The timetable to get primary care networks (PCNs) up and running is incredibly tight, and practices are having to make major decisions about the structure of their network within this time frame.
The BMA Handbook on Primary Care Networks suggests five different structures that practices could adopt, and I have since heard of at least two others (one quite barmy). So what are financial issues practices need to consider and how do these structures affect this?
First of all there are some key principles. Apart from the payment for taking part in the DES (which comes directly to each practice), all funding has to be channelled through one recipient, and that recipient must hold either a PMS, GMS or APMS contract.
That recipient effectively holds the funds on trust for the other PCN members, but is trust enough? Practices will need to consider how funding will be distributed to the constituent practices and specify this in their network agreement as part of their governance procedures. This will depend on the services each practice provides as part of network DES.
Aside from this, the key financial considerations for the PCN structure are:
- Employment liabilities
- Access to NHS pension
- HMRC’s interpretation of the structure
The provision of healthcare is exempt from VAT, but the provision of staff or the supply of management services is not. How the structure is set up will determine the liability to VAT. There are some work-arounds. Setting up a cost sharing group in which the group as a whole is considered may be useful, and having joint employment contracts may help so it is not one entity providing services to another
If a single lead practice receiving the funds employs the staff, then they carry the liabilities that accompany those staff. It is possible and probably necessary to have those liabilities covered by the other PCN members as well, but in the worst case that would require an action by the lead practice to be indemnified. Practices will need to talk to their employee liability insurance provider to ensure they are fully covered.
For staff to have access to NHS pensions, the employer must be an employing authority, in other words it must hold an NHS contract. Staff employed by an existing practice will not have a problem, but if a new separate entity is set up, it may preclude access to NHS pensions.
The BMA has said it is currently in discussions with the government about addressing this matter and is ‘hopeful of a resolution’, but warns that it is unlikely this will be in place by July 2019 when networks get underway.
HMRC’s Interpretation of the structure
I have not seen much written about this, but HMRC could view the arrangement as a partnership for UK tax purposes. Careful advice should be taken on this point, the consequences of not completing partnership tax returns and declaring the income on the individual tax returns could be significant
There is a reference in the DES contract specification (Annex B1.1) which states that payments from the DES are taxable and superannuable as gross income of the PCN member.
What does this mean? My own interpretation is that the income either from the CCG or the lead provider should be shown as taxable and superannuable income in the practice receiving the funds. But this must also mean that the expenses incurred in providing the DES would be tax and superannuable-deductible expenses, so just the profits would be subject to tax and superannuation.
Using the structures in the BMA handbook, the following table is a summary of the key financial considerations:
|Flat practice||Lead practice||Federation/|
|Super practice||Non-GP provider|
|VAT||No problem||Potential problem||Potential problem||No problem||Potential problem|
|Employer liabilities||Potential problem||Potential problem||No problem||No problem||No problem|
|Pensions||No problem||No problem||Potential problem||No problem||No problem|
|HMRC's view||Potential problem||Potential problem||No problem||No problem||No problem|
What this article shows is that setting up primary care networks is not necessarily straightforward. It is imperative to get good quaity expert advice from both a legal and accounting perspective at the earliest opportunity.
- This article was written by Laurence Slavin of Ramsay Brown Chartered Accountants who specialise in the finances of GP and primary care. Laurence can be contacted at firstname.lastname@example.org and his firm at www.ramsaybrown.com
This article first appeared on our sister site Medeconomics.co.uk, where you can find more advice and information about primary care networks