GPs face £15,000 loss in capital gains changes

GPs thinking of selling surgery premises or shares in premises after April 2008 will face a tax bill up to £15,000 higher than now, according to accountants.

The warning follows the introduction of changes to capital gains tax by the Chancellor.

In his first pre-budget report, Alistair Darling announced the system of exemptions and taper relief would be abolished and a lower base rate of 18 per cent capital gains tax would apply.

This will affect all those who bought property after March 1982 and before April 1998 and are set to retire or sell their shares in premises after 6 April 2008.

Stuart Williamson, partner in the specialist medical accounting firm Williamson West, said GPs could face paying an extra £15,000 in tax (see table).

'We've worked out the impact for one of our clients due to leave his practice next year. If he retires in March next year then his tax bill will be £6,000, but if he sells after 6 April next year then his tax bill will be in excess of £20,000.

'These exemptions were locked into the system before Gordon Brown became prime minister and in a sense that money has been confiscated.

'In this firm alone we have counted we will have 40 clients who will be affected,' he added.

Valerie Martin, medical director with PKF, said GPs had previously benefited from indexation relief, which allowed inflation to be taken into account when calculating the cost of properties, and taper relief, which meant that if a GP had owned their premises for more than two years they were taxed on only one quarter of the profit made.

'GPs were paying 10 per cent on a small amount of taxable profit. Now they will pay 18 per cent on the profit,' she added.

Ms Martin said she would advise retiring GPs to begin selling their premises now.

This mean owning premises will become less attractive. 'Because GP premises are owned for a long time, 18 per cent tax on what are very good profit margins is not bad,' she said.

But the change might make it now less attractive to become a practice partner.

Last week GPC chairman Dr Laurence Buckman warned that practices that shy away from offering partnerships to salaried GPs during turbulent times are putting another nail in the coffin of general practice.

Capital Gains Tax Changes
Tax on sale of surgery share at £190,000
  Old rules
New rules
1982 cost £64,000
Indexation £23,000
Gain £103,000
Business taper @ 75%
Taxable gain
Annual exemption
Taxable income
Tax due
@ 40%
@ 18%

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