees on flexible terms’ by HMRC. Detailed guidance on the factors that HMRC will consider on this matter are now available on the DH website.
Occasionally it may be possible for GPs to make a case for the income to be treated as self-employed. This will need to be agreed with HMRC on a case-by-case basis and accountants will be able to advise.
What does employed status mean?
Taxation: Earnings will be taxed under PAYE by deduction at source from monthly salary. Income tax rates will be based on a GP’s individual total taxable earnings from all sources. CCG earnings will be taxed at the same rates whether they are classed as employed or self-employed. Employed earnings will be taxed on a GP’s self-assessment tax return, with credit given for any tax deducted at source. Under PAYE the appropriate tax code will need to be applied, a GP’s accountant will liaise with HMRC to ensure this is correct.
Expenses: The ability to claim tax relief on expenses differs from that under self-employment. Tax relief will be given where expenses are incurred wholly, exclusively and necessarily for the purposes of the salaried engagement. Mileage to and from the CCG is not allowable. CCGs should pay the appropriate mileage allowance for travel for CCG purposes. Such changes in circumstance may affect the overall business mileage percentages that a GP is entitled to claim. If other expenses are incurred, a GP should take advice as to tax allowability.
National Insurance: Total National Insurance contributions (NIC) are greater under employed status. As an employee there will be two tranches of NIC payable:
- class I employer’s NIC – payable by employer
- class I employee’s NIC – payable by deduction at source from employee
However, the burden of NIC falls most heavily on the CCG (employer) not the GP (employee). For example, on a gross salary of £150,000 over the same self-employed earnings the burden is an extra £910 for the GP but £19,667 employer contributions due from the CCG (2012/2013 rates applied).
Superannuation: From April 2013 all CCG earnings for GPs carrying out work for a CCG will be fully superannuable, assuming the CCG is an NHS employing authority, under the terms of the NHS pension regulations.
It will not be possible to choose whether this income is superannuated.
GPs who have applied for fixed protection, and have ceased making pension contributions, will need to ensure that the terms of the fixed protection are adhered to. Such GPs should take advice from their Independent Financial Advisor.
Responsibility for the 14% employer’s element of superannuation lies with the CCG. Employee and added years contributions will be paid by the GP by monthly deduction at source.
The CCG post is treated as employed service and will be lodged in NHS Pension Scheme records as ‘officer’ service. At present on retirement, the better of a separate officer pension for the CCG post or an adjusted GP pension (in which some or all officer service is treated as if it were GP service) will automatically be paid.
The GP working under an employed post will continue to have all of these earnings superannuated. The GP may see a reduction in cost to them for the employer’s element of the superannuation now payable by the CCG. They may enjoy employee contributions at a lower tier rate on these earnings resulting from the way in which their earnings are now split. There will be no adverse effect on pension, assuming total pensionable earnings remain constant.
Practices will need to ensure new partnership share agreements are lodged with the NHS commissioning board so that it can make correct pension deductions.
For GPs taking up CCG posts, there could be a detrimental effect to full seniority entitlement.
Pensionable earnings from employed CCG posts will not be taken into consideration when eligibility for full seniority is measured. It is possible that a GP will see seniority entitlement reduced from 100% to 60% and in rare situations seniority entitlement maybe lost. A GP’s accountant will explain this further as situations differ. Seniority may need to be brought into negotiations with CCGs to ensure rates of pay are set with consideration to all factors.
GP income received
In summary there are changes for GPs taking up CCG roles that need to be understood. Broadly the income that will be paid to the GP will be treated in a similar way to that paid now to many GPs under a range of hospital posts. The important fact to remember is your CCG post is likely to be considered as employed income under HMRC regulations. Your accountant will be able to explain the effects in more detail.
- Sally Sidaway is director of medical services at accountants RSM Tenon.